WHO IS AN INDEPENDENT DIRECTOR? Independent Director is Director other than a managing director or a Whole time Director or a nominee Director.who fulfils all criteria as given in Section 149(6) along with Rule 4 and Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

1. INDEPENDENT DIRECTOR UNDER COMPANIES ACT 2013
WHO IS AN INDEPENDENT DIRECTOR?
Independent Director is Director other than a managing director or a Whole time Director or
a nominee Director who fulfils allcriteria as given in Section 149(6) along with Rule4 and Rule
5 of the Companies (Appointment and Qualification of Directors) Rules, 2014.
In generalsense,an independent director is a non-executive director of a company who helps
the company in improving corporate credibility and governance standards. He does not have
any kind of relationship with the company that may affect the independence of his
judgement.
WHICH COMPANIES ARE REQUIRED TO APPOINT INDEPENDENT DIRECTOR?
For Listed Public Company:
Every listed public company shall have
 at least one-third of a total number of directors as independent directors.
(Any fraction contained in that one-third shall be rounded off as one)
For Unlisted Public Company:
As per Rule 4 of The Companies (Appointment and Qualification of Directors) Rules, 2014,
the following classes of companies shall have at least 2 directors as independent directors.
 Public Companies with paid-up share capital of Rs. 10 crores or more; or
 Public Companies with turnover of Rs. 100 crore or more; or
 Public Companies with aggregateoutstanding loans,debentures, and deposits,
exceeding Rs. 50 crores.
WHICH COMPANIES ARE EXEMPTED TO APPOINT INDEPENDENT DIRECTOR?
 The provisions of independent director are not applicable to private company.

2.  Where a company ceases to fulfil any of the conditions as mentioned above
and laid down in Rule 4 of Companies (Appointment & Qualification of
Directors) Rules 2014 for consecutive 3 years, itshallnot be required to comply
with these provisions until it meets any of such conditions. It was further
clarified that the amount existing on the last date of latest audited financial
statements shallbe taken into account for calculating the paid-up share capital
or turnover or outstanding loans, debentures and deposits. (Third proviso to
Rule 4 of Companies (Appointment & Qualification of Directors) Rules 2014
 A joint venture, wholly owned subsidiary and dormant company are exempted
from the requirement to appoint Independent Director even if they fulfil the
eligibility criteria.
WHAT ARE THE ROLE AND FUNCTIONS OF INDEPENDENT DIRECTOR?
Independent Director acts as a guide, coach, and mentor to the Company. The role includes
improving corporate credibility and governance standards by working as a watchdog and help
in managing risk. Independent directors are responsible for ensuring better governance by
actively involving in various committees set up by company.
The independent directors are required to perform the following role:
 facilitate withstanding and countering pressures from owners;
 help in bringing an independent judgment to bear on the Board’s
deliberations especially on issues of strategy, performance, risk
management, resources, key appointments and standards of conduct;
 bring an objective view in the evaluation of the performance of board
and management;
 scrutinise the performance of management in meeting agreed goals
and objectives and monitor the reporting of performance;
 satisfy themselves on the integrity of financial information and that
financial controls and the systems of risk management are robust and
defensible;
 safeguard the interests of all stakeholders, particularly the minority
shareholders;
 balance the conflicting interest of the stakeholders;
 determine appropriate levels of remuneration of executive directors,
key managerial personnel and senior management and have a prime
role in appointing and where necessary recommend removal of
executive directors, key managerial personnel and senior
management;
 moderate and arbitrate in the interest of the company as a whole, in
situations of conflict between management and shareholder’s interest.

3. WHAT ARE THE DUTIES OF AN INDEPENDENT DIRECTOR?
The independent directors shall:
 undertake appropriate induction and regularly update and refresh their
skills, knowledge and familiarity with the company;
 seek appropriate clarification or amplification of information and,
where necessary, take and follow appropriate professional advice and
opinion of outside experts at the expense of the company;
 strive to attend all meetings of the Board of Directors and of the Board
committees of which he is a member;
 participate constructively and actively in the committees of the Board
in which they are chairpersons or members;
 strive to attend the general meetings of the company;
 where they have concerns about the running of the company or a
proposed action, ensure that these are addressed by the Board and, to
the extent that they are not resolved, insist that their concerns are
recorded in the minutes of the Board meeting;
 keep themselves well informed about the company and the external
environment in which it operates;
 not to unfairly obstruct the functioning of an otherwise proper Board
or
committee of the Board;
 pay sufficient attention and ensure that adequate deliberations are
held before approving related party transactions and assure
themselves that the same are in the interest of the company;
 ascertainand ensure that the company has an adequate and functional
vigil mechanism and to ensure that the interests of a person who uses
such mechanism are not prejudicially affected on account of such use;
 report concerns about unethical behaviour, actual or suspected fraud
or violation of the company’s code of conduct or ethics policy;
 acting within his authority, assist in protecting the legitimate interests
of the company, shareholders and its employees;
 not disclose confidential information, including commercial secrets,
technologies, advertising and sales promotion plans, unpublished price
sensitive information, unless such disclosure is expressly approved by
the Board or required by law.
WHAT IS THE TENURE OF APPOINTMENT OF INDEPENDENT DIRECTOR?

4.  Subject to the provisions of section 152, an independent director shall
hold office for a term up to five consecutive years on the Board of a
company, but shallbeeligiblefor reappointment on passing ofa special
resolution by the company and disclosure of such appointment in the
Board's report. [Sec 149(10)]
 No independent director shall hold office for more than two
consecutive terms, but such independent director shall be eligible for
appointment after the expiration of three years of ceasing to become
an independent director: Provided that an independent director shall
not, during the said period of three years, be appointed in or be
associated with the company in any other capacity, either directly or
indirectly.[Sec 149(11)]
MANNER OF APPOINTMENT OF INDEPENDENT DIRECTOR?
1) Appointment process of independent directors shallbe independent of
the company management; while selecting independent directors the
Board shall ensure that there is appropriate balance of skills,
experience and knowledge in the Board so as to enable the Board to
discharge its functions and duties effectively.
2) The appointment of independent director(s) of the company shall be
approved at the meeting of the shareholders.
3) The explanatory statement attached to the notice of the meeting for
approving the appointment of independent director shall include a
statement that in the opinion of the Board, the independent director
proposed to be appointed fulfils the specified conditions. The
explanatory statement shall mention that the proposed director is
independent of the management.
4) The appointment of independent directors shall be formalised through
a letter of appointment,
5) The terms and conditions of appointment of independent directors
shall be open for inspection at the registered office of the company by
any member during normal business hours
6) The terms and conditions of appointment of independent directors
shall also be posted on the company’s website.
WHAT IS THE PROCEDURE FOR APPOINTMENT OF INDEPENDENT DIRECTOR?
 Firstly, diligently select a person proposed to be appointed as an
independent director and ensure that he possesses appropriate
balanceof skills,experienceand knowledge in the Board. The proposed

5. person may be selected from the database of Independent directors
maintained by any body, institute or association authorized by CG.
(Rule 6 of Companies (appointment and qualification of Directors)
Rules, 2014)
 Ensure the proposed person to be appointed as Independent director
in the company fulfils the conditions specified in Sec 149(6) and Rule 5
(Companies (appointment and qualification of Directors) Rules, 2014)
 Ensure that the proposed director is not disqualified under Sec 164 and
Sec 165 of the Companies Act 2013.
 Ensure the individual proposed to be appointed as Independent
Director has furnished his DIN to the company and a declaration in
Form DIR-8 stating he is not disqualified to become director under the
provisions of this Act. (Sec 152(4) and Rule 14 of (Companies
(appointment and qualification of Directors) Rules, 2014
 Before appointment of individual as Independent Director obtain
consent to act as Director in Form DIR-2.
 Issue Notice and agenda of Board meeting or a shorter notice in case
of urgent business, in writing to every director of the company at his
registered address with company. [Sec 173(3)]
 Hold a board meeting and ascertain the quorum required under Sec
174 is present and pass the following resolution:
1. Resolution for appointment of Independent Director to hold
office up to a period of 5 years, subject to approval of
Shareholders in the general meeting of the company.
2. To authorize the Company Secretary or Director of the
company to sign, fill the relevant Form and to do such acts,
deeds and things as may be necessary to give effect to the
resolution.
3. To Fix day, date time, venue for holding general meeting of
shareholders of the company.
4. To Approve the draft notice of the meeting along the
explanatory Statement annexed with notice as per the
requirement laid down in Sec 102 of the act.
5. To authorize the Director or the Company Secretary of the
company to sign and issue the notice of the general
meeting.
 Hold the general meeting on the day fixed and pass the ordinary
resolution for the appointment of Independent director.
 As per Schedule IV(IV)(4) to the Companies Act, 2013 the Company will
have to issuethe appointment letter to Independent Director. Also,the
terms and conditions of Independent Director’s appointment have to
be posted on the company’s website.
 Obtain the declaration of the appointed Director regarding his interest
in other entities in Form MBP-1 within 30 days of appointment or at

6. the first Board meeting in which he participates as a director.,
whichever is earlier. [Sec 182(1) read with Sec 182(2)]
 File Form DIR-12 containing the particulars of the appointment of
Director within 30 days of his/her appointment. (Sec 170 (2) and Rule
8 and 18 of the Companies (Appointment and Qualification of
Directors) Rules, 2014.
 The Independent Director has to submit a declaration of independence
as per Section 149(6) of the Companies Act, 2013 before his/her
appointment. Such declaration has to be placed before the 1st Board
Meeting in which he/ she participates as a director and the subsequent
first board meeting in each financial year.
 In case of resolution passed as Special resolution for re-appointment
of Independent Director, file a certified copy of special resolution in
Form MGT-14 within 30 days of the date of general meeting.
 Make necessary entries in the register of Directors and key managerial
personnel and their shareholding.
REMUNERATION TO INDEPENDENT DIRECTORS:
An independent director shall not be entitled to any stock option. An independent director
may receive remuneration by way of sitting fees. Sitting fees to be paid to Independent
Directors for attending the Board Meetings pursuant to Section 197(5) which is maximum of
Rs.1,00,000/- per meeting is to be decided by the Board. The independent director shall be
entitled to the reimbursement of expenses for participation in the Board and other meetings
and profit related commission as may be approved by the members.
RESIGNATION OF INDEPENDENT DIRECTOR:
 An Independent Director may resign from his/her office by giving a
notice in writing to the Company.
 Within 30 days from the date of receipt of such notice the Board shall
file same with Registrar of Companies in Form DIR- 12.
 The director shallalsoforward a copy of resignationalong with detailed
reasons for the resignation to the Registrar of Companies within 30
days of resignation.
REMOVAL OF INDEPENDENT DIRECTOR:
 A Company may, by ordinary resolution, remove a director, before the
expiry of his period after giving a reasonable opportunity of being
heard.

7.  A special notice is required for any resolution, to remove a director
under this section, or to appoint somebody in place of a director so
removed.
 The vacancy shall be filled within a period of not more than 180 days.
INTERMITTENT VACANCY OF AN INDEPENDENT DIRECTOR:
Any intermittent vacancy in the office of an independent director shall be filled up by the
Board in the immediately next board meeting or within three months from the date of such
vacancy, whichever is earlier. (Second Proviso to Rule 4 of Companies (Appointment &
Qualification of Directors) Rules 2014.
EXTENT OF LIABILITY OF THE INDEPENDENT DIRECTOR:
The Companies Act, 2013 restricts and limits the liability of Independent Directors only in
respect of acts of omission or commission by a company which had occurred with his
knowledge, attributable through board processes, and with his consent or connivance or
where he had not acted diligently.
OTHER PROVISIONS NEEDED TO BE KEPT IN MIND REGARDING INDEPENDENT DIRECTOR
UNDER THE COMPANIES ACT 2013
 A person must be an independent director in not more than seven
listed companies at a time.
 An independent director shall not retire by rotation and shall not be
included in “total number of directors’ for the purpose of
computation of rotational directors.
 A person can be appointed as an alternate director. But he must be
qualified to be appointed as an independent director.
 A small shareholder director shall be considered as an independent
director, if-
o he is eligible for appointment as an independent director u/s
149 (6),
o he gives a declaration of his independent u/s 149(7).
 If the Board meeting is called at shorter notice so as to transact some
urgent business, then the presence of at least 1 independent director
is mandatory. In absence of any independent director, a decision shall
be circulated to all the directors and later approved by at least 1
independent director.

8.  The Nomination committee shall consist of three or more non-
executive directors out of which not less than one-half shall be
independent directors.
 The Audit Committee shall consist of a minimum of three directors
with independent directors forming a majority.
 Remuneration Committee shall consist of three or more non-
executive directors out of which not less than one-half shall be
independent directors.
 Corporate Social Responsibility Committee shall consist of three or
more non-executive directors out of which at least one should be an
independent director.
 The independent directors of the company shall hold at least one
meeting in a year, without the attendance of Non-Independent
directors and Members of the management.