The Companies
Act, 2013 makes it obligatory for every listed company to have at least
one-third of the total number of directors as independent directors. This will
include companies listed on the SME segment of the stock exchange.
Unlisted
public companies must appoint at least two independent directors in the
following circumstances:
1. If
the paid-up share capital exceeds Rs. 10 Crores.
2. If
the turnover exceeds Rs. 100 Crores.
3. If
the aggregate of all the outstanding loans, debentures and deposits exceeds Rs.
50 crores.
However, if a
company is required to have a higher number of independent directors due to its
higher composition of its audit committee, or is required under any other law,
the company must appoint such higher number of independent directors.
Companies
which failed to meet above mentioned criteria for three consecutive years, will
not be required to appoint independent directors till the time they meet the
required conditions again.
Existing company must comply with the requirements within a year. Earlier, in listed companies, the number of independent directors could vary from 1/3rd to 1/2nd of total directors (depending upon executive/non-executive nature of chairman) which was fixed under the listing agreement with the board.
The tenure term of the independent directors must not be more than 5 years and they can be re-elected for a second term. Companies are allowed to appoint an independent director for a period less than 5 years, however, a person cannot be appointed for more than two terms, even if he has been appointed for a period less than 10 years. A cooling period of three years is mandatory after expiry of the second term.
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