Last updated: March 2nd, 2024 2:22 PM

Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2022

The Ministry of Corporate Affairs (MCA) on 10th June 2022 has published the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2022 to amend the Companies (Appointment and Qualification of Directors) Rules, 2014. The amendment is brought under rule 6 which deals with compliances required by a person eligible and willing to be appointed as an independent director.

Synopsis of MCA Notification

The MCA has inserted sub-rule (5) in Rule 6, after sub-rule (4) of the Companies (Appointment and Qualification of Directors) Rules, 2014 vide the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2022. As mentioned above Rule 6 deals with the Compliances required by a person eligible and willing to be appointed as an independent director. The official Notification of the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2022 is attached here for ready reference: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2022/06/companies-appointment-and-qualification-of-directors-second-amendment-rules-2022-1.pdf" title="companies-appointment-and-qualification-of-directors-second-amendment-rules-2022"]

Independent Director – Companies Act 2013

An independent director is a non-executive director who does not have any kind of relationship with the company that may affect the independence of his/her judgment. An independent director should not have been a partner or executive director of the auditors/lawyers/consultants of the company in the preceding three years or should not hold 2% or more of shares of the company.

Compliances Required by an Independent Director

Every individual who intends to get appointed as an Independent Director shall apply online to the Indian Institute of Corporate Affairs for inclusion of his name in the data bank for one year or five years or his lifetime till he continues to hold the office of an independent director in any company.

Independent Director Data Bank

Independent Director Data Bank was created by MCA along with the Indian Institute of Corporate Affairs (IICA) by the provisions of Section 150 of the Companies Act, 2013 to maintain a data bank of Independent Directors who are willing and eligible to be appointed as an independent director.

Renewal Procedure

Every individual whose name has been included in the data bank shall file an application for renewal for 1 year, 5 years, or his lifetime, within 30 days from the date of expiry of the period upto which the name of the individual was applied for inclusion in the data bank, failing which, the name of such individual shall stand removed from the data bank of the institute.

Online proficiency self-assessment test

Rule 6(4) states that every individual whose name is so included in the data bank shall pass an online proficiency self-assessment test conducted by the institute within 2 years from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the databank of the institute. Until now, if the name was removed under sub-rule (4), the individuals whose names were so removed were required to apply afresh under sub-rule (1), however, vide Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2022, an opportunity is provided to such individuals to restore their names upon payment of prescribed fee and subject to the few conditions.

Fee for Restore Independent Directors names on data bank

MCA now announced that any individual, whose name has been removed from the databank, may apply for restoration of his name on payment of fees of one thousand rupees.

Conditions to Restore Independent Directors' names on data bank

Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2022 states the following conditions for Restoration Independent Directors names on data bank:

• The name shall be shown in a separate restored category for 1 year from the date of restoration
• Such individual shall be required to pass the online proficiency self-assessment test within 1 year from the date of restoration;
• The name shall be included in the databank, only, if the individual passes the said online proficiency self-assessment test
• upon passing the test, the fees paid by the individual at the time of initial registration shall continue to be valid for the period for which the same was initially paid;
• In case the individual fails to pass the online proficiency self-assessment test within 1 year from the date of restoration, his name shall be removed from the data bank
• Upon failing the online proficiency self-assessment test, the individual shall be required to apply afresh under sub-rule (1) for inclusion of his name in the databank.

Independent Director Registration procedure:

Independent Director needs to access the official website of the Ministry of Corporate Affairs, After login to the portal, select individual / corporate registration from ID databank registration Under MCA services

• Provide details of DIN (In case the ID does not possess DIN, enter PAN. If the ID does not hold PAN, enter his passport number)
• An OTP will be sent to the registered Mobile number, Once OTP is entered, the ID and password will be sent to the mobile number.
• The Independent Directors can register themselves at https://www.independentdirectorsdatabank.in/ using the login id and password received in the mobile number.
• Provide all the mandatory details and click on submit. By paying the required amount, the registration will be completed.

Proficiency Self-Assessment Test

• Every individual is required to do an online proficiency self-assessment test within one year from the inclusion of his name in the data bank.
• An individual who has obtained a score of not less than sixty percent in aggregate in the online proficiency self-assessment test shall be deemed to have passed such test.
• Individuals can make multiple attempts for self-assessment even after passing it with a minimum score of 60%.