The Independent Director By CS Makarand Joshi makarandjoshimmjc

‘The Independent Director’ By CS Makarand Joshi -makarandjoshi@mmjc. in -

Coverage of this PPT Eligibilit y Liabilitie s Max Limits Independent Director Max Tenure Duties Powers

Eligibility

Who is eligible to be Independent Director? Non executive director, not being a nominee director A director who is not a promoter or related to promoters or directors of the Company or its holding / subsidiary / associate company A person who by himself or through his relatives is not having or had any material pecuniary relationship with Company / its holding / subsidiary / associate company / their promoters / directors during the 2 immediately preceding financial years or current year

Who is eligible to be Independent Director? A person who, in any of the 3 years immediately preceding the financial year in which he is proposed to be appointed, has not, directly or through his relatives, had the following relationship with Company/holding / subsidiary / associate company: KMP or employee Employee / proprietor / partner of a firm of auditors / company secretaries in practice or cost auditors Any legal or consulting firm that has / had transaction with the above amounting to 10% or more of gross turnover of such firm

Who is eligible to be Independent Director? A person who does not hold together with his relatives 2% or more of the total voting power of the Company A person who is not a Chief Executive or director, by whatever name called, of any non profit organization that receives 25% or more of its receipts from the Company, promoters, directors or its holding, subsidiary or associate company or that holds 2% of the total voting power in that company A person who is not a material supplier, service provider, or customer or a lessor or lessee of the Company

Code of Conduct

Code of Conduct The duties of Independent Directors should be mentioned in the Code of Conduct of the Company All Directors and senior management personnel should affirm compliance with Code of Conduct on annual basis Code of Conduct to be posted on Company’s website

Maximum Directorships

Maximum Limit He can be an Independent Director in max 7 listed companies If he is a Whole Time Director in any listed company, then he can be an Independent director in max 3 listed companies

Maximum Tenure

Maximum Tenure Max term of 5 consecutive years Eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Directors Report.

Powers of Independent Director

Powers of Independent Director. . . To hold separate meetings without attendance of non independent directors to review performance of non independent Directors and Board as a whole, Chairman, quality, quantity and timelines of flow of information, etc Board meeting can be held at shorter notice only with the presence of at least 1 independent director In case no independent director attends such Board meetings, decisions taken thereat must be ratified by at least 1 independent director

Powers of Independent Director. . . To report concerns about any unethical behaviour, actual or suspected fraud or violation of Company’s code of conduct under the Whistle blower policy of the Company To report any such concerns to the Chairman of the Audit Committee – who shall be an Independent Director, for further investigation

Duties of Independent Director

Duties as per Companies Act To act in accordance with Articles of Association To ensure Company is operating to promote objects of the Company for the benefit of shareholders, employees and in best interest of Company To exercise independent judgement while approving decisions on behalf of Company Not to involve in a situation in which he may have direct or indirect conflict with the interest of Company

Duties towards decision making To attend Board / Committee Meeting To discharge duties with diligence To discharge duties with care To discharge due skills To ensure agenda is sufficient and proper To ensure decisions are taken … and executed

Duty towards stakeholders Environment Govern -ment Shareholder Employe e Director Society Lender s Supplier Custom er

Duty. . Not to have conflict To give disclosure of interest in first BM of FY To give disclosure about change in interest (either as Director or Shareholder) Not to involve in situation of conflict of interest Not to deal in forward dealing in securities No to deal in insider trading of shares of the Company

What is disclosure of interest? To disclose list of relatives To disclose list of companies / firms / Trust in which Director is owner / director / shareholder To disclose list of firms in which his relatives has interest Disclosure to be given every year and whenever there is change Format is MBP 1

What is conflict? Not to involve ‘self’ or ‘self benefited entity’ as supplier or customer or in other nature Not to have competing business with that of company

Duty towards laws …. To ensure compliance with all applicable laws To ensure proper system to ensure compliance with all laws To ensure that compliance system is adequate To ensure that compliance system efficiently functioning

Stake holders protection visa a vis compliance of laws Econom y [Fema & Customs laws] Govern ment (Revenu e Laws) SHs (Compan ies Act, SEBI) Ensure complianc e of all applicable laws Compan y (Corpor ate Laws) Custome rs Contract s and warrantee Environm ent (Environm ental Laws) Employe es (Labour Laws)

Liabilities

Liabilities Independent Directors are liable for acts / omissions occurred with his knowledge attributable through broad process Penalties = monetary or imprisonment Insurance can be taken to cover liabilities

Whether Director is liable for liabilities of the ‘Company’? Towards borrowed funds – yes, if personal guarantee is given Towards commercial liabilities – No Towards contingent liabilities – No Towards legal / compliance liabilities – Yes Towards criminal liabilities – Yes, if involved either Directly or Indirectly

How to avoid liabilities ? Discharge all duties diligently Ensure system is set to take care of financial controls Ensure system is set to take care of compliance Ensure that there is a system for preparation of meaningful agenda Ensure that there is a system to identify related parties and avoid any contract without board approval

Thank you We will be happy to help you become successful Independent Director MMJC