ArticleCompany Law

Clarification of Registration of Independent Director in Data Bank

Ministry has issued, The Companies (Creation and Maintenance of databank of Independent Directors) Amendment, Rules 2021 passed on 18th June 2021. These Rules came into effect on 18th June 2021.

Applicability:

The new norms shall be applicable to

  • Existing Independent directors and
  • Individual who is willing to be appointed as an independent director and
  • The Companies are required to appoint Independent Directors under the Companies Act 2013.

Provisions before Amendment: {Rule 6(1)}

MCA introduce ID Data Bank rules on 20th October 2019. As per those Rules:

Inclusion of Name in Data Bank:

  • If a person was continuing as independent Director as of 20th October 2019 such person was required to add his name in Data Bank within 10 [1]month from the publication of these rules (i.e. 20th August 2020)

[1] https://www.independentdirectorsdatabank.in/pdf/databank-rules/Rule2_25062020.pdf

  • If a person wanted to appointed ID after 20th October 2019, then before the appointment such a person has to add his name in Data Bank.

Passing of Examination: {[1]Rule 6(4)}

Every individual whose name is so included in the data bank under sub-rule (1) shall pass an online proficiency self-assessment test conducted by the institute within a period of [2]two year 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.

Renewal of Name in Data Bank: (Rule 2)

Registration under data Bank could be One year, five years, or lifetime.

Every individual whose name has been so included in the data bank shall file an application for renewal for a further period of one year or five years or for his lifetime, within a period of [3]thirty days from the date of expiry of the period up to 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.

As per the above-mentioned provisions,

  • If an individual fails to apply for registration in Data Bank such individual was not allowed to appoint as Director.
  • If an individual fails to renew their registration, his name shall be removed from the data bank.

[1] https://www.independentdirectorsdatabank.in/pdf/databank-rules/CmpFifthAmndtRules_22102019.pdf

[2] https://www.independentdirectorsdatabank.in/pdf/databank-rules/FifthAmdtRules_18122020.pdf

[3] https://www.independentdirectorsdatabank.in/pdf/databank-rules/CmpFifthAmndtRules_22102019.pdf

[1]Extract of Amendment:

(a) in sub-rule (7), in clause (a), after the words “for inclusion”, the words “or renewal” shall be inserted;

(b) after sub-rule (7), before explanation, the following sub-rule shall be inserted, namely:- “(8) In case of delay on the part of an individual in applying to the institute under sub-rule (7) for inclusion of his name in the data bank or in case of delay in filing an application for renewal thereof, the institute shall allow such inclusion or renewal, as the case may be, under rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 after charging further fees of one thousand rupees on account of such delay.”

Also Like: Case Laws – Objection of the employees in case of the shifting of the registered office

Effect of Amendment:

Now, after this amendment MCA allowed that:

  • if an individual has not applied for the entrance of his name in the data bank, still such person can be appointed as Independent Director and such person can apply for inclusion of his name later on by paying extra fees of Rs. 1,000/-.
  • if an individual fails to renew his registration in the data bank within 30 days of the expiry of the registration, still such person can continue as Independent Director & his name shall not remove from the record of the data bank. The only condition such person has to apply for renewal by paying extra fees of Rs. 1,000/-.

CONCLUSION:

Even if a person not applied for registration of his name with Data Bank, he can appoint as Independent Director.

[1] https://www.independentdirectorsdatabank.in/pdf/databank-rules/CmpInpdtDirectorsRules_18062021.pdf  

CS Divesh Goyal

CS Divesh Goyal is a Fellow member of ICSI, Practicing Company Secretary, and Steering Voice in the Corporate World. He is a Prop. at Goyal Divesh & Associates, Company Secretaries. He is a competent professional having enrich 6 years post qualification experience as Company Secretary with expertise in Corporate Law, FEMA, IBC, SEBI, RBI. He has written more than 600 editorials on Companies Act, 2013 to keep at pace with the latest changes and critically analyse the implications of various provisions of the Companies Act, 2013, Insolvency & Bankruptcy Code, 2016, FEMA, RBI, SEBI etc. He is a vibrant, sought after, and spellbinding speaker and has delivered more than 200 sessions on various aspects of Company Law at ICSI, ICAI, and online platforms. Apart from his passion for his work he also believes in elevating his profession and for that dream

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