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Independent Directors are an important part of corporate governance, contributing significantly to boards of directors by bringing a varied range of talents and an independent judgement on crucial problems. Independent Directors serve as a company’s guide, coach, and mentor. Their responsibilities include strengthening corporate credibility and governance standards by acting as a watchdog and assisting in risk management. Independent Directors participate actively in the company’s numerous committees to maintain excellent governance. We will see the Objectives of Launching the Databank Of Independent Directors in compliance with the Companies Act, 2013 and the rules issued thereunder. The Ministry of Corporate Affairs has created the Independent Directors Databank.
Background
The government was looking into measures to tighten the framework for independent directors, who play a critical role in ensuring that companies follow sound corporate governance procedures.
It aims to tighten the procedure because political appointees with solid financial backgrounds have been restored as independent directors in several corporations.
The recent Infrastructure Leasing and Financial Services (IL&FS) crisis revealed credit rating agencies’ reckless grading, in which they freely awarded and downgraded corporations as they pleased and got away with it.
Aside from establishing the Independent Directors Bank, the government has decided to hold examinations for the appointment of independent directors, with a minimum score of 60% being required for certification.
The modification is following the modified Companies Act. Companies wanting to increase their board of directors or make new appointments under the current regulations can access the government’s database of experts who passed the test.
Objectives of Launching the Databank Of Independent Director
Develop an ecosystem for independent directors and companies.
Create and operate a verified database of existing and aspiring Independent Directors.
Providing a platform to individuals to help them acquire knowledge, develop new skills, assess their understanding, and apply best practices.
Helping in creating an ecosystem of individuals looking for opportunities and corporate requiring to appoint of independent directors. Companies may register themselves with the databank to search, select and connect with individuals who possess the right skills and attitude for being considered for appointment as independent directors. So these were the Objectives of Launching the Databank Of Independent Directors.
About The Databank
The Indian Institute for Corporate Affairs (IICA), part of the Ministry of Corporate Affairs, established and maintains it. It’s a first-of-its-kind project that offers a variety of e-learning courses on topics such as the Companies Act, Securities Laws, basic accounting, board practises, board ethics, and board effectiveness. It provides an easy-to-use navigation platform for existing Independent Directors and persons interested in becoming Independent Directors. Companies can join the databank to search for, select, and interact with individuals interested in becoming Independent Directors.
The Ministry of Corporate Affairs (MCA) published the Companies (Creation and Maintenance of Independent Director Databank) Rules, 2019, on October 22nd and revised the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019.
The Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019, which took effect on December 1, 2019, designated the Indian Institute of Corporate Affairs (IICA) as the institute or association responsible for the creation and maintenance of an online About the databank containing the names, addresses, and qualifications of existing Independent Directors as well as persons who are eligible and willing to act as Independent Directors. In addition, IICA has been tasked with conducting an online proficiency self-assessment test for Independent Directors, which will be available on March 1st.
What is an Independent director?
In corporate governance, an independent director is a member of a board of directors who has no material link with the firm, is not a member of its executive team, and is not involved in its day-to-day operations.
A member of the board of directors who
(1) has no material link with the company,
(2) is not a member of the executive team, and
(3) is not involved in the company’s day-to-day operations and is known as an independent director.
There are standards for the number of independent members on the board of directors to be allowed to list on certain exchanges. A significant relationship may impair a director’s ability to exercise independent judgement.
Conclusion
Databank is a comprehensive database that includes both current independent directors and those who are eligible and willing to be nominated as independent directors. From December 1, 2019, all independent directors must register with the Databank within seven months. The deadline for Independent Directors to register has been extended to June 30, 2020.Databank also allows companies to register, allowing them to search for, choose, and connect with individuals who have the necessary abilities and attitudes to be considered for appointment as Independent Directors. So far, we have seen the Objectives of Launching the Databank Of Independent Directors.
