New Delhi: The government plans to put in place a stricter disclosure framework for independent directors, including providing details about their resignation from companies, as part of continuing efforts to bolster corporate governance standards. Corporate Affairs Secretary Injeti Srinivas said the disclosure requirements would be finalised after elaborate deliberations with stakeholders.
Independent directors have significant responsibilities under the Companies Act and are part of various committees, including those related to CSR and remuneration. The role of independent directors has come under the scanner in certain instances of corporate misdoings.
“We will not do anything that will become burdensome and counter productive. Whatever we will do, we will do that is absolutely necessary and in the interest of everyone,” he said. According to him, there would be some disclosure requirements when a person resigns as an independent director.
“What should be that disclosures, timing and within how many days… those will be part of rule framework and it is being done after elaborate deliberations with the stakeholders,” he added. In efforts to further strengthen the regulatory framework for independent directors, the ministry is also working to ensure that individuals have certain basic qualification to be eligible for independent directorship.
There has to be a basic qualification for individuals to become independent directors and the ministry would give “a carve out for people who have acquired knowledge by experience such as already holding a board position. In such cases, the individual need not have minimum formal qualification”, Srinivas said. One of the proposals being looked is to have a 60-hour online course on self-study mode for individuals wanting to be independent directors. Then clearing an examination would make them eligible for independent directorship.
The ministry is open to both options — one is having an external examination and another is to undergo self study and self test, he said, adding that existing directors will have some easy pathway to comply with. The ministry is planning to make the Indian Institute of Corporate Affairs (IICA) as designated institution for registration of independent directors.