How independent director come to know about any
irregularities or misconduct in working of the company except from purview of
fin. Results.
Can any share insight on
this.
You might have view that in India only promoter runs the company, so how
can independent director show his independence and share his unbiased views
over working of company to the public at large....
Definition of
Independent Director as per Companies Act.
“Independent director” as
per Section 2 (47) of the Companies Act, 2013 means an independent director
referred to in sub-section (6) of section 149 which further states that an
independent director in relation to a company, means a director other than a MD
or a WTD or a nominee director
Who is eligible to
be an Independent Director?
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(a) who, in
the opinion of the Board, is a person of integrity and possesses relevant
expertise and experience
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(b) who is or
was not a promoter or related to promoters or directors of the company or its
holding, subsidiary or associate company
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(c) who is
only concerned with remuneration as director or having transaction not
exceeding 10% of his total income or such amount as may be prescribed, with
the company, its holding, subsidiary or associate company, or their
promoters, or directors, during the 2 immediately preceding FY or during the
current FY
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(d)none of
whose relatives—
(i) is holding any security of or interest in the
company, its holding, subsidiary or associate company during the 2
immediately preceding FY or during the current FY:
Provided that the relative may hold security or
interest in the company of face value not exceeding 50 lakh rupees or 2% of
the paid-up capital of the company, its holding, subsidiary or associate company
or such higher sum as may be prescribed;
(ii) is indebted to the company, its holding,
subsidiary or associate company or their promoters, or directors, in excess
of such amount as may be prescribed during the 2 immediately preceding FY or
during the current FY;
(iii) has given a guarantee or provided any security in
connection with the indebtedness of any third person to the company, its
holding, subsidiary or associate company or their promoters, or directors of
such holding company, for such amount as may be prescribed during the 2
immediately preceding FY or during the current FY; or
(iv) has any
other pecuniary transaction or relationship with the company, or its
subsidiary, or its holding or associate company amounting to 2% or more of
its gross turnover or total income singly or in combination with the
transactions referred to in sub-clause (i), (ii) or (iii)
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(e) who, neither himself nor any of his relatives—
(i) holds or
has held the position of a key managerial personnel or is or has been employee
of the company or its holding, subsidiary or associate company in any of the
3FY immediately preceding the financial year in which he is proposed to be
appointed
Provided that
in case of a relative who is an employee, the restriction under this clause
shall not apply for his employment during preceding 3FY
(ii) is or has been an employee or proprietor or a
partner, in any of the 3FY immediately preceding the FY in which he is
proposed to be appointed, of—
(A) a firm of auditors or company secretaries in
practice or cost auditors of the company or its holding, subsidiary or
associate company; or
(B) any legal or a consulting firm that has or had any
transaction with the company, its holding, subsidiary or associate company
amounting to 10% or more of the gross turnover of such firm;
(iii) holds together with his relatives 2% or more of
the total voting power of the company; or
(iv) is a CEO
or director, by whatever name called, of any NPO that receives 25% or more of
its receipts from the company, any of its promoters, directors or its
holding, subsidiary or associate company or that holds 2% or more of the
total voting power of the company or
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(f) who
possesses such other qualifications as may be prescribed
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Now the question
arises that how can independent director show his independence and shares his
unbiased views over working of company to the public at large??
Section 149 (4) states
that every listed public company shall have at least 1/3rd of the
total number of directors as independent directors and the C.G. may
prescribe the min. number of independent directors in case of any class or
classes of public companies,
Also, if we talk about
listed companies, where as per section 177 the board of every listed public
company shall constitute an audit committee, comprising majorly of the
Independent Directors, and the Audit Committee may call for the comments of the
auditors about internal control systems and the management of the company, also
they shall have power to obtain professional advice from external sources and
have full access to information contained in the records of the company,
Conclusion: via
audit committee the independent director come to know about any irregularities
or misconduct in working of the company except from purview of financial
Results.
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