Business Companies 27 Dec 2019 Independent director ...

Independent directors must enrol with online data bank

Published Dec 27, 2019, 2:23 am IST
Updated Dec 27, 2019, 2:23 am IST
Centre wants new directors to clear qualifying test
Ministry of Corporate Affairs
 Ministry of Corporate Affairs

Mumbai: As a new initiative towards enhancing good corporate governance standards, the Indian Institute of Corporate Affairs (IICA) has launched an online data bank for the independent directors. The move is in line with a notification issued by the ministry of corporate affairs on October 22, 2019.

Amongst all directors, independent directors are considered to bring credibility to the board as they are outside the sphere of influence.


However, recent corporate scams have turned the heat on company directors, who, the government feels, have failed to detect any signs of trouble. The accountability on the independent directors became the biggest reason for many independent directors to resign leading to a total of 606 independent directors resigning from the National Stock Exchange-listed company boards in 2018.

In comparison, 412 independent directors resigned between January and July this year.

All individuals who are proposed to be appointed as an independent director or who are already appointed as an independent director on board of companies in India have to register themselves in the data bank and then appear for an online proficiency test.


The application for inclusion of name in the data bank can be for one year, five years or for the person’s life-time. Existing independent directors have three months from December 1, 2019 for registration i.e., by February 29, 2020.

Independent Directors will also have to get their registration renewed 30 days before the expiry of the registration, unless the registration is availed for life-time. If an independent director fails to renew the registration, his or her name will be remo-ved from the data bank.

Every independent dire-ctor is now required to declare that their names are included in the data bank each time the independency declaration is submitted under section 149(7) of Companies Act, 2013.


Further, the company has to declare annually in its boards’ report that the IDs appointed on the Boa-rd have cleared online proficiency self-assessment test conducted by IICA, unless they are otherwise exempted from same.

Every individual whose name is entered in the data bank will within one year from the date of inclusion of his/her name in the data bank will appear for an online proficiency self-assessment test and secure at least in aggregate 60 per cent of the marks and failing which, his/her name will stand removed from the data bank of IICA. There’s no bar on how many times the test can be taken.


An individual who has served a period of not less than 10 years either as director or key managerial personnel in a listed public company or in an unlisted public company having paid-up share capital of `10 crore or more will not be required to pass online proficiency self-assessment test. However, he/she will still be required to get his/her name included in the data bank.

A non-resident individual is also required to pass the online proficiency self-assessment test. The online self-assessment test would cover company law, securities law, accountancy, and such other areas relevant to the functioning of an individual acting as an independent director. “The syllabus of the said test includes the Indian laws and practices and it may not be reasonable for such non-resident individual to prepare and pass for the exam which can shrink the pool for of independent directors,” said Nishith Desai Associates, a law firm.


“Also, as per our knowledge, none of the other comparable countries have introduced any such exam to test the skills or knowledge of the independent directors and their appointment is purely based on judgemen or decision of Board and shareholders,” it said.