On a reading of the Companies Act, 1956,(CA,1956) it is noticed that there is no direct reference to Independent Directors(IDs).
On a reading of the Companies Act, 1956,(CA,1956) it is noticed that there is no direct reference to Independent Directors(IDs).
The need to have IDs on the Board of Directors arose due to the changing global economic scenario and the opening up of our economy. It is observed that some of the Directors and some of the companies have not acted in a manner protective of the interests of the minority stakeholders. Sometimes greed and personal aggrandizement has superseded welfare and health of the company. Both in India and abroad we have seen scandals take place; eg: Enron & Satyam etc.. Hence , an Expert Committee under the Chairmanship of Dr. J.J. Irani was set up by the Ministry of Company Affairs (MCA) to submit a report on the changes to be brought about in the CA,1956.
(A) INDEPENDENT DIRECTORS (section 149 of CA,2013): Independent director means an Independent Director referred to in sub- section (5) of section 149, which states every company existing on or before the commencement of the Companies Act,2013 shall within one year from such commencement or from the date of notification of the rules , shall comply with the provision of sub-section (4), which states that every listed public company shall have at least one-third of the total number of directors as Independent Directors.
BRIEFLY SCHEDULE IV IS AS UNDER: The guidelines of professional conduct spans from upholding ethical standard of integrity and probity to assisting the company in implementing best corporate governance practices. An ID must not abuse his position.
Comparison of Provision of SEBI Regulations Clause 49 with Companies Act , 2013: On comparing the provisions on the corporate governance under the SEBI Regulations Clause 49 and Companies Act, 2013, it is noticed as follows:-
