ROLE

OF
INDEPENDENT DIRECTORS

SUBMITTED BY:
Srishti Narang 20BSP2506
Sween Bhatia 20BSP2600
Tushar Kapoor 20BSP2679
Vinod Chellani 20BSP2793
Yamini Chakraborty 20BSP2845
 TABLE OF CONTENTS

1. INTRODUCTION
2. NEED OF INDEPENDENT
DIRECTORS
3. ROLE OF INDEPENDENT
DIRECTOR
4. DUTIES OF INDEPENDENT
DIRECTOR
5. REMUNERATION
6. TERM OFFICE
7. PENALTY
8. DIFFERENCE BETWEEN
INDEPENDENT DIRECTOR &
EXECUTIVE
9. CONCLUSION
 INDEPENDENT DIRECTOR

As per Section 2(47), “independent director” means an independent

director referred to in sub-section (5) of section 149;
Section 149 (6) contains that –
An independent director in relation to a company, means a director other
than a managing director or a whole-time director or a nominee director,
—
(a) who, in the opinion of the Board, is a person of integrity and
possesses relevant expertise and experience;
(b) (i) who is or was not a promoter of the company or its holding,
subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its
holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship with the company, its
holding, subsidiary or associate company, or their promoters, or
directors, during the two immediately preceding financial years or during
the current financial year;
 Two – Thirds of the member of the
members of the nomination &
remuneration committee (AC) of
the board of a listed company
should be independent directors.

 Appointment of an independent
director should be approved
by shareholders within three months
or through an AGM, whichever is
earlier.

 If an independent director resigns

from the board, the company should
disclose to the exchanges the full
content of the letter of resignation
of that director.
NEED OF AN INDEPENDENT DIRECTOR

• Independents are impartial

• Independent can mentor and share their

network

• Independents are the key to conflict resolution

• Independent can bring focus and depth of

perspective

• Independents bring expertise to bolster where

you have room to grow
 ROLE OF INDEPENDENT DIRECTORS

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MARS MERCURY VENUS

Improves corporate
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It’s full of Bring
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Moon

Ensures better governance by Aim towards the solutions

actively involving in various which are in the best
committees interest of the company
 DUTIES OF INDEPENDENT DIRECTORS
The Independent Directors shall:

1. Undertake appropriate induction and regularly update and refresh their

knowledge and familiarity with the company.

2. Seek appropriate clarification of information and where necessary take

and follow appropriate professional advices at the expense of the
company.

3. Strive to attend all meetings of the Board of directors.

4. Participate actively in the committees of the board in which they are

chairpersons or members.

5. Strive to attend the general meetings of the company.

6. Keep themselves well informed about the company and the external
environment.
7. Not to disclose confidential information, unless such disclosure is
approved by the board or required by the law.

8. Report concerns about unethical behaviour, actual or suspected fraud or

violation of the company’s code of conduct or ethics policy.

9. Act within their authority, assist in protecting the legitimate interests of

the company, shareholders and its employees.

10. Ascertain and ensure that the company has an adequate and functional
vigil mechanism and to ensure that the interests of a person who uses such
mechanism.
 REMUNERATION

NO STOCK OPTION PROFIT RELATED

COMMISSION

REIMBURSEMENT OF
REMUNERATION FEES EXPENSES
 TERMS OF OFFICE

TENURE TO BE NON-
AFTER EXPIRY OF AN ROTATIONAL
5 (ORIGINAL TERM) + 5 INDIVIDUAL INELIGIBLE
YEARS (ADDITIONAL FOR REAPPOINTMENT
TERM SUBJECT TO A FOR 3 YEARS
SPECIAL RESOLUTION
Difference Between:
Executive Director Non-executive/Independent Director

An Executive Director is the one involved in the routine A Non-Executive Director is a member of the company's board, but
management of the firm he/she does not possess the management responsibilities

Represented as internal directors Represented as external directors

They are appointed by “letter of employment” They are appointed by “letter of appointment”

They are appointed to board by Nomination Committee or by They are appointed to board by Shareholders
Shareholders

ESOPs can be granted to such director ESOPs cannot be granted to such director
Remuneration – salary Remuneration – service fee

These includes CEO, MD, CFO etc. These include Chairman

No minimum number of executive directors required to be 1/3rd must be an independent for Listed & at least two independent
appointed for unlisted
Penalty for Non-compliance of independent
director provisions:

• Double penalty for non-compliance – under Companies Act and Securities

and Contract Act (SCRA)

• Penalty under section 172, Companies Act; INR 50,000 to INR 5,00,000

• Penalty under SCRA; Imprisonment upto 10 years or fine upto rupees 25

crore
 CONCLUSION

• BRIDGE BETWEEN
MANAGEMENT
AND
SHAREHOLDERS

• INDEPENDENT • IMPORTANT
JUDGEMENTS ASSIST
Thank
You