Independent directors on company boards will have to clear an exam
NEW DELHI : The government is planning to introduce a mandatory online certificate course followed by a test for them.
Independent directors on company boards will soon have to clear an exam before they can be appointed, said Injeti Srinivas, the top bureaucrat in charge of corporate affairs. At present, the government is having a dialogue with industry and other stakeholders.
To improve corporate governance, a basic 60-hour online course for independent directors is being considered by the Ministry of Corporate Affairs (MCA). “It is likely to be more of a self-taught, self-tested online course which will focus on making independent directors aware of their liabilities and rights.”
“We want to demolish the myth that independent directors don’t have any fiduciary duty,” Srinivas said in an interview in New Delhi on June 6. “We want to propagate corporate literacy to make them aware of their duties, roles and responsibilities.”
The Indian Institute of Corporate Affairs (IICA) will be the designated authority for rolling out the online course as well as exam or test. “We are considering two options. If people are meeting certain criteria, they can just go for self-test, while others will take an external examination. Another alternative is that we may allow everybody to do self-test. However, the online study course will be compulsory for everyone,” according to a source.
As the independent directors have a very important role in a company, “it is very critical to ensure that they possess the requisite knowledge to discharge their duties. So many cases of fraud and corporate mis-governance have come before us. It shows that the institution of independent directors needs to be strengthened,” said another official.
An independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations, as per the latest Companies (Appointment & Qualification of Directors) Rules. In addition to a minimum qualification, the requirement for the certificate course will also come into play
The exam will be an online assessment covering the basics of Indian company law, ethics, and capital market norms among other areas, Srinivas said. While aspiring directors will have a fixed time frame within which they have to clear the exam, they will be allowed an unlimited number of attempts, he said.
Experienced directors who have already been on boards for several years will be exempt from the test but will have to register themselves on a database the government is preparing. This compilation will be a one-stop platform where companies looking for independent directors can meet those willing to serve, Srinivas said.
According to existing law, every company listed in India has to have independent directors accounting for at least a third of its board strength. Their main duty is to act as overseers outside the influence of the firm, safeguarding the interests of minority shareholders.
Srinivas, who aims to roll out the new oversight program within two months, said the ultimate aim of the exam is to ensure that officials aren’t able to plead ignorance if they’re hauled up over a lack of oversight.(With Agency Inputs ).
