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Independent Directors - towards good governance
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Updated On:
28/06/2014
Now updated based on Final Rules Independent directors are functionally appointed to monitor the performance of the executive management with a transparent, fair and independent perspective of things. So far only listed public companies were required to appoint independent directors under the Listing Agreement but now Companies Act, 2013 extends such requirement to cover other companies also.
An independent board of directors in public companies is seen as an integral element of a country's corporate governance norms. Board independence has taken on such a pivotal status in corporate governance that it has become almost indispensable. Consequently, governance reform in recent years has increasingly pinned hope as well as responsibility on independent directors to enable higher standards of governance.
Independent directors under the Companies Act 2013 - At least 1/3rd of the total number of directors of every listed public company should be independent directors. As per the provisions of Rules prescribed for this section, apart from listed companies following companies to have at least two independent directors:
- Public companies having paid – up share capital of Rs 10 crore or more; or
- Public companies having turnover of Rs 100 crore or more; or
- Public companies which in aggregate have outstanding loans, or borrowings, or debentures, or deposits, exceeding Rs 50 crore or more.
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