Norms eased for independent directors :-livemint . Updated: 21 Dec 2020, 08:10 AM ISTGireesh Chandra Prasad · Centre has granted two years to pass the online proficiency test from date of inclusion in independent directors database

 

·The government has given extra time for independent directors and eligible candidates to pass a mandatory proficiency test and reduced the experience requirement for exemption from the test.

·The ministry of corporate affairs has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 effective from 18 December, granting two years for people to pass the online proficiency test from the date of their inclusion in the database of independent directors.

· Before the amendment, serving directors and candidates had one year to pass the test from the date they are included in the database of independent directors maintained by the Indian Institute of Corporate Affairs, which is attached to the ministry.

According to an amendment last year, all serving directors were required to get their names included in the registry by the end of October 2020, which remains unchanged.

But they now have two years from the date of getting registered to clear the test. Aspiring independent directors have to get their names enrolled before they take up the assignment. They also have two years to pass the test. Also, it requires only 50% score to pass the test, compared to 60% earlier.

·The amended rules also liberalize the experience requirement for those who have already held directorships to be exempted from the test, lowering it to three years from the earlier 10 years.

· Accordingly, people who have served for three years on the board of entities such as listed companies, unlisted companies with ₹10 crore or more paid-up capital, non-resident companies with $2 million paid-up capital or a commercial entity set up under a central or state law need not take the proficiency test. 

The rules now specifically recognize senior officials of select ministries and regulatory bodies with three years of corporate governance experience as persons exempted from the test.

Accordingly, the directors in the ministries of finance, corporate affairs, commerce and industries, heavy industries and public enterprises with experience in economic, corporate and securities laws need not take the test. In the case of regulators such as the Securities and Exchange Board of India, Reserve Bank of India, Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority, those in the pay scale of chief general managers with three years experience are exempt from the test.

·The move makes it easier for state-owned and private enterprises to find people to serve on their board. The proficiency test aims to ensure that only those who can understand the implications of board decisions are hired as independent directors.