IICA Independent Director cheat sheet

The Independent Directors Databank is maintained by IICA with MCA support; a person must be registered in it to be appointed as an independent director under the Companies Act, 2013.

Eligibility to appear for the online proficiency self-assessment: any person who has passed the Indian Institute of Corporate Affairs (IICA) exam or is otherwise eligible as per Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Registration in the databank is valid for a period of one year from the date of registration or renewal, as the case may be; renewal must be applied for before expiry to keep the databank status active.

A person registered in the databank must apply for renewal of registration on or before the expiry of the validity period; failure to renew within the prescribed time results in removal from the databank.

Exemption from the online proficiency self-assessment is available to persons who have served as a director or key managerial personnel for at least three years in a listed company or certain other specified entities.

The online proficiency self-assessment must be cleared within two years from the date of inclusion of the name in the databank, unless exempt.

A person who fails to clear the self-assessment within the prescribed period is required to pass it before being appointed or continuing as an independent director.

The databank records the director's identity, DIN, qualification, experience and self-assessment status; changes must be updated promptly to avoid disqualification.

SEBI LODR Regulation 17 requires that the board of directors of a listed entity shall have an optimum combination of executive and non-executive directors with not less than one-third of the board comprising independent directors where the chairperson is a non-executive director.

Where the chairperson is an executive director, at least half of the board must comprise independent directors under LODR Regulation 17(1)(b).

The board must meet at least four times a year, with a maximum gap of one hundred and twenty days between two consecutive meetings.

Audit committee under LODR Regulation 18 must have a minimum of three directors as members, with at least two-thirds being independent directors, and the chairperson must be an independent director.

Nomination and remuneration committee under Regulation 19 must have at least three members, all of whom shall be non-executive directors, with at least two-thirds being independent directors.

A listed entity must have at least one independent woman director on its board under LODR Regulation 17(1)(a) read with the Companies Act, 2013.

The Companies Act, 2013 Section 149(4) requires every listed public company to have at least one-third of the total number of directors as independent directors.

Board evaluation under Section 178 and LODR Regulation 17(3) requires annual evaluation of the performance of the board, its committees and individual directors.

Section 149(6) of the Companies Act, 2013 prescribes the criteria for an independent director, including absence of material pecuniary relationship with the company, its promoters, directors or holding/subsidiary/associate companies.

An independent director shall not be entitled to any remuneration other than sitting fees, reimbursement of expenses and profit-related commission approved by members; stock options are prohibited under Section 149(9).

Section 149(10) provides that an independent director shall hold office for a term of up to five consecutive years and is eligible for reappointment on passing of a special resolution by the company.

Section 149(11) limits the total tenure of an independent director to two consecutive terms; a cooling-off period of three years is required before re-appointment.

Section 149(12) provides that independent directors are liable only in respect of acts of omission or commission by a company which occurred with their knowledge, attributable through board processes, and with their consent or connivance.

Section 167 and the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribe disqualifications and the number of directorships an independent director may hold.

Section 135 of the Companies Act, 2013 read with the CSR Rules, 2014 governs corporate social responsibility obligations of companies meeting the prescribed thresholds.

SEBI (LODR) Regulations, 2015 and the SEBI (Prohibition of Insider Trading) Regulations, 2015 are the principal market-side regulatory frameworks applicable to listed companies.

India's business environment is shaped by the Companies Act, 2013, the Insolvency and Bankruptcy Code, 2016, the Competition Act, 2002 and the Foreign Exchange Management Act, 1999.

The Insolvency and Bankruptcy Code, 2016 established the Insolvency and Bankruptcy Board of India and provides for time-bound resolution of stressed assets.

The Competition Commission of India under the Competition Act, 2002 regulates anti-competitive agreements, abuse of dominance and combinations.

FEMA, 1999 governs cross-border transactions and foreign investment; the RBI issues regulations under it, including the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

The Goods and Services Tax regime, introduced in 2017, replaced multiple indirect taxes and is administered under the CGST Act, 2017 and related state legislation.

The Companies (Amendment) Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, define CSR obligations and permissible activities.

The National Guidelines on Responsible Business Conduct (NGRBC), 2019 issued by MCA provide a framework for ethical business practices.

The Business Responsibility and Sustainability Report (BRSR) is mandatory for the top 1,000 listed entities by market capitalisation under LODR Regulation 34(2)(f).

Section 135(1) of the Companies Act, 2013 applies to companies with net worth of INR 500 crore or more, turnover of INR 1,000 crore or more, or net profit of INR 5 crore or more during the immediately preceding financial year.

A company meeting the Section 135 threshold must constitute a CSR Committee of the Board with at least one independent director; the committee recommends CSR policy and expenditure.

The CSR obligation is 2% of the average net profits of the company made during the three immediately preceding financial years, computed as per Section 198.

Section 135(5) requires the company to spend at least 2% of average net profits; if it fails, the board must report the reasons and transfer the unspent amount to a specified fund within six months of the financial year end (for ongoing projects, within 30 days).

The CSR Rules, 2014, as amended, permit CSR activities in areas such as education, healthcare, sanitation, environment sustainability and protection of national heritage.

CSR expenditure does not include activities undertaken in the normal course of business, contributions to political parties, or activities benefiting only employees of the company.

The NGRBC, 2019 principles cover ethics, human rights, employee well-being, stakeholder engagement, environment, and transparency.

BRSR disclosures under LODR Regulation 34(2)(f) require reporting on the nine NGRBC principles and are mandatory for the top 1,000 listed entities.

The Independent Directors Databank is maintained by IICA with MCA support; a person must be registered in it to be appointed as an independent director under the Companies Act, 2013.

Eligibility to appear for the online proficiency self-assessment: any person who has passed the Indian Institute of Corporate Affairs (IICA) exam or is otherwise eligible as per Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Registration in the databank is valid for a period of one year from the date of registration or renewal, as the case may be; renewal must be applied for before expiry to keep the databank status active.

A person registered in the databank must apply for renewal of registration on or before the expiry of the validity period; failure to renew within the prescribed time results in removal from the databank.

Exemption from the online proficiency self-assessment is available to persons who have served as a director or key managerial personnel for at least three years in a listed company or certain other specified entities.

The online proficiency self-assessment must be cleared within two years from the date of inclusion of the name in the databank, unless exempt.

A person who fails to clear the self-assessment within the prescribed period is required to pass it before being appointed or continuing as an independent director.

The databank records the director's identity, DIN, qualification, experience and self-assessment status; changes must be updated promptly to avoid disqualification.

SEBI LODR Regulation 17 requires that the board of directors of a listed entity shall have an optimum combination of executive and non-executive directors with not less than one-third of the board comprising independent directors where the chairperson is a non-executive director.

Where the chairperson is an executive director, at least half of the board must comprise independent directors under LODR Regulation 17(1)(b).

The board must meet at least four times a year, with a maximum gap of one hundred and twenty days between two consecutive meetings.

Audit committee under LODR Regulation 18 must have a minimum of three directors as members, with at least two-thirds being independent directors, and the chairperson must be an independent director.

Nomination and remuneration committee under Regulation 19 must have at least three members, all of whom shall be non-executive directors, with at least two-thirds being independent directors.

A listed entity must have at least one independent woman director on its board under LODR Regulation 17(1)(a) read with the Companies Act, 2013.

The Companies Act, 2013 Section 149(4) requires every listed public company to have at least one-third of the total number of directors as independent directors.

Board evaluation under Section 178 and LODR Regulation 17(3) requires annual evaluation of the performance of the board, its committees and individual directors.

Section 149(6) of the Companies Act, 2013 prescribes the criteria for an independent director, including absence of material pecuniary relationship with the company, its promoters, directors or holding/subsidiary/associate companies.

An independent director shall not be entitled to any remuneration other than sitting fees, reimbursement of expenses and profit-related commission approved by members; stock options are prohibited under Section 149(9).

Section 149(10) provides that an independent director shall hold office for a term of up to five consecutive years and is eligible for reappointment on passing of a special resolution by the company.

Section 149(11) limits the total tenure of an independent director to two consecutive terms; a cooling-off period of three years is required before re-appointment.

Section 149(12) provides that independent directors are liable only in respect of acts of omission or commission by a company which occurred with their knowledge, attributable through board processes, and with their consent or connivance.

Section 167 and the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribe disqualifications and the number of directorships an independent director may hold.

Section 135 of the Companies Act, 2013 read with the CSR Rules, 2014 governs corporate social responsibility obligations of companies meeting the prescribed thresholds.

SEBI (LODR) Regulations, 2015 and the SEBI (Prohibition of Insider Trading) Regulations, 2015 are the principal market-side regulatory frameworks applicable to listed companies.

India's business environment is shaped by the Companies Act, 2013, the Insolvency and Bankruptcy Code, 2016, the Competition Act, 2002 and the Foreign Exchange Management Act, 1999.

The Insolvency and Bankruptcy Code, 2016 established the Insolvency and Bankruptcy Board of India and provides for time-bound resolution of stressed assets.

The Competition Commission of India under the Competition Act, 2002 regulates anti-competitive agreements, abuse of dominance and combinations.

FEMA, 1999 governs cross-border transactions and foreign investment; the RBI issues regulations under it, including the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

The Goods and Services Tax regime, introduced in 2017, replaced multiple indirect taxes and is administered under the CGST Act, 2017 and related state legislation.

The Companies (Amendment) Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, define CSR obligations and permissible activities.

The National Guidelines on Responsible Business Conduct (NGRBC), 2019 issued by MCA provide a framework for ethical business practices.

The Business Responsibility and Sustainability Report (BRSR) is mandatory for the top 1,000 listed entities by market capitalisation under LODR Regulation 34(2)(f).

Section 135(1) of the Companies Act, 2013 applies to companies with net worth of INR 500 crore or more, turnover of INR 1,000 crore or more, or net profit of INR 5 crore or more during the immediately preceding financial year.

A company meeting the Section 135 threshold must constitute a CSR Committee of the Board with at least one independent director; the committee recommends CSR policy and expenditure.

The CSR obligation is 2% of the average net profits of the company made during the three immediately preceding financial years, computed as per Section 198.

Section 135(5) requires the company to spend at least 2% of average net profits; if it fails, the board must report the reasons and transfer the unspent amount to a specified fund within six months of the financial year end (for ongoing projects, within 30 days).

The CSR Rules, 2014, as amended, permit CSR activities in areas such as education, healthcare, sanitation, environment sustainability and protection of national heritage.

CSR expenditure does not include activities undertaken in the normal course of business, contributions to political parties, or activities benefiting only employees of the company.

The NGRBC, 2019 principles cover ethics, human rights, employee well-being, stakeholder engagement, environment, and transparency.

BRSR disclosures under LODR Regulation 34(2)(f) require reporting on the nine NGRBC principles and are mandatory for the top 1,000 listed entities.