we help these thriving Foreign Companies and MNCs in fulfilling their requirement for Directorships in the form of Independent Directors, Additional Directors, and Professional Directors and ease out the process for them to establish and incorporate here.
Though a company being a separate legal entity, it does not have its own physical existence. All the affairs of the company need to be conducted by natural persons on its behalf. A Director is any person appointed as a member to the Board of Directors who is usually in charge of the Company’s business in one way or the other and has the responsibility for determining and implementing the Company’s policies in alignment with the Company’s Vision and Mission, thereby increasing the wealth of the Shareholders. A director need not hold any stock or shares of the Company to hold his office. They are often termed as the Company’s agents as authorized by the Articles of Association, who on behalf of the Company, enter into contracts with third parties like suppliers, buyers, lenders and bind the Company. We at PSAC & Associates understand how difficult it gets for any Company outside India (Foreign Companies, MNCs, etc.), to establish its Place of Business and get started with its fully functional operations. Therefore with our team of esteemed, qualified and skilled Chartered Accountants, we help these thriving Foreign Companies and MNCs in fulfilling their requirement for Directorships in the form of Independent Directors, Additional Directors, and Professional Directors and ease out the process for them to establish and incorporate here.
In a broad sense, an Independent Director is a non-executive director who does not have any kind of relationship with the company that may affect the independence of his/her judgment. As per Section 149(6) of the Companies Act, 2013, 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;
d. none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to 2% or more of its gross turnover or total income or Rs. 5 million or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
e. who, neither himself nor any of his relatives-
(i.) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii.) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent or more of the gross turnover of such firm;
(iii.) holds together with his relatives two percent, or more of the total voting power of the company; or
(iv.) is a Chief Executive or director, by whatever name called, of any non-profit organisation that receives twenty-five per cent, or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent, or more of the total voting power of the company; or
f. who possesses such other qualifications as prescribed below:
An independent director shall possess appropriate balance of skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business.
Following class of companies are required to appoint at least 1/3 of total number of directors on their Board of Directors as independent directors:
i. Listed Companies as per Clause 49 of the Listing Agreement;
ii. Public Companies having paid up share capital of Rs. 1 Billion or more; or
iii. Public Companies having turnover of Rs. 3 Billion or more;
iv. Public Companies which have, in aggregate, outstanding loans or borrowings or debentures or deposits, exceeding Rs. 2 Billion.
When the Articles of Association of the Company so provides, the Board can under Section 161(1) of the Companies Act, 2013, appoint a person, other than a person who fails to get appointed as a Director in a General Meeting, as an Additional Director. Pertinently there is no restriction on the exercise of this power, which can be done by the Board more than once every year, however, the total number of directors including the additional directors shall not at any time exceed the maximum strength fixed by the Board by the articles. Additional Directors are usually appointed taking into consideration the load of work pertaining in the company. The Additional Director shall hold his/her office
i. up to the date of the next annual general meeting, or
ii. the last date on which the annual general meeting should have been held, whichever is earlier.
The term "Professional Director" has not yet been defined by the Companies Act, 2013. However, while filing form 32, one has to mention, in the category of directors, whether the said person is a promoter director, independent director or professional director. The term “Professional Director” does not refer to the tradition definition one would assume like academicians, attorneys and other individual contributors who serve on several boards. It instead refers to well-established professionals who devote all of their work, time and energies to corporate board activities. With the increasing number of frauds and scandals, Profession Directors are the need of the hour. Professional Directors can play a vital role especially in Foreign Companies, Multi-National Corporations and Public Sector Undertakings, where governance of the company along with the technical legalities is utmost required, which is a child’s play for these Professional Directors.