Definition of an Independent Director Section 149



Posted on 19-04-2016        By ADMIN



Definition of an Independent Director  Section 149 (6)   COMPANIES ACT, 2013  

An independent director means a director other than a managing director or a wh ole-time director or a nominee director wh o does not have any material or pecuniary relationship with the company/ directors. Section 149 (6) of the Act prescribes the criteria for independent directors which are as foll ows:  (a) Who in the opinion of the Board, is a person of integrity and poss esses relevant industrial expertise and experience;  (b) Such individual shall not be a promoter or related to promoter of the company or its holding, subsidiary or associate company;  (c) Such individuals must not have any material or pecuniary relationship during the two imm ediately preceding financial years or during the current financial year with the company or its promoters/directors/holding/subsidiary/ asso ciate company; (d) The relatives of such perso n should not have had any pecuniary relationship with the company or its subsidiaries, amounting to 2% or more of its gross turnover or total income or Rs. 50 lacs or such higher amount as may be prescribed, wh ichever is less , during the two immediately preceding financial years or in the current financial year;  (e) He must not either directly or any of his relatives  (i)  hold or has held the pos ition of a key managerial personn el or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years imm ediately preceding the financial year in which he is proposed to be app ointed.  (ii )  is or has been an employee or proprietor or a partner, in any of the three financial years imm ediately preceding the financial year in wh ich he is propos ed to be app ointed, of—  (A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or asso ciate 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 per cent or more of the total voting power of the company; or  (iv) is a Chief Executive or director, by wh atever name call ed, of any non- profit organisation that receives 25 % or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds 2% or more of the total voting power of the company, then also he is not eligible for office of independent director; or  (f) who possesses such other qualifications as prescribed in Rule 5 as an independent 

 COMPANIES ACT, 2013  

director shall poss ess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, techn ical operations or other disciplines related to the company’s business. 



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