Indep Directors Final

8/12/2019 Indep Directors Final

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RESPONSIBILITIES OF

INDEPENDENT DIRECTORS

Submitted by

Group 9

Bhavya Kakkar -145

Jatin Jain - 147

Priyanka Malhotra -

183Vibhu Sharma -186

Karan Batheja- 190

Anusha Gupta -194

Shweta Shridhar -19



Clause 49 of Listing Agreement

The company must agree to comply with the followingprovisions:

Board of Directors

Composition of Board The Board of directors of the company shall have an optimum

combination of executive and non-executive directors with notless than fifty percent of the board of directors comprising ofnon-executive directors.

Where the Chairman of the Board is a non-executive director , atleast one-third of the Board should comprise of independent

directors and in case he is an executive director, at least half ofthe Board should comprise of independent directors.

Provided that where the non-executive Chairman is apromoter of the company or is related to any promoteror person occupying management positions at the Boardlevel or at one level below the Board, at least one-halfof the Board of the company shall consist of



means a non-executive director of the companywho:

a. apart from receiving director’s remuneration,does not have any material pecuniaryrelationships or transactions with the company, itspromoters, its directors, its senior management orits holding company, its subsidiaries andassociates which may affect independence of the

director; b. is not related to promoters or persons occupying

management positions at the board level or at onelevel below the board;

c. has not been an executive of the company in

‘independent director’



is not a partner or an executive or was not partner or anexecutive during the preceding three years, of any of the

following:

the statutory audit firm or the internal audit firm that

is associated with the company, and the legal firm(s) and consulting firm(s) that have a

material association with the company.

is not a material supplier, service provider or customer or

a lessor or lessee of the company, which may affectindependence of the director;

is not a substantial shareholder of the company i.e.

owning two percent or more of the block of voting shares.

is not less than 21 years of age





Why are independent directors

needed?

Role of owners in electing the Board

Protection of minorities

Role of other stakeholders in management

Board structure and objectivity of the Board

System of reporting and accountability

Audit and internal control Effective supervision and enforcement by

regulators

To encourage Sustainable Development of the

Company and its stakeholders





Role of an

IndependentDirector



Oversight of company financial reporting process and

disclosure of its financial information.

Recommending to Board on the appointment, re-

appointment and if required replacement or removal ofstatutory auditor and fixation of audit fees.

Review with management, the annual financial

statements before approval by the board with

particular reference to Directors ResponsibilityStatement, changes in accounting policy, major

accounting estimates, audit findings adjustments,

compliance with listing and other legal requirements,

disclosure of related party transactions and



Review of quarterly financial statements.

Review with management, performance of

statutory and internal auditors, adequacy of

internal control systems, adequacy of internalaudit function including their structure,

frequency, reporting.

Discussing significant finding of internalauditors, including internal investigations made

by them into areas of fraud, irregularities or

major failures of internal control systems.



Protection of the minority shareholders

Discussing with auditors on the scope of the audit.

Reviewing reasons for defaults into payments.

Statutory compliances Reviewing the whistle blower mechanism.

Be prepared to attend.

Contribute to and constructively challenge development of

company strategy.

Review financial statements of subsidiary companies with

special attention to investments made by them.

risk management and review



Rights & Authorities

Right to attend and vote in every Board

Meeting.

Right to be appointed on various committees.

Right to demand information on every

business matter.

Right to seek clarifications/justifications.

Right to dissent.



Duties &Responsibilities of

an Independent

Director



Responsibility of Directors

Responsibility

Statutory

Fiduciary



Statutory Responsibilities

Director should conduct himself in such a way that he does not incur suchdisqualification

Director should maintain absolute secrecy of confidential information

Director should not derive undue personal advantage or benefit by virtue ofhis position

Director should ensure that company at all times complies with statutes,rules and regulations in letter and spirit

Director with other Directors of the Board is responsible that report andrecommendation of Audit Committee and Shareholders’ / Investors’Grievance Committee receive due consideration

Director is accountable for the company practicing the highest standard ofcorporate governance with a underlying view of increasing the

shareholders’ value



Fiduciary Duty of Directors

Director should not enter into engagements in

which he can have a personal interest

conflicting with the interest of the company.

Director must display the utmost good faithtowards the company in their dealings with it

or on its behalf.



Duties & Responsibilities



Duties & Responsibilities

He should furnish information about disclosure of

General Notice of directorship, membership of

body corporate and other entities in the prescribed

form to the company. He should also inform the Company about any

change in the details submitted subsequently.

He should provide a list of his relatives as definedin the Companies Act and their directorship and

interest in other concerns.



The Director shall have fiduciary duty to act in

good faith and in the interest of the company.

It is the duty of the Independent Director to

acquire proper understanding of the business ofthe Company.

He should act only within the powers laid down

by the Memorandum of Association and Articlesof Association and by applicable law and

regulations.

He should not be a Director of more than fifteen

Companies.

Independent Directors and



Independent Directors and

Vicarious Liability

The Companies Act, 1956 looks at all directors alike. Itdoes not exempt independent directors from any of theduties, liabilities, and responsibilities of the Board.

As of the current legal norms, Independent directors

face the same liabilities as the executive directors.Section 141 of this Act imposes a vicarious liability onthe directors of a company who are prosecuted inrespect of dishonor of cheque.

The law does not make a distinction between directors

who are in charge of the day-to-day affairs of thecompany and non-executive members attending onlythe board meetings once in three months.

It however does look unreasonable to make such non-executive directors liable for the actions and decisions

of the company they may not be aware of.



Recommendations

Better Defined Rules The Chair of the Board should be an IndependentDirector with the roles segregated from that of the CEO

Guidelines for legal liability of Independent Directors As long as theIndependent directors show due diligence, the law should exempt them fromall types of liabilities for the actions of the board or the managing director theymay not be aware of.

Improved transparency Remuneration of CEOs should be decided by aregulatory body like SEBI based on size of the company or decided byinstitutional investors holding significant stake in the company.

Remove One-Size-fits-all approach Clause 49, which lays down role of theaudit committee and role of board disclosure risk management, mentionscompliance norms to be independent of the size of the company. This may notnecessary yield the desired levels of compliance in India.

Better effectiveness Medium term lock-in options (medium term stockoptions which are convertible only after 4-5 years or simply through contractsfor the number of years of stay) for the CEO to prevent the CEO from acting inways to gain short term gains from unethical governance.

Training Program for new Directors In order to have a better clarity on theissues facing the business and the upcoming challenges in the industry, many

companies could do more in terms of a formal and tailored inductionprogram(which is a recommendation of the Narayana Murthy Report) for their



Documents

Indep Directors Final