The Amendment Rules shall come into force from the date of publication of this notification in the Official Gazette i.e. 5th July, 2017.
As per the Notification, amendment is made in Rule 4 of Companies(Appointment and Qualification of Directors) Rules, 2014. The earlier Rule 4 shall be numbered as sub rule(1) and after sub-rule (1) as so renumbered, the following sub-rule shall be inserted namely:-
The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-
(a) a joint venture;
(b) a wholly owned subsidiary; and
(c) a dormant company as defined under section 455 of the Act
Through this notification, exemptions have been granted to certain classes of companies from appointment of Independent Director on the Board of the Company.
Further, In the principal rules, in the Annexure, for Physical Form DIR-5 (Application for surrender of Director Identification Number) an e-form DIR-5 shall be substituted.
Rule 4 of Companies(Appointment and Qualification of Directors) Rules, 2014 after Amendment:
Rule 4: Number of Independent Directors
(1) The following class or classes of companies shall have at least two directors as independent directors
- the Public Companies having paid up share capital of ten Crore rupees or more; or
- the Public Companies having turnover of one hundred Crore rupees or more; or
- the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty Crore rupees:
Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it:
Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later:
Provided also that where a company ceases to fulfil any of three conditions laid down in sub-rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;
Explanation. – For the purposes of this rule, it is here by clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account:
Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.
(2) The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-
(a) A joint venture;
(b) A wholly owned subsidiary; and
(c) A dormant company as defined under section 455 of the Act.
For Detailed Analysis Please watch my YouTube Video on this Topic at: https://youtu.be/yl1ljtr1RHI
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