In a climbdown of sorts, the Corporate Affairs Ministry (MCA) has relaxed the criteria for taking the online self-proficiency test mandated for all independent directors looking to get into or retain their board positions in companies.
Simply put, a large number of independent directors in Corporate India may not be required to appear for the test.
Since October 2019, one’s eligibility to be an independent director rested on two main criteria — finding a place in the databank maintained by Indian Institute of Corporate Affairs and taking an online self-proficiency test. Finding a place in the databank is still a must for being recognised as an independent director.
Eligibility for waiver
However, the MCA has now ruled that individuals who have served as directors or key managerial personnel in listed companies or unlisted companies with paid-up capital of over ₹10 crore for a period of three years on the date of their inclusion in the maintained databank need not appear for the online proficiency test.
Prior to this rule change, individuals who had served as directors or key managerial personnel for at least 10 years were eligible for the waiver.
The MCA has also now exempted those individuals holding positions of directors or key managerial personnel in overseas body corporates (with paid-up capital of $2 million or more) for at least three years from taking the test.
A similar exemption has been extended to those serving as director on a body corporate listed on any overseas stock exchange in a country which is a member-state of the Financial Action Task Force on Money Laundering, and the regulator of the securities market in such member-state is a member of the International Organisation of Securities Commissions.
This move will come in handy for Corporate India, as several entities are finding it difficult to attract globally reputed individuals to the board, SN Ananthasubramanian, practising company secretary and former ICSI President, told BusinessLine.
Besides exempting directors serving listed body corporates and conforming to a three-year experience rule, the MCA has also specifically exempted directors (with three years experience) of statutory corporations set up under an Act of Parliament or any State legislature carrying on commercial activities from the online self proficiency test.
All officers with three years experience as a director and in the pay scale of director or above in the MCA, or in the Ministries of Finance, Commerce and Industry or Heavy Industries and Public Enterprise and experience in handling matters relating to corporate laws or securities laws or economic laws have been exempted from the online self proficiency test. A similar dispensation will be available for those in the pay scale of chief general manager or above in SEBI, the RBI, the IRDAI and the PFRDA.
The MCA has also now given more time for existing directors to take the online self proficiency test. All existing directors will have two year’s time — as against one year stipulated earlier—from the day they are included in an IICA-maintained databank to go through the online test.