I. TERMS AND CONDITIONS OF APPOINTMENT OF INDEPENDENT DIRECTORS
Schedule IV to the Companies Act, 2013 provides for the ‘Code for Independent Directors & The appointment process of Independent Directors is independent of the company management. During the selection process, the Board ensures that there is appropriate balance of skills, experience and knowledge in the Board so as to enable the Board to discharge its functions and duties effectively.
The appointment of Independent Director(s) of the Company is approved at the meeting of the shareholders. The Board always ensures that the Independent Director proposed to be appointed fulfils the conditions specified in the Act and the Rules made thereunder and that the proposed director is independent of the management and a statement to that effect is included in the explanatory statement attached to the notice of the meeting.
The terms and conditions for the appointment of the Independent Director are enumerated below:
The appointment is for a term of 5 (five) years commencing from the date of appointment and ending (‘Termination Date’) on 6th Annual General Meeting of the Company following the date of appointment and shall not be liable to retirement by rotation. Unless the
appointment is renewed on or prior to the Termination Date, the appointment shall come to an end on the Termination Date. The appointment is as per the Company’s Articles of Association.
As Independent Director, they will not be liable to retire by rotation.
Notwithstanding the other provisions of the terms and conditions of the appointment of the Independent Director, the appointment may be terminated with or without cause at any time by the Company with immediate effect, in accordance with the Companies Act, 2013 and Rule and Regulations made thereunder and the Company’s Articles of Association or, as applicable, or upon the resignation of the Independent Director, or the Board of Directors (excluding the concerned Independent Director) is of opinion that the continued appointment is not in the interest of the Company. Upon such termination or resignation of the appointment for any reason, the Independent Director shall not be entitled to any damages for loss of office and no fee will be payable in respect of any unexpired portion of the term of the appointment or any damages whatsoever. Upon such termination or resignation, the Independent Director will have to undertake to sign all appropriate paperwork that the Company may require.
Reappointment of the end of the Term shall be based on the recommendation of the Nomination and Remuneration Committee and subject to the approval of the Board and the shareholders.
During the term of the appointment, the Independent Director may be asked to serve on one or more of the Board Committees including Audit Committee, Nomination and Remuneration Committee, Stakeholders’ Relationship Committee, Corporate Social Responsibility Committee or such committee of the Board of the Directors from time to time and copies of the terms of Reference for each of those committees will be provided to him.
If circumstances change, and the Independent Director believes that his independence may be in doubt, he should discuss this with the Chairman of the Company as soon as possible.
The re-appointment of independent director shall be on the basis of report of performance evaluation.
3. RESIGNATION OR REMOVAL:
The resignation or removal of an independent director shall be in the same manner as is provided in sections 168 and 169 of the Act.
An independent director who resigns or is removed from the Board of the company shall be replaced by a new independent director at the earliest but not later than immediate next
Board Meeting or three months from the date of such vacancy, whichever is later.[Rule 4 of (Appointment and Qualification of Directors) Rules, 2014]
Where the company fulfils the requirement of independent directors in its Board even without filling the vacancy created by such resignation or removal, as the case may be, the requirement of replacement by a new independent director shall not apply.
II. ROLE AND FUNCTIONS
The Independent Directors shall:
help in bringing an independent judgment to bear on the Board’s deliberations especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct;
bring an objective view in the evaluation of the performance of board and management;
scrutinize the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;
satisfy themselves on the integrity of financial information and that financial control and the systems of risk management are robust and defensible;
safeguard the interests of all stakeholders, particularly the minority shareholders;
balance the conflicting interest of the stakeholders;
determine appropriate levels of remuneration of executive directors, key managerial personnel and senior management and have a prime role in appointing and where necessary recommend removal of executive directors, key managerial personnel and senior management;
moderate and arbitrate in the interest of the company as a whole, in situations of conflict between management and shareholder’s interest.
As members of the Board, they along with the other Directors will be collectively responsible for meeting the objectives of the Board which include:
Requirements under the Companies Act, 2013;
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Accountability under the Director’s Responsibility Statement.
They shall abide by the ‘Code For Independent Directors’ as outlined in Schedule IV to section 149(8) of the 2013 Act, and duties of directors as provided in the 2013 Act (including Section 166).
They are particularly requested to provide guidance in their area of expertise.
The independent directors shall—
undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company;
seek appropriate clarification or amplification of information and, where necessary, take and follow appropriate professional advice and opinion of outside experts at the expense of the company;
strive to attend all meetings of the Board of Directors and of the Board committees of which he is a member;
participate constructively and actively in the committees of the Board in which they are chairpersons or members;
strive to attend the general meetings of the company;
where they have concerns about the running of the company or a proposed action, ensure that these are addressed by the Board and, to the extent that they are not resolved, insist that their concerns are recorded in the minutes of the Board meeting;
keep themselves well informed about the company and the external environment in which it operates;
not to unfairly obstruct the functioning of an otherwise proper Board or committee of the Board;
pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure themselves that the same are in the interest of the company;
ascertain and ensure that the company has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use;
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report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy;
acting within his authority, assist in protecting the legitimate interests of the company, shareholders and its employees;
not disclose confidential information, including commercial secrets, technologies, advertising and sales promotion plans, unpublished price sensitive information, unless such disclosure is expressly approved by the Board or required by law.
E. Other Obligations And Compliances
The Independent Director will be required to execute / confirm with respect to the following documentation on a periodic basis:
Confirmation that he is not disqualified to act as a Director of the Company in terms of the Companies Act, 2013
Declaration of Independence in terms of the Companies Act, 2013
Disclosures under the Company Code for Prevention of Insider Trading
Code of Conduct for Directors of the Company
Code of Conduct for Independent Directors as per Schedule IV of the Companies Act, 2013
Disclosure of change in interest in companies where he is appointed / ceased as a Director or Key Managerial Personnel
Confirmation that his directorships in companies do not conflict with the interest of the Company.
IV. GUIDELINES OF PROFESSIONAL CONDUCT
An independent director shall:
uphold ethical standards of integrity and probity;
act objectively and constructively while exercising his duties;
exercise his responsibilities in a bona fide manner in the interest of the company;
devote sufficient time and attention to his professional obligations for informed and balanced decision making;
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not allow any extraneous considerations that will vitiate his exercise of objective independent judgment in the paramount interest of the company as a whole, while concurring in or dissenting from the collective judgment of the Board in its decision making;
not abuse his position to the detriment of the company or its shareholders or for the purpose of gaining direct or indirect personal advantage or advantage for any associated person;
refrain from any action that would lead to loss of his independence;
where circumstances arise which make an independent director lose his independence, the independent director must immediately inform the Board accordingly;
assist the company in implementing the best corporate governance practices.
V. SEPARATE MEETINGS
The independent directors of the company shall hold at least one meeting in a year, without the attendance of non-independent directors and members of management;
All the independent directors of the company shall strive to be present at such meeting;
The meeting shall:
review the performance of non-independent directors and the Board as a whole;
review the performance of the Chairperson of the company, taking into account the
views of executive directors and non-executive directors;
assess the quality, quantity and timeliness of flow of information between the
company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
VI. EVALUATION MECHANISM
The performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the director being evaluated.
On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the independent director.
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VII. TIME COMMITMENT
By accepting the appointment, the Independent Director confirms that he is able to allocate sufficient time to perform his role as an Independent Director of the Company.
In terms of the Companies Act, 2013, he will have to attend at least one Board Meeting during every Financial Year in-person. Also, he will strive to attend the Board / its committees’ calls whenever scheduled as per the best convenience of all the attendees.
As Independent Directors, they shall be paid sitting fees as decided by Board for attending meetings of the Board and the Committees of which they are members. The sitting fees for attending each meeting of the Board and its Committees would be as determined by Board from time to time.
The aggregate remuneration to be paid to all the Independent and Non-Executive Directors would not exceed 1% of the total net profits of the Company during any Financial Year.
IX. TRAINING AND DEVELOPMENT
The Company may, if required, conduct formal training program for its Independent Directors. The Company may, as may be required, support Directors to continually update their skills and knowledge and improve their familiarity with the company and its business. The Company will fund/arrange for training on all matters which are common to the whole Board.
X. DISCLOSURES, OTHER DIRECTORSHIPS AND BUSINESS INTERESTS
During the Term, they agree to promptly notify the Company of any change in their directorships, and provide such other disclosures and information as may be required under the applicable laws. They also agree that upon becoming aware of any potential conflict of interest with their position as Independent Directors of the Company, they shall promptly disclose the same to the Chairman and the Company Secretary.
During their Term, they agree to promptly provide a declaration under Section 149(7) of the 2013 Act, upon any change in circumstances which may affect their status as an Independent Director.
XI. CHANGES OF PERSONAL DETAILS
During the Term, they shall promptly intimate the Company Secretary and the Registrar of Companies in the prescribed manner, of any change in address or other contact and personal details provided to the Company.
They may resign from the directorship of the Company by giving a notice in writing to the Company stating the reasons for resignation. The resignation shall take effect from the date on which the notice is received by the Company or the date, if any, specified by them in the notice, whichever is later. Their directorship on the Board of the Company shall cease in accordance with law. The Company may disengage Independent Directors prior to completion of Term (subject to compliance of relevant provisions of the 2013 Act) upon:
violation of any provision of the Code of Conduct as applicable to NEDs;
the director failing to meet the criteria for independence as envisaged in Section 149(6) of the 2013 Act.
An Independent Director will be liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board process, and with his consent or connivance or where he had not acted diligently.