The term “Independent Director” has been defined in the Act, along with few new necessities identifying new prerequisites relating to their appointment, duties, role, and responsibilities. The provisions relating to the appointment of Independent Directors are contained in Section 149 of the Companies Act, 2013 ought to be perused along with Rule 4 and Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Duties of Independent Directors

The independent director according to part II of schedule IV has the following roles and functions:

  • In case of issues relating to strategic risk management, resources, key appointments, standard of conduct, and performance, the independent director must facilitate in bringing an independent judgment.
  • The independent director must be impartial when considering the evaluation of the performance of the management and the board of the company
  • He must ensure the financial controls and risk management systems are efficient and effective.
  • An independent director must always make sure that he is safeguarding the interest of all stakeholders especially the minority shareholders.
  • In case of conflicting interests of all stakeholders, the independent director must try to maintain a balance.
  • The independent director must facilitate in determining remuneration for different levels of:
    • The Executive directors.
    • Key managerial personnel.
    • Senior management and wherever necessary.
  • While adjudicating matters, the independent director must adjudicate keeping in mind the interest of the company as a whole.

Updation process of the independent directors

  1. Independent director must update and enhance their skills knowledge and familiarity with the company regularly.
  2. An independent director must aim to attend all the board meetings and the meetings conducted by the board committee is of which he is a member.
  3. The independent director must try to keep himself updated about the company the external environment under which it operates.
  4. Before approving any related party transactions the independent director must ensure death the transaction is in the interest of the company and has been duly considered.
  5. An independent director must report the matters concerning unethical behavior whether it is actual or suspected fraud of the companies ethics policy for code of conduct.
  6. The independent director must never disclose confidential information  except if such disclosure is required by law.
  7. In order to discharge his duties or in order to take any decision independent director may seek expert opinion or  clarifications of the information
  8. Must be active and an impartial member of the committees of the board that they are part of.
  9. In case of any concerns regarding a proposed plan of action or scheme, the independent director must convey his concern to the board and make sure that they are duly addressed and resolve.
  10. Independent directors are prohibited from unjustly obstructing the functioning of the board or committee of the board.
  11. Independent directors must make sure that there is a proper and efficient vigil mechanism in place in the company.
  12. Independent directors should never overstep their authority. Protecting the interest of the company, its shareholders, and its employees are the primary duty of an independent director.