1. ‘The Independent Director’ - By CS Makarand Joshi - makarandjoshi@mmjc.in

2. Coverage of this PPT Independent Director Eligibility Max Limits Max Tenure PowersDutiesLiabilities

4. Who is eligible to be Independent Director?  Non executive director, not being a nominee director  A director who is not a promoter or related to promoters or directors of the Company or its holding / subsidiary / associate company  A person who by himself or through his relatives is not having or had any material pecuniary relationship with Company / its holding / subsidiary / associate company / their promoters / directors during the 2 immediately preceding financial years or current year

5. Who is eligible to be Independent Director? A person who, in any of the 3 years immediately preceding the financial year in which he is proposed to be appointed, has not, directly or through his relatives, had the following relationship with Company/holding / subsidiary / associate company:-  KMP or employee  Employee / proprietor / partner of a firm of auditors / company secretaries in practice or cost auditors  Any legal or consulting firm that has / had transaction with the above amounting to 10% or more of gross turnover of such firm

6. Who is eligible to be Independent Director?  A person who does not hold together with his relatives 2% or more of the total voting power of the Company  A person who is not a Chief Executive or director, by whatever name called, of any non profit organization that receives 25% or more of its receipts from the Company, promoters, directors or its holding, subsidiary or associate company or that holds 2% of the total voting power in that company  A person who is not a material supplier, service provider, or customer or a lessor or lessee of the Company  A person who is not less than 21 years of age

8. Code of Conduct  The duties of Independent Directors should be mentioned in the Code of Conduct of the Company  All Directors and senior management personnel should affirm compliance with Code of Conduct on annual basis  Code of Conduct to be posted on Company’s website

10. Maximum Limit  He can be an Independent Director in max 7 listed companies  If he is a Whole Time Director in any listed company, then he can be an Independent director in max 3 listed companies

12. Maximum Tenure  Max term of 5 consecutive years  Eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Directors Report.

14. Powers of Independent Director...  To hold separate meetings without attendance of non independent directors to review performance of non independent Directors and Board as a whole, Chairman, quality, quantity and timelines of flow of information, etc  Board meeting can be held at shorter notice only with the presence of at least 1 independent director  In case no independent director attends such Board meetings, decisions taken thereat must be ratified by at least 1 independent director

15. Powers of Independent Director...  To report concerns about any unethical behaviour, actual or suspected fraud or violation of Company’s code of conduct under the Whistle blower policy of the Company  To report any such concerns to the Chairman of the Audit Committee – who shall be an Independent Director, for further investigation

17. Duties as per Companies Act  To act in accordance with Articles of Association  To ensure Company is operating to promote objects of the Company for the benefit of shareholders, employees and in best interest of Company  To exercise independent judgement while approving decisions on behalf of Company  Not to involve in a situation in which he may have direct or indirect conflict with the interest of Company

18. Duties towards decision making  To attend Board / Committee Meeting  To discharge duties with diligence  To discharge duties with care  To discharge due skills  To ensure agenda is sufficient and proper  To ensure decisions are taken … and executed

19. Duty towards stakeholders Director Share- holder Employee SupplierCustomerLendersSociety Govern- ment Environ- ment

20. Duty.. Not to have conflict  To give disclosure of interest in first BM of FY  To give disclosure about change in interest (either as Director or Shareholder)  Not to involve in situation of conflict of interest  Not to deal in forward dealing in securities  No to deal in insider trading of shares of the Company

21. What is disclosure of interest?  To disclose list of relatives  To disclose list of companies / firms / Trust in which Director is owner / director / shareholder  To disclose list of firms in which his relatives has interest  Disclosure to be given every year and whenever there is change  Format is MBP 1

22. What is conflict?  Not to involve ‘self’ or ‘self benefited entity’ as supplier or customer or in other nature  Not to have competing business with that of company

23. Duty towards laws ….  To ensure compliance with all applicable laws  To ensure proper system to ensure compliance with all laws  To ensure that compliance system is adequate  To ensure that compliance system efficiently functioning

24. Stake holders protection visa a vis compliance of laws Ensure compliance of all applicable laws SHs (Compani es Act, SEBI) Customers Contracts and warrantee Environmen t (Environme ntal Laws) Employees (Labour Laws) Company (Corpora te Laws) Governm ent (Revenue Laws) Economy [Fema & Customs laws]

26. Liabilities  Independent Directors are liable for acts / omissions occurred with his knowledge attributable through broad process  Penalties = monetary or imprisonment  Insurance can be taken to cover liabilities

27. Whether Director is liable for liabilities of the ‘Company’?  Towards borrowed funds – yes, if personal guarantee is given  Towards commercial liabilities – No  Towards contingent liabilities – No  Towards legal / compliance liabilities – Yes  Towards criminal liabilities – Yes, if involved either Directly or Indirectly

28. How to avoid liabilities ?  Discharge all duties diligently  Ensure system is set to take care of financial controls  Ensure system is set to take care of compliance  Ensure that there is a system for preparation of meaningful agenda  Ensure that there is a system to identify related parties and avoid any contract without board approval  Ensure Introduce doer.. Checker system

29. Thank you We will be happy to help you become successful Independent Director MMJC