Companies Act Section 150 — Manner of selection of independent directors and maintenance of databank of independent directors
CHAPTER XI APPOINTMENT AND QUALIFICATIONS OF DIRECTORS
Commercial / Corporate
Summary
Sub-section (1) allows a company to choose an independent director from a data bank of eligible and willing persons, which is maintained by a body, institute, or association notified by the Central Government and published on its website. The company making the appointment is responsible for exercising due diligence before selecting a person from this data bank.
Sub-section (2) states that the appointment of an independent director must be approved by the company in a general meeting, as provided under sub-section (2) of section 152. The explanatory statement attached to the notice of that general meeting must explain the reasons for choosing that particular person as an independent director.
Sub-section (3) requires the data bank mentioned in sub-section (1) to create and maintain records of persons willing to act as independent directors, following the rules that may be prescribed.
Sub-section (4) allows the Central Government to prescribe the manner and procedure for selecting independent directors who meet the qualifications and requirements specified under section 149.
Official Text
(1) Subject to the provisions contained in sub-section (6) of section 149, an independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent directors, maintained by any body, institute or association, as may be notified by the Central Government, having expertise in creation and maintenance of such data bank and put on their website for the use by the company making the appointment of such directors:
Provided that responsibility of exercising due diligence before selecting a person from the data bank referred to above, as an independent director shall lie with the company making such appointment.
(2) The appointment of independent director shall be approved by the company in general meeting as provided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of the general meeting called to consider the said appointment shall indicate the justification for choosing the appointee for appointment as independent director.
(3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as independent director in accordance with such rules as may be prescribed.
(4) The Central Government may prescribe the manner and procedure of selection of independent directors who fulfil the qualifications and requirements specified under section 149.