Changes in Appointment of Independent Directors

Changes in Appointment of Independent Directors

The Ministry of Corporate Affairs and the Indian Institute of Corporate Affairs have introduced a new procedure that is to be followed by individuals and corporates for maintaining Databank for Independent Directors. It is a comprehensive online databank where all existing and eligible Independent Directors need to empanel within 3 months of the introduction of this rule. The date of empanelment starts on 1st December 2019. It is a mandatory requirement. 

Who is an independent director?

An Independent Director is the non-executive director of the company who has no relationship with the company that can influence his judgment and his role towards the company is to improve its corporate credibility and governance standards. The criteria for appointment of Independent Directors, his role and remuneration are given separately under the Companies Act 2013. It is mandatory for every listed company in India to appoint at least 1/3rd of its directors as Independent Directors. Other than that, unlisted companies which are prescribed under the Act to do so are also required to appoint at least 2 Independent Directors on their board.

What does the new rule say?

The new Rule draws its origin from Companies (Appointment and Qualification) Rules, 2019. As per this Rule, a Databank is created which will serve as one-stop for individuals who are eligible and willing to be appointed as Independent Directors of companies and the listed companies and other companies falling under this criterion who are required to appoint Independent Directors. This rule has also resulted in some changes in the criteria for Appointment of Independent Directors. 

What are the changes in criteria for Appointment of Independent Directors?

•    The individuals willing to be appointed as Independent Directors shall give an examination under MCA;

•    This exam will be conducted by the Indian Institute of Corporate Affairs;

•    The individuals scoring at least 60 per cent will be eligible to be appointed as Individual Directors;

•    These eligible individuals will then have to empanel themselves in the Databank for Individual Directors;

•    The examination will cover the areas which define their knowledge and proficiency relevant to their role as Independent Directors eg. accountancy, finance, company law etc. ; 

•    The exams enrolment will start on 1st December and will have to be taken by individuals within 3 months of this date; 

•    Every empanelled individual shall file a request for renewal of his name in the Databank within 30 days of such expiry;

•    Necessary due diligence will be performed by the company before the appointment.

Process for empanelment in the Databank

The process of empanelment of Independent Directors, as well as corporates, are given on the IICA website. The procedure provided for the empanelment is very easy and quick. Fees will be charged from the individuals who are willing and eligible to enrol as Independent Directors in the Databank. This fee is based on the number of years of subscription i.e. Rs. 5,000 + 18% GST for 1 year subscription, Rs. 15,000 + 18% GST for 5 years subscription and Rs. 25,000 + 18 % GST for lifetime subscription. No fees will be charged from the corporates who are listing themselves in the Databank for the search of Independent Directors.  

The procedure of Empanelment Independent Directors on Databank


A.    Valid DIN/PAN/Passport

B.    Registration in MCA Portal

6 step process in MCA:

1.    Log in to MCA portal

2.    Under ‘MCA Services’ go-to ‘ID Databank Registration’ and click on ‘Individual Registration’

3.    Enter valid document details i.e. DIN/PAN/Passport and click on ‘Submit’

4.    Enter email id, mobile number and country code then click on ‘Send OTP’

5.    Fill in the sent OTP and click on ‘Verify OTP’

6.    Click on ‘Proceed’ after successful verification to receive Databank credentials on your email and mobile number.

3 step Databank process:

1.    Login to Independent Directors Databank

2.    Fill profile with required details i.e. personal details, educational details and experience and submit the declaration

3.    Pay subscription fees

Procedure for registration of corporates in Databank


A.    Valid CIN 

B.    Registration in MCA portal

6 step MCA process:

1.    Login to MCA portal

2.    Under the ‘MCA Services’ section go to ‘ID Databank Registration’ and click on ‘Corporate Registration’

3.    Enter your CIN details and submit the same

4.    It will auto-fill the email id so just click on ‘Send OTP’

5.    Enter the provided OTP and click on ‘Verify OTP’

6.    Click on ‘Proceed’ after verification and you will receive the Databank credentials

3 step databank process:

1.    Login to Independent Directors Database

2.    Fill your company details and assign 2 designated officers who will have access to the Databank then accept the terms and conditions

3.    Submit the details


This new change in the appointment of Independent Directors and defined eligibility criteria will help the industry in many ways and will improve the performance of active listed companies. It will result in better corporate governance, increased knowledge and work proficiency of the board, reduction of corruption, nepotism and mute spectators in corporate boardrooms, easier search and appointment of independent directors. So, in conclusion, we can say that the ministry has taken the right decision in the matter of appointment of individual directors.


eStartIndia Team

Leave a Comment

Previous Comments

Related Blogs