The law mandates every listed company in India to have independent directors accounting for at least a third of its board strength who would act in the interest of minority shareholders outside the influence of the company.
Persons looking to join the board of a listed company as independent directors may have to clear an exam before taking up the role, according to a Bloomberg report.
The report noted that the step was taken by the Narendra Modi government after a string of corporate frauds has undermined faith in prevailing corporate governance standards in the country.
The publication also stated that the government is looking to ban auditor Deloitte Haskins & Sells for five years after it did not flag risks from the activities carried out by fraud-hit NBFC IL&FS.
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The agency also spoke to corporate observers, who stated that the independent overseers should have warned the authorities of such risks earlier.
“We want to demolish the myth that independent directors don’t have any fiduciary duty,” said Injeti Srinivas, the top bureaucrat in charge of corporate affairs. He also said that the aim is to propagate corporate literacy by making prospective independent directors of their duties, roles and responsibilities.
These aspirants will have to clear the exam in a fixed time frame, but there are no limits to the attempts taken. The exam will be online, and will cover topics related to the basics of capital market norms, company law and ethics.
Experienced directors, who have been at the boards of companies for several years would not have to take the exam, but will have to have to register with a government database, which could be used as a platform for companies to search for prospective directors.
The law mandates every listed company in India to have independent directors accounting for at least a third of its board strength who would act in the interest of minority shareholders outside the influence of the company.
