The Corporate Affairs Ministry (MCA) has specifically exempted certain individuals from taking the online proficiency self-assessment test for them to get into or retain their Board positions as independent directors in companies.
It has now specifically ruled that individuals who are or have been for at least ten years an advocate of a Court; or in practice as a chartered accountant; or in practice as a cost accountant; or in practice as company secretary need not pass the online proficiency self assessment test.
It maybe recalled that MCA had in October 2019 mandated that independent directors will have to take up an online proficiency self-assessment test conducted by the Indian Institute of Corporate Affairs (IICA), if they are to get into or retain their Board positions.
Why proficiency test?
Boards of companies have, in their reports to shareholders, been stressing on the “integrity, expertise and experience (including the proficiency) of the independent directors”. To opine on the ‘proficiency’, the Board will have to be guided by the ‘proficiency’ ascertained from the online test conducted by the IICA, the MCA had then said in October 2019.
After the MCA’s new framework, a candidate aspiring to become an independent director in Corporate India had to satisfy two main criteria — find a place in the databank and take an online proficiency test. Directors — other than those exempted — have two years time — from the day they get into a IICA maintained databank — to pass the online proficiency self assessment test.
From time to time, MCA has been tweaking the norms around independent directors and previous rule change happened in December last year.
Experts speak
Snigdhaneel Satpathy, Partner, Saraf & Partners, said that MCA’s decision to allow CAs, CSs, Cost accountants in practice and advocates with more than 10 years experience to be appointed as independent directors without a proficiency test is indeed laudable. With their understanding of the norms of corporate governance, such experienced professionals would be best placed to serve in their capacity as independent directors, bringing in requisite expertise as well as tiding over the shortage of good independent directors, Satpathy said.
Siddharth Talwar, Partner-CFO Services, Grant Thornton Bharat LLP, said this is a welcome move in the direction of government’s ongoing efforts towards enhancing corporate governance standards in India. These experienced professionals have always imbibed the spirit of code for independent directors, enshrined in corporate law, in their daily lives.
The amendment has rightfully recognised the values of integrity and probity these professionals stand for, Talwar added.
Meanwhile, MCA has also relaxed the criteria for exempting senior government officials from the proficiency test. Hitherto, only those in the pay scale of Director or above in the MCA or the Ministry of Finance or Ministry of Commerce and Industry or the Ministry of Heavy Industries and having experience in handling the matters relating to corporate laws or securities laws or economic laws were exempted from the test.
Now, the rules have been amended to allow this exemption for all in the pay scale of Director or equivalent or above on any ministry or department of the Central government or any State government having experience in handling matters relating to commerce, corporate affairs, finance, industry or public enterprises.