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Independent Directors in PSUs



Independent Directors in PSUs
Section 149(4) of Companies Act, 2013 mandates appointment of independent directors by listed companies. Further, as per Rule 4 of Companies (Appointment and Qualifications of Directors) Rules, 2014 the following class of companies shall have atleast two independent directors:-


• the Public Companies having paid up share capital of ten crore rupees or more; or

• the Public Companies having turnover of one hundred crore rupees or more; or

• the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees;

Since, the issue of appointment of directors on the Board of Public Sector Undertakings falls in the domain of Department of Public Enterprises, this Ministry has sought their comments. Based on the comments received from the Department of Public Enterprises, the reply is as under:-

(i) The proposals for the appointment of independent (non-official) Directors are required to be initiated by the concerned Administrative Ministries and submitted to DPE. These proposals are processed in DPE and are placed for the consideration of the Search Committee. The recommendations of the Search Committee are thereafter forwarded to the concerned administrative Ministries. The appointment of non-official Directors on the Boards of CPSEs is made by the administrative Ministries on the basis of recommendations made by the Search Committee after completing due formalities and obtaining approval of competent authority.

(ii) The Non-official Directors are appointed for a tenure of three years. Filling up vacant positions of non-official Directors is a continuous process and these vacant positions will get filled up after proposals furnished by administrative Ministries are considered by the Search Committee and non-official Directors are appointed on the basis of the recommendations of the Search Committee.

(iii) Following actions have been taken to ensure the timely appointment of independent Directors on the Boards of CPSEs.

• Time lines have been prescribed for various activities associated with the process of selection and appointment of non-official Directors.

• DPE is regularly requesting the concerned administrative Ministries to furnish proposals for filling vacant positions.

• The Search Committee has recently recommended names for filling around 150 positions of independent Directors on the Boards of CPSEs (including listed CPSEs). Based on these recommendations, around 90 positions of independent Directors have already been filled.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha.
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Judicious use of CSR Resources
While no CSR Compendium for the Corporates has been organised by the Ministry, the CSR provisions under the Companies Act, 2013, exhort eligible corporates to function in a socially responsible manner with the underlying spirit being to ensure use of scarce resources in a judicious manner for the greater good of Society.

Implementation of CSR by companies above specified threshold is a mandatory provision of the Companies Act, 2013. In order to facilitate effective implementation of CSR by companies, the Ministry of Corporate Affairs has (i) amended Schedule VII of the Act to ensure that a wide range of activities are permissible CSR activities ; (ii) issued a clarificatory circular dated 18.06.2014 suggesting, inter-alia, liberal interpretation of Schedule VII; and (iii) issued amendments to the Companies (Corporate Social Responsibility Policy) Rules, 2014, to (a) include ‘expenditure on administrative overheads’ for CSR as permissible CSR expenditure and (b) facilitate pooling of resources by companies to undertake CSR activities. All the above are available on the Ministry’s website (www.mca.gov.in).

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha.
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Compliance with CSR Rules
The provisions of Corporate Social Responsibility (CSR) under Section 135 of the Companies Act, 2013 and rules made thereunder have come into force with effect from 01.04.2014. The year 2014-15 was the first year of implementation of CSR policies by companies under the legislation. As per Section 135(4) read with Section 134(3) (o) of the Act, the Board of the company, eligible to comply with the CSR provisions of the Act, is mandated to make annual disclosure on CSR in the Board’s report. The companies are still in the process of filing their Annual Reports with the Ministry. Details about number of companies that have complied with the CSR provisions of the Act, CSR activities undertaken and expenditure incurred there on, in the year 2014-15, are expected to be available after requisite filings are made by companies.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha.
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Review of Companies Act

The Companies Law Committee was constituted (Annexure-I) in fulfillment of an assurance made by the Corporate Affairs Minister during discussion on Companies (Amendment) Bill, 2014 in the Rajya Sabha in response to the concerns raised by Members in Rajya Sabha as well as for addressing issues raised by various stakeholders regarding the Companies Act, 2013.

The CLC invited suggestions from all stakeholders through the Ministry’s website www.mca.gov.in and in response, approximately 2000 suggestions (including from Industry Chambers, Professional Institutes, individuals etc.) were received by the Committee. With a view to have broad-based deliberations on the suggestions received, six groups were formed having representation from industry and experts.   The recommendations of CLC would be dealt with appropriately.

The process for constitution of National Company Law Tribunal (NCLT) has already been initiated with the selection process for (Judicial as well as Technical) members of NCLT and Technical Members of National Company Law Appellate Tribunal (NCLAT) having commenced. Steps have also been taken to make provision for infrastructure and other supportive requirements for the Tribunals.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha.

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Annexure-I
F. No. 2/19/2011-CL-V
Ministry of Corporate Affairs
Government of India

'A' Wing, 5th Floor, Shastri Bhawan
New Delhi - 110001.
Dated: 4th June, 2015
ORDER

Subject: - Constitution of Companies Law Committee

                The Government hereby constitutes a Companies Law Committee consisting of the following:-
S. No.       Name of Person/Institution
Position
1.


Secretary, Ministry of Corporate Affairs
Chairperson
2.
Ms. Reva Khetarpal, former Judge, Delhi
Member

High Court

3.
Sh.  Manoj     Fadnis,      President,      The
Member

Institute of Chartered Accountants of


India

4.
Sh.  Atul    H    Mehta,    President,      The
Member

Institute   of    Company     Secretaries      of


India

5
Dr. A.S. Durga Prasad, President, The Institute of Cost Accountants of India
Member
6.
Shri  Bharat     Vasani,     Chief Legal      &
Member

Group General Counsel, Tata Sons Ltd, Industry nominee

7.
Shri Y.M. Deosthalee, Chairman, L&T
Member

Finance Holdings, Industry nominee

8.
Joint  Secretary     (Policy),     Ministry     of
Member-Convener

Corporate Affairs





2        .            The Committee may invite or co-opt subject matter experts relating to corporate law or any other subject matter, as well as experts from SEBI, RBI, C&AG as needed. The Committee may also invite any other person or body in the interest of broad-based consultation.

3.      The terms of reference of the Committee are as follows:
(i)      to make recommendations to the Government on issues arising from the implementation of the Companies Act, 2013 and
(ii)    to examine the recommendations received from the Bankruptcy Law Reforms Committee, the High Level Committee on CSR, the Law Commission and other agencies, while undertaking (i) above.

4.      Non-official members of the Committee will be eligible for travelling, conveyance and other allowances as per extant Government instructions, wherever the sponsoring agency is unable to bear their expenditure. Secretarial support to the Committee will be given by the Ministry of Corporate Affairs.

5.        The Committee shall submit its recommendations within six months of its first meeting.

                  Sd/-
(Alok Samantrai)
Director, Inspection and Investigation
Phone: 2.338 9602
To
The Members of the Committee
Copy also to:
 (i) PS to CAM
(ii) Sr. PPS to Secretary
(iii) PS to AS
(iv) PSs to JS(M), JS(B), JS(SP), JS(K)
(v) All RDs/ROCs/OLs
(vi) President ASSOCHAM/FICCI/CII
(vii) Guard File
(viii) Website of the Ministry
***********
Redressal of Investors’ Grievances

As per the investors’ grievances data maintained by the Ministry of Corporate Affairs, action has been initiated against 319 Companies in 2012-13, 420 companies in 2013-14 and 2414 companies in 2014-15. This is an on-going process.

Non-payment of dividend/interest on listed securities, pertaining to companies listed at stock exchanges is actionable under sections 11B/15C of the SEBI Act, 1992.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha. 

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