Amendment- Companies (Appointment and Qualification of Directors) Rules, 2014

Ministry of Corporate Affairs has made following amendments to the Companies (Appointment and Qualification of Directors) Rules, 2014 wide notification dated 18 December 2020. These shall come into force on the date of their publication in the Official Gazette.

1. Following is the amended Rule 6 Subrule (4),
2. Every individual whose name is included in the data bank under sub-rule (1) shall pass an online proficiency self-assessment test conducted by the institute within a period of two year from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the databank of the institute.
3. Key Change-Earlier this time limit was one year.
   • Following are the amended first and second proviso to Rule 6 Subrule (4)–
   • Provided that an individual shall not be required to pass the online proficiency self-assessment test when he has served for a total period of not less than three years as on the date of inclusion of his name in the data bank.

as director or key managerial personnel, as on the date of inclusion of his name in the databank, in one or more of the following, namely:

• listed public company; or
• unlisted public company having a paid-up share capital of rupees ten crore or more; or
• body corporate listed on any recognized stock exchange or in a country which is a member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions; or
• bodies corporate incorporated outside India having a paid-up share capital of USD 2 million or more; or
• statutory corporations set up under an Act of Parliament or any State Legislature carrying on commercial activities; or

(B) in the pay scale of Director or above in the Ministry of Corporate Affairs or the Ministry of Finance or Ministry of Commerce and Industry or the Ministry of Heavy Industries and Public Enterprises and having experience in handling the matters relating to corporate laws or securities laws or economic laws; or

(C) in the pay scale of Chief General Manager or above in the Securities and Exchange Board or the Reserve Bank of India or the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority and having experience in handling the matters relating to corporate laws or securities laws or economic laws:

• Provided further that for the purpose of calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as director or as key managerial personnel in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.
• Key Changes–

Earlier for availing exemption from online proficiency self-assessment test, an individual had to serve as director or key managerial personnel, for a total period of not less than ten years, as on the date of inclusion of his name in the databank, in one or more of the following, namely:

• listed public company; or
• unlisted public company having a paid-up share capital of rupees ten crore or more; or
• body corporate listed on a recognized stock exchange

In the explanation, following is the amended item (b)-

• an individual who has obtained a score of not less than fifty percent. in aggregate in the online proficiency self-assessment test shall be deemed to have passed such test
• Key Change- Earlier the passing criteria was score of not less than sixty percent

Inference- The above amendments shall further ease the process of becoming directors as the scope of exemption from exam has been expanded and passing criteria as well as period within which an individual has to appear in exam has been eased.

Source-MCA Notification, Date 18 December 2020

-Sambhav Jain, Audit Associate, SW India