Independent Directors: A test of competence?

A new rule in company law has given rise to a few concerns and invited criticism. This rule, effective from December 1, 2019, requires all existing independent directors (IDs) or persons who wish to become IDs to clear an online proficiency test conducted by the Indian Institute of Corporate Affairs (IICA). This self-assessment test needs to be cleared within a year of ID’s name being added to the data maintained by IICA. The rule recognises the standing and experience of persons. It, therefore, exempts those directors or key managerial personnel who have worked in these capacities for at least ten years in listed companies or in unlisted companies having a minimum paid-up share capital of Rs 10 crore. There is no limit on the number of attempts to clear the test, but a minimum score of 60% in aggregate is required.

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