Manner of selection of independent directors and maintenance of data bank of independent directors (Section 150 of the Companies Act, 2013) :

This section provides for the manner of selection of independent directors and maintenance of databank of independent directors.

(i) According to section 150(1) of the Companies Act, 2013, an independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent directors, subject to the provisions contained in section 149(5).

Such data bank shall be maintained by any body, institute or association, as may be notified by the Central Government as having the expertise in creation and maintenance of such data bank and put on their website for the use by companies appointing such directors.

Further, the responsibility of exercising due diligence before selecting a person as an independent director from the data bank referred to above, shall lie with the company making such appointment [Proviso to section 150(1)].

(ii) The appointment of independent director shall be approved by the company in general meeting as provided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of the general meeting called to consider the said appointment shall indicate the justification for choosing the appointee for appointment as independent director [Section 150(2)].

(iii) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as independent director in accordance with such rules as may be prescribed [Section 150(3)]

(iv) The Central Government may prescribe the manner and procedure of selection of independent directors who fulfill the qualifications and requirements specified under section 149 [Section 150(4)]

Creation and maintenance of databank of persons offering to become independent directors:

(i) Any body, institute or association (referred as “the agency”), which has been authorised in this behalf by the Central Government shall createand maintain a data bank of persons willing and eligible to be appointed as independent director and such data bank shall be placedon the website of the Ministry of Corporate Affairs or on any other website as may be approved or notified by the Central Government.

(ii) The data bank shall contain the particulars in respect of each person included in the data bank to be eligible and willing to be appointed as independent director like DIN, the name and surname in full, details of LLPs in which he is or was a designated partner, the list of companies in which he is or was director, etc.

(iii) For further details regarding the procedure of creation and maintenance of databank of persons offering to become independent directors, please refer Companies (Appointment and Qualification of Directors) Rules, 2014 and Companies (Appointment and Qualification of Directors) Amendment Rules, 2014.

Note: The MCA vide Notification No. 466(E) dated 5thJune, 2015, has clarified that section 150 of the Companies Act, 2013, shall not apply to a section 8 company.