MCA Amends Companies (Appointment and Qualification of Directors) Rules, 2014 [Read Notification]

The Ministry of Corporate Affairs ( MCA ) has recently amended Companies (Appointment and Qualification of Directors) Rules, 2014 by the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018.

The amendment aims to restrict the qualifications of an independent director. Rule 5 has been renumbered into sub rule (1) so as to accommodate one more sub rule (2), which provides one more criterion to be satisfied for the qualification of an independent director. The condition is that none of the relatives of an independent director is indebted to the company, its holdings, subsidiary or associate company or their promoters, or directors; or has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holdings, subsidiary or associate company or their promoters, or directors of such holding company, for an amount of fifty lakhs rupees at any time during the two immediately preceding financial years or during the current financial year.

The new amendment has also amended Rule 16 of the Companies (Appointment and Qualification of Directors) Rules, 2014 in which it was mandatory for a director to furnish a copy of his resignation to the Registrar within 30 days from the date of resignation along with reasons for his resignation in Form DIR-11. But now for the word “shall” used in Rule 16, the new amendment has substituted it with the word “may” thereby making it optional for the Director to forward a copy of his resignation to the Registrar.

The Central Government has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 by virtue of powers conferred by Section 149 & 168 read with Section 469 of the Companies Act, 2013.