MCA floats a new testing proposal to filter frivolous independent directors

The Ministry of Corporate Affairs has proposed a new testing system for independent directors of a company. This has been entrusted with the Indian Institute of Corporate Affairs, which shall provide a portal for registration and administer the test. According to a senior government official, this shall help increase the pool of qualified persons. Others say it is to keep a check on frivolous appointments which have previously led to massive corporate misgovernance cases. But how do laws regarding independent directors in India pan out vis-a-vis other nations? Geetika Srivastava gives an insight

Expert speak

India seems to be an outlier when it comes to the testing requirement, and many experts think that the move is not adequate to deal with the ongoing problems. 

“Laws in various countries now increasingly mandate stringent qualification criteria. I think rather than an exam, it’s advisable to have an annual credit-based programme that will enhance the knowledge base of independent directors. This, coupled with stringent qualification and disclosure norms, will be relatively beneficial,” said Siddharth Mahajan, partner, Athena Legal.

There are also questions being raised about the curriculum of the test. “The contents of the test appear to be only company law, securities law, accounting, etc. The board members are required to have many other attributes. There are behavioural and leadership related aspects that cannot be effectively tested under this mechanism,” said Sharad Abhyankar, partner, Khaitan & Co. Whether the test leads to an improvement in corporate govern-ance is what remains to be seen.