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How do you clear the self-assessment test for Independent Directors?

How can the likes of HR managers, compliance professionals, and entrepreneurs become Independent Directors (IDs) on the board of a company? 

What exactly does an ID do?

What are the eligibility criteria to become an ID? 

What is the nature of the self-assessment test that the majority of IDs now need to clear?

How difficult is it to clear the test?

You may already know some of the answers, and we will provide the rest and much more at our free upcoming bootcamp on how experienced professionals can become Independent Directors. 

Before you join the bootcamp, you could interact with our learner Lovekesh Jain, who was part of our January 2023 batch and cleared the test last week, within just two months of joining our course. 

The author of three books, Mr Jain is the founder and CEO at Chisel Hammer Consulting, with over 25 years of experience in multinational and blue chip Engineering, Procurement and Construction (EPC) companies. 

He was also kind enough to collaborate with us on a video that you can check out on our YouTube channel here.

The basics

Just to give you some more context so that you come to the bootcamp with adequate references, section 149(4) of the Company Act 2013 provides that every listed public company shall have at least one-third of the total number of directors as IDs.

For unlisted public companies, Rule 4 of The Companies (Appointment and Qualification of Directors) Rules, 2014 mandates that the following are required to appoint at least two Independent Directors: 

  • Companies with paid-up share capital of INR 10 crore or more 
  • Companies with turnover of INR 100 crore or more 
  • Companies with aggregate outstanding loans, debentures, and deposits exceeding INR 50 crore

Additionally, Section 150 of the Company Act prescribes the manner in which IDs are to be selected, and provides for a databank containing names, addresses and qualifications of persons who are eligible and willing to act as IDs. 

Accordingly, the Ministry of Corporate Affairs and the Indian Institute of Corporate Affairs (IICA) have developed a databank of Independent Directors, after joining which an individual must clear the online self-assessment test. 

What is the online self-assessment test?

The Companies (Appointment and Qualification of Directors) Fifth Amendment Rules 2019 require all existing IDs as well as professionals aspiring to become IDs to apply online to the IICA for registration in the databank.

All IDs thus registered must clear the Online Proficiency Self-Assessment Test conducted by IICA within one year of the date of inclusion of their name in the databank.

Failing to pass the test within the stipulated period shall result in the removal of the individual’s name from the databank, though they may re-register for a small fee. But they will still need to clear the test as before. 

A small group of individuals are exempt from the test, and a full list is available on the Independent Director’s Databank website. Among them are those who at the time of registering their names are, or have been, for at least 10 years:

i. An advocate of a court; or

ii. In practice as a chartered accountant; or

iii. In practice as a cost accountant; or

iv. In practice as a company secretary

But the test is mandatory for all other professionals. 

Scheme of the self-assessment test

Broad topics covered

  • Companies Law
  • Securities Law
  • Basic Accountancy 
  • Corporate Governance

Of course, we will provide the detailed breakdown of these topics at the bootcamp.

Marking scheme

Total marks – 100

Total number of MCQs – 50

Total test duration – 75 minutes

Marks assigned to each question – 2 

Average time allotted to each question – 1.5 minutes

Break-up of questions

Board Essentials – direct questions

Board Practice – scenario-based questions

An individual who has obtained a score of not less than 60 percent in aggregate in the self-assessment test shall be deemed to have passed the test.

There is no limit on the number of attempts an individual may make to clear the self-assessment test.

What does it take to clear the test?

That is exactly what we will help you with at the bootcamp. No matter what anyone tells you, the test is really not that difficult for a senior professional. 

Just scroll up and look at the syllabus again, or go through some of the key responsibilities of an ID:

  • Seek appropriate clarification or amplification of information and where necessary, take relevant professional advice from outside experts
  • Participate constructively and actively in the committees of the board in which they are chairpersons or members 
  • Ensure that any concerns about the running of the company or a proposed action are addressed by the board, and insist that such concerns are recorded in the minutes of the board meeting 
  • Stay well informed about the company and the external environment in which it operates 
  • Report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy
  • Assist in protecting the legitimate interests of the company, shareholders and its employees 
  • Maintain secrecy regarding confidential information, including technologies, advertising and sales promotion plans, and price-sensitive information, unless such disclosure is approved by the board or required by law 

As compliance professionals, entrepreneurs, or HR professionals, many of you have probably already performed some of these duties, and have firsthand experience of the subjects in the syllabus. 

All you need is to channelise your learnings and experience in a focused manner, which we will help you with.

Life as an Independent Director is not merely hugely prestigious, but financially highly rewarding too. The job also offers a healthy work-life balance, and a chance for you to put your cross-functional experience to excellent use. 

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