This article on how to register in an independent director databank is written by Ashutosh. In this article, the author has discussed in detail the steps to register in an independent director databank and all other necessary requirements that an independent director needs to comply with in order to successfully register in the independent director databank. In this very article, the author has also covered some additional information related to independent directors such as challenges faced by them, eligibility criteria to register in a databank, renewal of registration, etc.

Introduction

Independent directors play an extremely crucial role in the management of a company. They are the special members of a company’s board who are not related to the daily operations of a company. They bring a lot of valuable skills and knowledge into the company with their experiences. They help the company in making unbiased and fair decisions on all the big issues that affect the company. Independent directors are required to act as a custodian of good governance by performing advisory as well as monitoring roles with full efficiency. They are also required to act in the interest of the company and make all the decisions that are for the benefit of the company.

The Ministry of Corporate Affairs has also understood the importance of strengthening the institution of the independent directors and it is working to increase their effectiveness by developing a pool of skilled individuals and professionals as the agents of change. The Ministry of Corporate Affairs along with the Indian Institute of Corporate Affairs (IICA) have created a databank for all the independent directors by the name of independent director databank in accordance with Section 150 of the Companies Act, 2013.

At the same time, acting as an educator as well as facilitator, the Ministry of Corporate affairs has provisioned for the capacity building of all the independent directors by the help of an integrated Learning Management System (LMS) to provide an engaging and interactive library of eLearning courses. We will be dealing with LMS in detail further in this article.

Objectives of an independent director databank

There are various objectives behind the establishment of an independent director database and some of the most important ones are mentioned below.

It develops an ecosystem for all the companies and independent directors
It also creates and develops a verified database of all the aspiring as well as existing independent directors.
It builds and empowers the capacities of empanelled persons so that they can develop skills and acquire knowledge.
It helps in facilitating knowledge at ease through various online learning courses, publications and research, regular newsletters, reports and video-based content.
It also provides a platform to self-assess the knowledge and understanding of multiple topics that are related to regulatory and compliance framework, corporate governance, board essentials, board practices and all the other important practice areas.
It provides a platform to all the organisations and companies that are required to appoint an independent director to search and select the directors from the databank of aspiring and existing individuals with the help of all the search tools that are available.
The independent director’s databank enhances responsible business conduct as well as corporate governance.
The independent director databank also helps all the independent directors in improving their networking. With the help of this databank, they can easily make connections in the companies with all the other independent directors and it also helps in creating a community of skilled professionals who have an interest in corporate governance.
The independent director databank also helps in the promotion of diversity, it encourages diversity in all the corporate boards by providing a huge number of candidates. It also helps all the companies in finding directors that have some specific background and skills that they require for their company.

Features of an independent director databank

The independent director databank has various features and some of the key features of the databank are listed below.

It does the empanelment of all the professionals who act as an independent director
It also does the empanelment of all the professionals that have or do not have the director identification number and they wish to serve as an independent director.
It offers online courses with the help of an integrated learning management system, under this there are two types of courses. They are board essentials courses and board practice courses.
It has knowledge resources and a newsletter for continued professional development.
Profile sharing for the purpose of corporate access for helping them appoint an independent director that is well informed and well trained.
It allows all the companies to search for directors based upon some specific requirements, it consists of various advanced filters for qualifications, industry experience and skills.
It helps in keeping track of all the compliance with the regulatory requirements for the independent directors.
It alerts all the users about all the important and essential opportunities, required actions and regulatory changes, it sends important updates to the users via SMS notifications and Email.
It also allows all the organisations and companies to give feedback on all the directors that have been appointed and it also helps in maintaining the quality of the databank.
It provides for a compulsory online test to check the knowledge of directors in the areas of securities law, company law, basic accountancy and also in corporate governance.

Who is an independent director

Independent director is also commonly called an outside director, he is basically a member of the board of directors who is responsible for bringing a unique and unbiased perspective. The term independent director is commonly used to denote a director who does not serve as an employee of the organisation or firm where they have the duty to serve on the board. Whether they are serving on a board of directors or on the board of trustees, it is their duty to look after all the affairs of the company and make sure that all its missions are completed.

With the increasing importance of the matter of corporate governance. Organisations and companies are starting to pay more attention to those board members whose purpose is just to give oversight. Independent directors do not have any conflict of interest with the organisations where they work. They are required to bring unique perspectives, expertise and backgrounds to the table of the board of directors, and one most important thing about independent directors is that they assist in maintaining an objective viewpoint while making any decisions.

What is an independent director databank

IICA also known as the Indian Institute for Corporate Affairs is a part of the Ministry of Corporate Affairs (MCA) and it is also maintained and established by MCA. It is a first of its kind project that provides a variety of online courses on various topics of securities laws, board practices, basic accounting, securities law, board effectiveness and as well as board ethics. It also provides a very handy and easy to use navigation platform for all the existing independent directors and individuals who have a keen interest in becoming an independent director. Companies and organisations can also join the databank in order to search, select and interact with all the individuals who are interested in becoming an independent director.

The Ministry of Corporate Affairs on 22nd October published the Companies (Creation and Maintenance of Independent Director Data Bank) Rules, 2019 and also revised the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019.

The 2019 Rules of Companies (Creation and Maintenance of Independent Director Data Bank), which came into the picture on the 1st of December, 2019 designated the IICA as the association or the institute that is solely responsible for the maintenance and creation of an online about the databank section that contains the addresses, names and qualifications of all the existing independent directors as well as all the individuals who are willing and eligible to become an independent director. Other than this, IICA has also been given the responsibility to conduct an online proficiency self-assessment test for all the independent directors.

Eligibility criteria to register for independent directors databank

The eligibility criteria for an independent director to register at the independent director databank are as follows:

The age limit is one of the initial conditions that must be met by each independent director. It is necessary to be 21 years old to register in a databank; there is no maximum age limit restriction. Therefore, it makes no difference if you are a recent graduate or a seasoned professional till and unless you are older than 21.
Another most important requirement that every independent director is required to comply with is nationality. They are just required to state their nationality and the databank remains available for all the individuals no matter what their nationality is.
A bachelor’s degree from any accredited institution or college is required of the independent directors, it is not necessary to have a degree from a particular discipline; a bachelor’s degree from any stream is acceptable.
It is not necessary for an independent director to possess a director identity number in order to register with the independent director databank, anyone can do so without one. However, if you are already appointed as a director then you are required to have it.

Disqualifications from registration

There are a few things that can disqualify an independent director from registering at the independent director database, and they are as follows:

An independent director who is an undischarged solvent is barred from registering at the independent director databank.
If an independent director is convicted by a court for any offense that involves moral turpitude or otherwise and is sentenced to imprisonment for a period of not less than six months
If the tribunal or court has passed an order to disqualify the appointment of an independent director
If an independent director has not paid off calls on the shares of the company held by him for a period of six months
An independent director is also prohibited from registering with the independent director databank if he is found guilty of handling any related party transactions under Section 188 of the Companies Act, 2013 during the previous five years of office.

Empanelment process of individual directors

The Indian Institute of Corporate Affairs and the Ministry of Corporate Affairs have introduced a comprehensive online databank for all aspiring and existing independent directors. This databank draws its origin from the Companies (Appointment and Qualification) Rules, 2019. According to these rules, all the existing independent directors are required to empanel with this databank within three months of the commencement of all these rules. The process of empanelment of independent directors is a simple and quick process.

Following are the steps that an independent director is required to follow for the empanelment process:

Open the official website of the Ministry of Corporate Affairs or log in to mca.gov.in and then go to the registration block of independent directors.
Choose the individual registration from the independent director’s databank registration options.
Next, input the PAN, DIN, or passport registered with MCA21, or any relevant combination of these.
Enter your email id, mobile number and your PAN, this is to be done only if you are not registered with the MCA21.
Check and verify your phone number and submit.
After all this, you will be redirected to the independent director’s databank website.
Use your login credentials that were shared with you through your mobile number or email.
Login with those credentials to check your profile page.
The data of MCA21 will be pre-populated on your profile.
Share more details such as professional, educational and Directorship/limited liability/key managerial (not already present with MCA21).
After this select your privacy options and review your profile page.
Select your subscription plan and pay the required fees to finish the process of empanelment.
Download the invoice and also the registration certificate for your future use.
After doing this, access the integrated learning machine system at the databank to check all the comprehensive eLearning course libraries.
The course library at the databank provides modules on board practice, board essentials and case studies for professional development.
Explore all the options available for the online proficiency self-assessment test.
Book a slot for the test.
Practise mock tests.
Learn about the test requirement and process from the help guide and videos available at the databank.

Empanelment process of corporate bodies

All the listed as well as unlisted companies can register themselves with the databank of independent directors. This databank is established to serve as a single-stop repository of all the individuals who are willing and eligible to be appointed as an independent director. To upscale the standards of corporate governance in India, the regulatory requirements that are required for the appointment of an independent director have been amended. All the organisations and companies can now register themselves with the databank.

Process of registration on the MCA portal

These are the steps that are required to be fulfilled:

The first step is to log in to the official website of MCA
Once you have successfully logged in on the MCA portal, you are required to go to the ID Databank Registration section under the MCA Services and then click on the corporate registration
After these steps, you are required to enter the CIN details and tap on the submit option
Email ID will be already populated you just need to click on “Send OTP”
Once you visit the OTP, enter your OTP within the time limit and get your OTP verified
Once you have successfully registered and your OTP is verified click on the “Proceed” option to get all the necessary credentials for the databank in your email ID.

Process of registration on databank

Follow these steps to register at the databank:

The first thing that you need to do is to log in to the independent director’s databank
After you have successfully logged in, fill up the company details, assign up to two designated officers, who will have access to the databank, and after assigning them, accept all the terms and conditions.
Once you have submitted all the crucial details, then at last to complete the registration, just pay the subscription fees.

What are the steps to register in databank

MCA released the notification no. G.S.R. 804(E) on 1st of December, 2019, and under this notification then released new rules known as Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019 for all those individuals who are willing and are also eligible to be appointed as an independent director. These rules state all the necessary compliances that are required to be carried out before the appointment of an independent director and for all those individuals who are pre-appointed.

These rules apply to:

All the individuals who have been already pre-appointed as independent director in a company.
All the individuals who intend to get elected as an independent director in a company.

Compliances

Apply online to the institute to include his name in the databank for a tenure of one year or five years or till his death, until he continues to hold the office as an independent director.
The membership is required to be renewed within thirty days from the date on which the registration is to expire and up to which the name of the person was applied to be included in the databank.
All the independent directors are required to submit a declaration of compliance with these rules to the Board, each time the individual submits the declaration required under sub-section (7) of Section 149 of the Act.
Every person who has his name included in the databank is required to pass an online proficiency self-assessment test within the period of one year from the time his name was included in the databank.

Please note:

Any person who wants to become an independent director without having a DIN can also voluntarily apply for the inclusion of his name.
No renewal is required for the individuals who have paid the life time fees.
Any person who has served more than ten years or ten years as of the date of inclusion of name in the databank as the director in a listed or unlisted company having a paid-up capital of ten crore rupees or more shall also be exempted from passing any online proficiency self-assessment test.

Process of registration

These are the steps required for the registration of an independent director in the databank.

The first thing that you need to do is visit the official website of the Ministry of Corporate Affairs and then enter all your MCA credentials.
Go to the MCA services and then click in the ID databank services and go to individual registration.
Enter your PAN number or your DIN number, any one of these works.
After this, you will receive an OTP on your mobile phone.
Copy your OTP and enter it, after this you will be given your ID and password.
Once you have received the ID and password, visit the independent director’s databank and then log in with the ID and password that you received on your mobile phone.
Full up all the necessary details and then click on the submit option.
Lastly, pay the prescribed fees.

Please note:

At present, the fee for a one-year subscription is five thousand rupees and an additional eighteen percent GST.

All about learning management system

The databank website consists of an integrated learning management system that is easily accessible from the dashboard. The learning management system consists of a wide range of eLearning courses on various topics to assist the individuals in acquiring knowledge.

The learning management system has been designed to be a single stop for all the individuals who wish to become an independent director as a source of continuous development and learning. The idea behind the establishment of a learning management system is to keep all the directors updated with the latest things in corporate governance, best practices and regulatory changes.

The learning management system is categorised in a very typical manner, in courses and modules. There is a mix of basic, medium and advanced topics and it is extremely important for the independent directors in their journey of learning.

The topics under the learning management system are divided into two categories broadly:

Board essential courses– Board essential courses are those courses that give a walkthrough of all the fundamental clauses of the Companies Act, 2013 and also reinforce the existing knowledge on processes, concepts and processes involved. Topics that are covered under this course are incorporation of companies. Institution of companies, share capital, liability of directors, board committees, general meetings, etc.

Board practice courses– The board practice courses provide a detailed overview of how a particular company is being incorporated, the process and rules for the issue of shares, prospectus and several other important topics. Topics that are covered under this very course are board evaluation, exemplary board, due diligence before joining a board, building a resilient company, managing through financial ratios, evaluation of independent directors, etc.

Features of learning management system

The features of the learning management system are as follows:

Wide range of content– The learning management system has a very wide range of topics that are very crucial for all the individuals and already existing independent directors. The content in the learning management system is arranged in a structured manner because of which all the users can easily build their knowledge from the basics to advanced topics.
Multiple materials of learning– The learning management system has been developed keeping in mind the view that all individuals have a different approach towards learning and thus because of this the learning management system offers courses in various formats. Such as in the form of video lectures, quizzes, e-books, webinars, podcasts, etc.
Progress tracking mechanism– In order to help all the users the learning management system has inserted a robust tracking system in order to keep all the users motivated and organised while doing their courses. Under this tracking system, the users get a personal dashboard that showcases all the progress of a user, it also shows all the certificates that the user has received and the modules that are completed.
Personal learning– The learning management system analyses the knowledge of a user and creates customised courses for them based on their profile and their interest and they also consider the learning history.
High-end search function– In order to help all the users find relevant content, the learning management system offers various functions such as keyword research across all the content, filters for the type of content, and research based on tag.

All about proficiency test

According to the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019, each and every individual whose name is there in the databank is required to pass an online proficiency self-assessment test that is conducted by the institute within a tenure of twelve months from the date on which his name was included in the databank of independent directors, and if the individual fails to do so his name will be excluded from the list of directors from the databank.

Rules have further provisions for exemption from this based on some conditions, which will be duly calculated, and all the empanelled independent directors will be notified well ahead of the test being made available on the databank.

There are several areas covered in this test and all the areas that are covered are relevant to the working of independent directors, Securities Law, Companies Act, Board practice, Basic Accountancy and other crucial related topics.

Features

These are some of the most important features of online proficiency self assessment tests.

One of the most important features of this test is that it checks the knowledge and understanding of an individual who wants to become an independent director.
It is an online remote proctored test that any individual can take to check his knowledge.
It has unlimited mock tests for familiarisation with the test environment and system requirement.
There are multiple choice questions that are based on the topics that are available in the learning management system.
It consists of convenient test slot booking.
It has a feature of multiple attempts for the purpose of improving the status and test score.
It gives a detailed summary and test report to assess all the areas of strength and make further improvements.
It also consists of an intuitive and interactive dashboard.
Once an individual passes the proficiency test, he gets a certificate and that certification is valid for a lifetime, then there is no need for periodic retest unless it is mandated by the future regulatory changes.
The proficiency test is available in various languages so that individuals from diverse backgrounds and cultures can attempt it. It also has special provisions for all those readers who are differently abled, such as screen readers for visually impaired people.

How to renew registration in the independent director databank

An independent director can register himself in the databank for a period of one year five years or for a lifetime. Any person whose name is included in the databank is required to file an application for the renewal for a further period of one year, five years or a lifetime. However, he is required to do this within a period of 30 days from the date of expiry of the period up to which his name was applied to be included in the databank and if he fails to do so, the name of such person will be excluded from the databank of the institute.

The registration done in the databank is required to be renewed periodically and it is done to ensure that all the information of the independent directors remains latest while maintaining all the eligibility criteria. The initial registration of an independent director remains valid for a period of one year which can be subsequently renewed another year or for the next five years or for a lifetime.

The independent directors must complete a few tasks in order to renew their registration. First and foremost, they must log in to the Independent Director Databank portal, navigate to the renewal sections, and review and update all of their personal information if requested. Next, they must select the period for which they wish to have it renewed. After making this selection, they must pay the renewal fees and submit their application.

During the renewal process, each independent director must complete a few additional tasks. In addition to updating their information and verifying that all of the previously provided information is still accurate and hasn’t changed, they must also notify of any changes that have occurred since their last registration and disclose any disqualification they may have experienced.

An independent director’s registration becomes inactive if he or she does not renew it within the allotted time. During this grace period, the independent director may file for a renewal; however, if he or she is unable to do so, a new application must be submitted.

Benefits of registering in the independent director databank

There are numerous benefits that an independent director avails after registering in the databank, some of which are as follows:

More opportunities– If an independent director registers in the databank then his profile becomes visible to all the organisations and companies looking for independent directors giving more opportunities to the independent directors.
Increases credibility– If an independent director registers at the databank then, his profile gets extra credibility and it showcases the commitment of an independent director towards corporate governance.
Continuous learning- The Independent director databank provides continuous and regular learning options to the independent directors. They get access to a variety of learning resources with the help of a learning management system.
More opportunities in networking– Joining the independent director’s databank is a goldmine of networking. Once you successfully get enrolled in the databank you become a part of the community of independent directors all around the world. There are a lot of networking opportunities at the databank in the form of discussions, forums, etc, everything centred on corporate governance available for an independent director. You get to meet with independent directors from all around the world, share your stories and ideas with them and eventually end up making good connections with them.
Recognition in the industry– Enrolling in the Independent Director Data Bank offers a number of exciting benefits. To begin with, it’s similar to receiving an honour badge from your peers. You are formally acknowledged as a qualified independent director once you have registered, making you more than simply any director. It greatly enhances your professional reputation. That’s not all, though. This acknowledgement may lead to opportunities that you were unaware ever existed. It could happen to you that invitations to speak at various gatherings and forums suddenly appear. It’s a fantastic method to spread the word about your name and abilities. Who knows? It’s possible that you’ll connect with prominent figures in the field or possibly find your next big break. Increasing your profile and showcasing your accomplishments to the world is the key.

Challenges that directors face during registration at independent director databank

Registering in the databank is not a difficult task for an independent director but still at times, most of the directors face some challenges during the registration which are mentioned below:

Technical problems: One of the most common challenges that every independent director faces while registering in the independent director databank is the issue of technicality. Often the website slows down or even crashes during the peak time of registration. There are other issues like trouble caused due to incompatibility with certain browsers and sometimes the individuals also face problems while uploading their documents and unexpected eros pop out while making submission.
Privacy concerns: During the process of registration, all the independent directors are required to share their personal information in the databank. This sometimes leads to data breaches and loss of data confidentiality. Thus, it is required to have certain transparency to balance it with personal privacy.
Language barriers: As we all know, the independent directors databank is available for all the independent directors and every individual who wishes to become an independent director can register in the databank. However, the registration process only appears in the English language, due to which, all non-English speaking individuals find it difficult to register in the databank.

Conclusion

The establishment of an Independent director databank is a step taken by the Ministry of Corporate Affairs to push the landscape of corporate governance in India. This was done with a view to standardising the process of identification and appointment of all the individuals who want to become an independent director. With the help of this databank, both the individuals and the organisations can be benefitted. The individuals who wish to become independent directors can create their profiles and share their details in the databank and all the organisations who want to appoint an independent director can look for an independent directors list from the same databank.

One of the most important features of the independent director databank is that it has an integrated learning management system that allows all the independent directors to do continuous learning. A databank is a tool that provides access to a whole library of study materials to independent directors, and it consists of all the major topics that an independent director needs to understand, from all the financial laws to the corporate laws everything becomes accessible at the fingertips. Thus, the independent director databank is much more than a registration system and it is in short, a comprehensive ecosystem that is designed to enhance the quality of corporate governance in India.

Frequently Asked Questions (FAQs)

Can an individual who is from a non-legal background or not from commerce background take the online proficiency self assessment test?

No, it is not at all necessary for an individual to remain from a commerce or law background in order to appear in the online proficiency self assessment test. Any individual belonging to any of the streams can appear in the online proficiency self assessment test of an independent director.

What happens if an independent director registered in the databank fails to renew his registration within the given time frame?

It is extremely necessary for an independent director who has registered in the databank to get his registration renewed within the given time frame but if the independent director fails to do it for any reason, then he is given a grace period and in that grace period, he is required to renew his registration. However, if the independent director even fails to renew his registration within the given grace period, then he is required to do a fresh registration.

What is the minimum age requirement for an independent director to get himself registered in the databank?

The minimum age requirement for an individual who is willing to get his name registered in the independent director databank is 21 years. There is no upper age limit.

How many attempts are given to an individual to appear in the online proficiency test of an independent director?

There are currently no restrictions on the number of attempts which an individual can give in the independent director online proficiency test. However, it is required that the independent directors must take a gap of at least one day in the 2 slots in which an individual is attempting the test.

In which mode the independent director online proficiency test is conducted?

The online proficiency test of an independent director is conducted in an online mode by the Indian Institute of Corporate Affairs, also known as IICA.

How is an independent director appointed?

The appointment of an independent director is done from the list of directors that is available on the independent director databank. All the individuals who are willing to become an independent director are required to register themselves in the databank and they are elected by the companies and organisations from there itself. The companies often look for individuals who have already qualified or passed the independent director online proficiency self assessment test. The companies or organisations can also appoint an individual as an independent director who is given the permission to become an independent director without even passing the independent director online proficiency self-assessment test. However, it is required that they meet all the necessary criteria for any person to be appointed as an independent director.

What is the procedure for reappointing an independent director?

In order to reappoint any person as an independent director of the company, the first thing that is to be done is the evaluation of the performance by the board members and if the board members think that their performance is satisfactory, then, in such a case he may be reappointed as the independent director of such a company. Their performance is evaluated by other directors on the basis of their performance appraisal report. The maximum period for which an individual can act as an independent director of a company is ten years.

How can an independent director be removed from his office?

The removal process of an independent director is the same as that of any independent director. They can be removed from their office by passing an ordinary resolution at the company’s board meeting.

In the case of registration, any independent director who wants to resign has to write the same to the board of directors of the company. He is required to mention the date on which he is leaving his office as an independent director of the company. After the board of directors receive the resignation of the independent director, they are required to inform the registrar of the company.

Is it necessary for all the directors to have a director identification number?

Yes, it is mandatory for all the directors to have a director identification number and not only the directors but all the individuals who wish to become an independent director are also required to have their director identification number.

What kind of questions are asked in the online proficiency self assessment test of independent directors?

Under the online proficiency self assessment test of an independent director mostly the individuals who are appearing for this test are asked objective questions and they are multiple choice questions.

Can an independent director of a company be reappointed as an independent director of the same company again?

Yes, an individual who was already an independent director of a company can be reappointed as the independent director for two consecutive terms.

How to register in independent director databank