Appointment of Independent director in group companies

[Rajesh]

Dear friends,

ABC public company has an independent director by name ID. 

XYZ also public company wants to appoint same independent director ID for their company.

The Promoters are common in both the companies. Also ABC is an associate company for XYZ company.

ID is an unrelated person to both the companies. There is no pecuniary relationship with the company apart from getting sitting fees and fixed annual commission.

Is it ok to appoint ID in XYZ limited?

I seek your views on this.

[CS Sarvajit S. Yadwad]

Dear Rajesh Ji,

Section 149 (6) (e) (i) says that a person cannot be appointed as ID if he or his relatives hold-

1. Position of KMP/employee in the Company or its holding/subsidiary/associate in any of the 3 preceding FY.

Further, the definition of KMP does not include ID. In this regard, if ID is unrelated to both the Companies, there will be no issue in appointment in both the Companies.

In the Act also it is nowhere mentioned so need more clarity.

Thanks & Regds,

CS Sarvajit S. Yadwad

9765144257

[Rajesh]

Thank you Mr. Yadwad. It is clarified to the extent of his independence to act.

One more clarification required :

S 149 (6)(c) pecuniary relationship, other than renunciation as such or having transaction not exceeding 10% of his total income or such amount as may be prescribed with the company or their promoters during preceding 2 financial years.

I understand that remuneration recived by  ID which exceeds 10% of his total income will not be considered as pecuniary relationship under above section.

Regards,

Rajesh R

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[Karishma]

As per my view, it won't be covered under pecuniary relationship with the company as he is taking salary/sitting fees in other capacity.

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[Rajesh]

Thank you so much. If the director is having business transactions which is more than 10% of his total business transaction in an year, then he is considered as related.

Thank you Mr. Yadwad and Ms.Karishma for the clarification.

Regards,

Rajesh R

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