View: Independent Directors’ registration process is absurd and embodies bureaucratic overkill
By Omkar Goswami
Economic liberalisation ought to have dramatically reduced the need for citizens to engage in useless, information-overloaded sarkari paperwork, right? Wrong. Here is an example that epitomises the irritatingly ridiculous. It is the so-called Independent Directors Registration that has to be mandatorily completed before February 29 on the ministry of company affairs’ (MCA) portal.
Before this bizarre initiative, any company director, independent or otherwise, had to possess a unique eight-digit director identification number (DIN). To obtain a DIN, a director needed to submit a photograph, identification proof such as Aadhaar and PAN (permanent account number) card, or passport for a foreigner, plus proof of residence — all attested by a chartered accountant, company secretary or cost accountant in whole-time practice.
Gimme Data, I’ll Give Ya Job
Moreover, each director must annually submit a detailed annual compliance certificate (ACC) under the Companies Act, 2013, as well as Sebi’s Listing Obligations and Disclosure Requirements Regulations, 2015. This involves listing (1) the name of companies where the person is a director and shareholdings, if any; (2) list of relatives; (3) list of companies or firms where relatives are shareholders, partners or directors; (4) list of board-level committees where the director is a member; (5) declaration of independence; and more.
Shouldn’t DIN, Aadhaar, PAN, proof of residence and ACC suffice to get a fix on each and every director? Don’t be daft. Never underestimate the capacity of bureaucrats to create more form-filling. Thus, the Independent Directors Registration. The paragraph below outlines what this new registration entails.
Login. Password. Email Id. DIN. Mobile number. Passport number. PAN. Full name. Gender. Father’s name. Date of birth. Nationality. Current and permanent address.
Education, from high school onwards, with name of institution, specialisation and date of completion. Professional experience, from the very first job till date, period from and up to. Professional expertise. Training programmes attended, their duration and at which institution.
All directorships, past and present, with name of each company and its 21-digit alphanumeric company identification number (CIN), nature of industry, type of directorship, appointment and cessation date. Whether key managerial positions were held and, if so, in what company and for what period. Whether the person is or was a partner in a limited liability partnership (LLP), what kind of LLP, CIN, what position and from when to when. Plus 17 other questions.
For the pleasure of filling all this up — which can take over a couple of hours’ struggle through the forms — each director must pay a fee of Rs 5,900 a year. To whom? The Indian Institute of Corporate Affairs (IICA), affiliated to and funded by MCA, headed by an IAS officer and located at Manesar, Haryana. IICA will administer this voluminous databank.
After paying Rs 5,900, yet another digital registration number shall be created in your name. Your details will repose in IICA’s inventory. Companies that need to view this to choose their fiduciaries shall pay IICA a search fee.
Had this been voluntary, you could have either ignored it, or indulged in masochism with the fond hope that some unknown company far beyond the pale would recognise your name, love your CV, and offer you an independent directorship.
I’m Right Even If I’m Wrong
But it is mandatory. Thus, knowing that this is a load of needless nonsense, you will still have to go through this exercise. Why? Because MCA has decided that there must be a new database of all independent directors that must reside in IICA. What is the locus standi of IICA? It is a quasi-independent institute that gets annual grants from MCA. It is not the MCA. Mandatory data contained in our PAN, Aadhaar card or DIN reside with GoI. These do not inhabit databanks of institutes funded by GoI. In this case, however, it does.
The Gazette of India notification dated October 22, 2019, states, ‘The institute [IICA] shallcreate and maintain a databank of persons willing and eligible to be appointed as independent directors, and such databank shall be an online databank which shall be placed on the website of the institute’ [emphases mine]. By what canon can MCA mandate that a host of detailed personal information be stored in the website of one of its institutes?
To put it in perspective, would you like the detailed decennial data collected from you and your family for the 2021 Census be housed in some quasi-autonomous institute affiliated to the ministry of home affairs instead of the office of the registrar general and census commissioner of India?
That’s not all. Barring those who have served 10 years on boards, all independent directors must sit for an online exam in corporate governance, company law, securities law and basic accountancy, and secure at least 60% to pass. Who will administer this test? IICA. What is its remit to conduct this test? Is it a statutory exam-conducting body like the Institute of Chartered Accountants of India (ICAI)? Absolutely not.
This is a ridiculous set of rules and procedures that uses the power of the State to mandatorily collect data from us, and park these at an institute, which is then authorised to examine us. Forget it’s ludicrousness. Isn’t it an unacceptable recreation of the Permit Raj?
The writer is chairman, Corporate and Economic Research Group (CERG)