Section 149 (4) of Companies Act 2013 read with rule 4 of Companies (Appointment of directors and their Qualification) Rules 2014, every listed public company, public companies having paid-up share capital of Rs 10 crore or more, public companies having turnover of Rs 100 crore or more, or public companies which have in aggregate outstanding loans, debentures and deposits exceeding Rs 50 crore or more to have Independent directors.
The Independent director cannot be appointed for more than 5 years on a continuous basis. However, further appointment of 5 years or less can be made by passing a Special resolution in general meeting. Moreover, Independent Director can be appointed for only 2 such terms and a cooling period of three years must be made for appointment after 2 terms of 10 years or less.
The MCA vide its General Circular No. 14/2014 dated 09.06.2014, has clarified that any continuous appointment of 5 years or less shall be counted as a single term.
However, as the Independent Director can be appointed for only 2 such terms, there augments a uncertainty that if an Independent director has been appointed for only a period of one month or even a single day and thereafter is removed or resigns, whether that will be counted as a single term in that company.
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