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Appointment of Director

Mandatory E-Registration For Independent Directors

In this article, we will take a look at the provision mandating the e-registration of Independent directors on the MCA portal


Independent Directors act as a guide to the company, offering valuable suggestions, credibility to board decisions while also acting as a moral compass for the company. An independent director is a non-executive director of a company and is responsible for ensuring that the company does not breach its fiduciary duties to its stakeholders such as creditors, customers, shareholders and the government. Public companies are mandatorily required to ensure at least one-third of its overall board composition is independent. 

One of the major tasks entrusted to an Independent Director is to oversee financial reporting processes including disclosure of the company’s financial information, compliance with listing and other legal requirements and disclosure of related party transactions. 

Why has e-KYC been proposed? 

While the Companies Act 1956 did not provide for any definition of Independent Director, the new Companies Act, 2013 and various rules framed after it, clearly outline the duties and other dynamics of Independent Director. Since the passing of the new act, it was realised that many companies in an urgent bid to satisfy the mandatory compliance requirement of appointment of an independent director hastily appointed directors who neither had the financial acumen, relevant technical expertise or experience to function as an Independent Director. 

The Ministry of Corporate Affairs recently passed a notification stating that every company appointing an independent director must do an e-KYC process. It is believed that such a move will help in the creation of a pool of talented individuals possessing adequate knowledge and experience in the field of corporate management, finance, taxation, accounting or other allied areas. 

Know more about: Director of a Company

Will the New Process Help to Weed Out Irregularities?

Currently, the process requires filing the nomination of a director, a DIN – Director Identification Number had to be compulsorily obtained and mentioned with every individual filing for the position of a director in every company. However, this new rule is in line with an earlier effort to find a screening mechanism for independent directors. It has been seen that many directors and promoters who were initially a part of the key decision making processes resign after noticing irregularities. This was specifically highlighted after the Jet Airways fiasco that has led to the collapse of operations of the airline. 


Although the demand for a review mechanism for the process of selection and oversight over independent directors is not new, a proper surveillance system on the conduct of independent directors against affairs of the company is yet to be implemented. The MCA has also come up with a voluntary training programme on corporate issues that Board Members are likely to face, which is offered through an online portal maintained by the Indian Institute of Corporate Affairs. 

Additionally, even a corporate boss or a promoter who may be an executive director in a company will have to go through the e-KYC registration process, if he/she holds the position of an independent director in another company. This is likely to create a stronger database which would be an asset to regulatory bodies in addition to the Ministry of Corporate Affairs, such as the Registrar of Companies, Serious Fraud Investigation Office etc, in mapping corporate liability in cases of irregularities, inconsistencies and investigation of frauds. If you have any other queries or require any further assistance with any legal or regulatory matters, make sure to get in touch with us and we will ensure that you receive the best professional help for your requirements.

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