How to Become an Independent Director in India
11 Steps to Become an Independent Director in a Prominent Organisation
Becoming an independent director in India involves several steps that align with the guidelines provided by the Ministry of Corporate Affairs, Government of India and the Companies Act of 2013.
Step 1: Assess Eligibility and Qualifications
- Educational Background: A strong educational background in business, law, finance, or management is advantageous.
- Experience: Relevant experience in business management, corporate governance, or professional fields is essential.
- Skills: Strong analytical skills, independent judgment, and integrity are crucial.
- Age and Residency: As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for the listed companies the minimum age to get appointed as an independent director is 21 years and the maximum age is 70.
A foreigner or a non-resident Indian can become an executive or a non-executive/independent director of Indian companies whether public or private.
Step 2: Acquire Necessary Knowledge
- Understanding of Corporate Laws: Aspiring independent directors need to familiarise themselves with the Companies Act, 2013, especially the provisions related to the roles and responsibilities of directors.
- Corporate Governance: One needs to gain knowledge about corporate governance practices, ethical standards, and risk management.
- Get certified: Become a certified independent director by getting certified from reputed organisation.
Step 3: Register on the Independent Directors’ Databank
- The Ministry of Corporate Affairs (MCA) has set up a databank for independent directors. Registration is mandatory.
- The databank provides a platform for individuals to get selected as independent directors in various companies.
Step 4: Complete the Proficiency Self-Assessment Test
After registering in the databank, you must pass the online proficiency self-assessment test conducted by the Indian Institute of Corporate Affairs (IICA).
- The test assesses understanding of company law, securities law, basic accountancy, and such relevant subjects.
Step 5: Personal Branding
Personal Branding and storytelling are critical tools for establishing your UVP or Unique Value Proposition as an independent board member in the corporate world.
Storytelling can help in creating a narrative that resonates with the ethos of corporate governance, yet reflects your individuality.
- An effective personal brand sets an independent director apart, highlighting their unique expertise, ethical standards, and decision making skills. Being a domain expert in areas such as ESG & CSR, corporate law, cybersecurity, international business etc can be useful.
- Enhance your profile with relevant experiences, certifications and skills that demonstrate your capability to serve as an independent director.
Step 6 : Strategic Networking
-Build a network with industry events, seminars, and forums.
- Connect with senior/successful independent directors to learn the ropes
- Network with Founders and Promoters of Startups
- Network with board community esp NRC committee members
Step 7: Apply for Positions
- Monitor corporate announcements and stay in touch with board search firms for openings.
- Utilize your network and the Independent Directors’ Databank to identify opportunities.
- In the long run, build a brand which gets you invited to the boards
Step 8: Understand the Selection Process
- Companies often have a Nomination and Remuneration Committee which evaluates potential candidates for appointing as a non-executive director (NED) / independent director..
- Each organisation may have its unwritten rules, priorities and unique needs. Get some information from a trusted resource on company culture etc.
- Be prepared for interviews and discussions regarding your vision and understanding of the role.
Step 9: Continuous Learning about Compliance changes
- Once appointed, stay updated with changes in laws and best practices in corporate governance.
- Adhere to ethical standards and compliance requirements as an independent director.
Step 10: Engage in Board Meetings and Contribute Effectively
- Participate actively in board meetings, offer objective viewpoints, and contribute to strategic decision-making.
- Uphold the interests of all stakeholders, including minority shareholders.
Step 11: Stay Updated
- Conflicts of Interest: Be vigilant about potential conflicts of interest and maintain independence in your judgments and decisions.
- Digital Dexterity: Develop digital dexterity and learn AI based tools.
- Corporate knowledge and trends: Useful to read magazines & newsletters like Board Stewardship to stay UpToDate with new developments and trends.