When can an independent director be reappointed?
An independent director may be reappointed when the first term, of up to five consecutive years, is ending. The reappointment is by special resolution, for one further term of up to five consecutive years. Two consecutive terms are the limit. Who counts as independent is on the independent director page.
How long is the term?
Section 149(10) gives a term of up to five consecutive years. The director does not retire by rotation. At the end of that term the office ends, unless the company reappoints the person. Section 149(11) allows only one such reappointment. After two consecutive terms, three years must pass. During those three years the person is not appointed in the company, or associated with it, in any other capacity, either directly or indirectly.
What resolution reappoints the director?
The members pass a special resolution. The appointment is disclosed in the board’s report. The special resolution is filed with the Registrar in Form MGT-14 within 30 days. The appointment itself is filed in Form DIR-12 within 30 days. The person also gives the declaration of independence under section 149(7). A disclosure of interest under section 184 is the director’s statement of interests. It is not a statement that no interest exists.
The name of a person proposed as an independent director is included in the databank maintained for that purpose, and the proficiency assessment applies unless the rules exempt the person. Renewing that inclusion is not the special resolution. The members’ resolution is what reappoints the director.
Which company must have one?
A listed public company must have at least one-third of the board as independent directors. The rules add certain unlisted public companies. A private company does not appoint one merely because it is private. Where a company does have an independent director, the five-year term and the two-term limit still apply to that office.
Frequently asked questions
Four questions cover a third term, the kind of resolution, retirement by rotation, and a private company.
Can there be a third consecutive term?
No. Section 149(11) stops at two consecutive terms. A further appointment waits for three years, and during those three years the person is not associated with the company in any other capacity, directly or indirectly.
Is an ordinary resolution enough?
No. Reappointment is by special resolution, and the appointment is disclosed in the board’s report.
Does the director retire by rotation?
No. An independent director is not liable to retire by rotation. The term ends when the five years end, unless a second term has been approved.
Must a private company reappoint one?
A private company does not appoint an independent director merely because it is private. The reappointment rules apply where the company has one.
Sources
The term and the reappointment are section 149(10) and section 149(11) of the Companies Act, 2013. Who must be independent is section 149(6), and which companies must appoint one is section 149(4).