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Woman Independent Director in India: India Promoting Gender Diversity in Boardrooms

Updated: Jun 28, 2023

Introduction - Woman Independent Director

In India, the representation of Woman Independent directors in boardrooms is gradually increasing, with approximately 18% of directorships in the top 500 NSE-listed businesses being held by women as of March this year. This blog post explores the importance of Woman Independent directors in the corporate environment, as mandated by the Companies Act of 2013. We delve into the requirements, appointment process, tenure, and potential penalties for non-compliance, shedding light on the measures taken to promote gender diversity and inclusive decision-making in boardrooms.

Woman Independent Director

The Need for Woman Independent Director

Under the Companies Act of 2013, it is mandatory for every company to have a minimum number of directors who play a crucial role in the company's management. The Act introduced the concept of adding two new types of directors—women and independents—to the boards of specific classes of companies. This initiative aims to bring diversity and independent perspectives to boardroom discussions.

Utilization of Woman Independent directors

Certain classes of companies are required to include at least one Woman Independent directors on their board, as per Section 149(1) of the Companies Act of 2013 and the Companies (Appointment and Qualifications of Directors) Rules of 2014. Rule 3 of the Rules outlines that the following classes of companies must appoint a woman director:

  1. Every listed company.

  2. Any other publicly traded company that: a) Has a fully paid-up share capital of at least Rs. 100 crore, or b) Has a turnover of at least Rs. 300 crore.

The appointment of a Woman Independent directors must be made within six months of meeting the above requirements, considering the latest audited financial accounts.

Process for Appointing a Woman Director

The appointment of a Woman Independent directors involves several steps:

  1. The prospective Woman Independent directors must fill out Form DIR-2 to confirm her willingness to serve as a director and Form DIR-8 to disclose any disqualification.

  2. The company must hold a general meeting and present a resolution for shareholder approval of the Woman Independent director's appointment.

  3. Listed companies are required to publish the proceedings of the general meeting on their website and submit them to the stock market within specified timelines.

  4. The company must submit Form MGT-14 within 30 days of the general meeting's adoption of the appointment resolution.

  5. Form DIR-12, detailing the appointment specifics, must be submitted within 30 days of the appointment.

  6. The company must maintain proper entries in the register of directors and key managerial personnel, as well as the register of contracts in which the woman director is interested.

  7. Any temporary vacancy for a woman director should be filled by the board within three months of the vacancy occurrence or at the next board meeting.

Director Tenure for Woman Independent Director

A woman director's appointment is valid from the date of appointment until the subsequent Annual General Meeting (AGM). She may be reappointed at the general meeting. However, her tenure is subject to retirement by rotation, as stated in Section 152(6) of the Act, which applies to all directors. Additionally, a woman director has the freedom to resign from the company by providing notice.

Penalties for Violation of Woman Independent Director Appointment

While the Act does not explicitly specify penalties for not appointing a woman director, non-compliance can attract penalties under Section 172 of the Act. According to Section 172, officials or entities in default may be subject to fines ranging from Rs. 50,000 to Rs. 5,000,000.

Conclusion - Appointment of Woman Independent directors

Gender diversity in boardrooms is gaining importance in India's corporate landscape, with the introduction of woman directors as a means to foster inclusive decision-making. The Companies Act of 2013 mandates the appointment of woman directors in certain classes of companies, ensuring a broader range of perspectives and expertise. By adhering to the regulations, companies contribute to a more balanced and effective governance framework. Embracing gender diversity in boardrooms is not only a legal obligation but also a step toward creating a more equitable and progressive business environment.

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