Exemption to certain unlisted public companies from the appointment of Independent Directors By CS Gaurav Kumar



Dear Professional Colleagues,

MCA has issued Circular to clarify the provision w.r.t Exemption to certain unlisted public companies under the Companies (Appointment and Qualification of Directors) Rules, 2014 from the appointment of Independent Directors. The exemptions have been provided to an Unlisted Public Company which is a joint venture, a wholly owned subsidiary or a dormant Company will not be required to appoint Independent Directors through the notification dated 05/07/2017. In this regard it has been clarified that Joint venture would mean a joint arrangement, entered into in writing, whereby the parties that have joint control of the arrangement, have right to the net assets of the arrangement. Further the usage of this term is similar to that provided under Accounting Standards.

General Circular No.09/2017 
dated 5th September 2017
issued by MCA

Companies (Appointment and Qualification of Directors) Rules, 2014 - Rule 4 - Clarifications with regard to the meaning of joint venture for the purposes of availing exemption under Rule 4

This Ministry, vide notification number G.S.R. 839(E) dated 5th July, 2017 issued the Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 inter-alia amending rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014. The said amended Rule 4 inter-alia provides that an unlisted public company which is a joint venture, a wholly owned subsidiary or a dormant company will not be required to appoint Independent Directors. Stakeholders have sought clarifications with regard to the meaning of joint venture for the purposes of availing exemption under Rule 4 of the aforesaid Rules as such a term is not defined in the Companies Act, 2013.

2.The matter has been examined and it is hereby clarified that a "joint venture" would mean a joint arrangement, entered into in writing, whereby the parties that have joint control of the arrangement, have rights to the net assets of the arrangement. The usage of the term is similar to that under the Accounting Standards.

3. This issues with the approval of Competent Authority.

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