Registration Process for IDs: All You Need to Know

Henil Shah, Assistant Manager, Vinod Kothari & Company

Original Date of Article: December 21, 2019

Updated as on: December 27, 2020

corplaw@vinodkothari.com

Ministry of Corporate Affairs (MCA) on October 22, 2019, notified the Companies (Appointment and

Qualification of Directors) Fifth Amendments Rules, 20191 pursuant to which it made it mandatory for

Independent Directors (ID) to have their name included in the databank maintained by the Indian

Institute of Corporate Affairs (IICA) as specified under Companies (Creation and maintenance of

databank of Independent Directors) Rules, 20192. Additionally, except for certain categories of IDs, all

other IDs are now required to clear an online proficiency self-assessment test conducted by the IICA

with 60% in aggregate.

While the time limit for registering the name with the Institute has been extended till 31st December,

20203, the time limit for passing the proficiency examination is one year from the date of registering

the name with the Institute. Also, the category of IDs who have been exempted from appearing in the

proficiency examination were those in certain services for 10 years.

Considering the last date for registration is approaching near, MCA on December 18, 2020 notified

Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 20204 (‘Amendment

Rules’) bringing modifications w.r.t to time period for completion, passing criteria and exemptions list

for online proficiency self-assessment test.

This article covers the applicability of regulatory provision relating to registration with the databank,

online proficiency self-assessment test and manner in which an ID can comply for the same.

Applicability for Inclusion of name in the databank 1. Every director appointed as an ID in an Indian Company before 1st December, 2019

2. Director who intends to get appointed as ID in an Indian Company after 1st December, 2019.

Timeline for registration 1. In case of director appointed as an ID before 1st December, 2019, before 31st December, 2020

2. In case where director is intending to be appointed an ID, before such appointment.

Process for Registration is provided under Annexure I

Period for which the name is required to be included 1. Options available for registration are 1 year, 5 year and Lifetime, it is the discretion of the ID

to choose for the tenure he/she wants to register.

Renewal of subscriptions 1. In case of 1 year and 5 year registration, the director shall apply for the renewal of his/her

license till he/she continues to be an ID.

1 http://www.mca.gov.in/Ministry/pdf/CmpFifthAmndtRules_22102019.pdf 2 http://www.mca.gov.in/Ministry/pdf/CmpInpdtDirectorsRules_22102019.pdf 3 http://egazette.nic.in/WriteReadData/2020/222076.pdf 4 http://egazette.nic.in/WriteReadData/2020/223776.pdf

2. Application of renewal shall be made within 30 days of expiry of subscription period

Requirement of passing proficiency test 1. Every ID whose name is included in the director databank shall pass online proficiency self-

assessment test conducted by the institute with 50% in aggregate (passing criteria reduced from

60%), within a period of 25 year from (extended from 1 year to 2 year) the date of inclusion in

the databank.

Exemption form the online proficiency self-assessment test: 1. Initially the exemption form the self-assessment tests was only provided to a person who served

as director or KMPs of a listed or an unlisted public company (paid of 10 Crore or more) for a

period of 10 years prior to their name being entered in data bank.

2. However, pursuant to the Amendment Rules coming into effect, the exemption list has been

significantly opened up by reducing the service requirement to 3 years and also considering the

exposure in body corporates, foreign companies, select ministry and regulatory authorities for

ascertaining whether the individual shall be required to clear online self-proficiency test or not;

3. Accordingly an individual who has prior to his name being entered in data bank served as a

director or KMP for a minimum of 3 years in any of the following is exempt from requirement

of clearing online self-proficiency test;

a) Listed Company;

b) Unlisted Public Company (paid up capital of 10 crores or more);

c) Body corporates listed on Recognised Stock exchange (e.g. Bank of Baroda)

d) Body corporates listed in countries who are member of State of Financial Action Task

Force6 and its securities market regulator is member of International Organisation of

Securities Commissions;7

e) Bodies incorporated outside India with paid up of US$ 2 million or more;

f) Statutory corporation carrying commercial activities (e.g. Unit Trust of India, Life

Insurance Corporation).

4. Additionally, exposure of at least 3 years in managing corporate, securities or economic laws

by virtue of being associated in a capacity of a director/chief general manager or higher position

with any of the ministry*/ regulatory body** respectively mentioned below shall also be taken

into consideration for ascertaining exemption norm for clearing online proficiency self-

assessment test prior to being appointed as ID.

a) Ministry of Corporate Affairs

b) Ministry of Finance

c) Ministry of Commerce and Industry

d) Ministry of Heavy Industries and Public Enterprises

e) Securities Exchange Board of India (SEBI)

f) Reserve Bank of India

g) Insurance Regulatory and Development Authority

h) Pension Fund Regulatory and Development Authority (PFRDA)

* Considering the organisational structure of ministries officials such as Secretaries (special, additional, joint),

Advisors, Chief Controllers, Director Generals) having served at the such position for a period of 3 years shall be

eligible individuals entitled to avail exemption from online proficiency test.

**As per the organisational Structure of above mentioned regulators officials with designations such as

chairperson, whole time member and executive director, governor, deputy governor principal general manger

5 Substituted vide MCA notification dated 28th December, 2020: http://egazette.nic.in/WriteReadData/2020/223776.pdf 6 https://www.fatf-gafi.org/about/membersandobservers/ 7 https://www.iosco.org/about/?subsection=membership

served at such position for a period of 3 years shall be eligible individuals entitled to avail exemption from online

proficiency test.

5. For the purpose of calculating period of not less than 3 years referred above, any period during

which an individual was acting as a “director” or “KMP” in two or more companies or bodies

corporate or statutory corporations at the same time shall be counted only once.

The expansion in the scope under the exemption list brings in much needed comfort for lots of

individuals with years of technical competence in their specific field, since clearing of a common

proficiency test need not be the sole barometer for being appointed on a corporate board or test one’s

expertise in a particular field.

Subsequent to the Amendment Rules, the individuals who will be required to clear online self-

proficiency tests will be individuals with either experience of less than 3 years in any of the above

mentioned organisation or who have served as directors or KMPs in a private or public company(paid

up of less than 10 crores). Considering that the requirement of mandatorily appointing an ID is for

Listed or Public Companies with paid-up of more than 10 cores (including certain other criteria’s)

exclusion of such from exemption list is understandable.

Parameters on which the online proficiency test shall be conducted 1. Companies Law;

2. Securities Law;

3. Basic Accountancy;

4. Corporate Governance.

Process for Online Proficiency Test 1. Once the registration is completed, he/she may select the slot for Online Proficiency Test.

a. Login8 – Dashboard

b. Select Slot for online proficiency self-assessment test as your convenience.

c. Result for the test will be displayed immediately on the completion of the test.

d. There is no limitation on number of attempts an ID can give for clearing online

proficiency test

e. If an individual fails to pass the test on a particular slot or misses the slot due to any

reasons, the next slot can only be booked after 1 day from the previous booked slot date

and time.

2. Actual online proficiency self-assessment test has begun from 01st March, 2020. There are 3

slots to choose from at any given day, Morning 8:00 AM to 9:00 AM, Afternoon 2:00 PM to

3:00 PM, and late evening 8:00 PM to 9:00 PM.

The IICA provides for mock test facilities for familiarizing oneself with test environment

Pass

Fail

Re-attempt

8 https://www.independentdirectorsdatabank.in/login/director

I. Login

II. Dashboard

III. Select Slot

Attempt test as

per the slot

booked

Results and Reports

are Published

Instantly

Declaration by the ID 1. Every ID shall submit a declaration with the board that he/she has registered with the data bank

maintained by the IICA and has passed the online proficiency self – assessment test along with

the declaration of Independence.

Annexure I

Process for Registration on Director Databank.

1. Login on MCA with MCA ID.

2. Once logged in proceed with Independent Director Registration9.

3. Email ID and Mobile Number of directors gets pre-filled per data stated under DIR-3-KYC.

4. Once the OTP is verified the director shall receive the Login ID and Password for Databank

registration on the registered email ID of Directors as mentioned under DIR-3- KYC.

5. Once Logged in the director shall fill required details as demonstrated below.

9 http://www.mca.gov.in/mcafoportal/iicaDirService.do

In case where the person

is not holding valid DIN

He/ She may enrol on the

portal through Valid PAN

or through Passport.

Personnel Information

1. The databank demands for the following personnel information:

a. DIN;

b. Passport number;

c. PAN Number;

d. GST Number ;

e. Name;

f. Fathers Name;

g. Gender;

h. Position to be considered for:

i. Independent Director;

ii. Women independent Director;

i. Date of Birth ;

j. Nationality;

k. Address ;

l. Contact Details.

Educational Details

1. Once the personnel information are saved the details relating to Educational and Tanning

details are required to be stated.

Professional Expertise and experience

1. Next step to registration is professional expertise and experience;

2. Data to be provided is:

a. Professional expertise, director must select from the options available in the drop

down;

b. Present Occupation;

c. Past Experience;

d. Any government of civil service experience;

e. Overseas experience;

Positions held by the Directors

1. Directorship position held by the director in companies is auto filled;

2. Further the director may self-declare the directorships and Key Managerial Positions held in

companies/ body corporates.

Declaration in the form of Yes/ No are required to be filled by the Directors

1. Have you ever been the subject of a disciplinary procedure in your previous positions?

2. Do you have any legal proceedings initiated or pending against you?

3. Please indicate if your profile should be made available to companies seeking Independent

Directors?

4. Would you like your personal details to be displayed?

5. Would you like your educational details to be displayed?

6. Would you like your present organization and title position to be displayed?

7. Would you like your occupation to be displayed?

Once all the data is filled the Director can review all the information provided and then select the

subscription plan for which he/she wants to register.