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Companies (Appointment and Qualification of Directors) Fifth Amendment Rules 2020

The Ministry of Corporate Affairs (MCA) has come up with various crucial amendments by introducing the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2020 vide a notification dated 18^th December 2020. With this notification, MCA has amended few provisions of the Companies (Appointment and Qualification of Directors) Rules, 2014. This notification is released in the official Gazette as per the requirement of Government of India and this present article briefly covers all the amendments.

Know more about the Compliances for Change in Registered Office of a Company

Synopsis of Companies (Appointment and Qualification of Directors) fifth Amendment Rules, 2020

The Synopsis of Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2020 is as follows:

• An Independent Director has to mandatorily get himself registered in the database on or before 31st December 2020
• Online proficiency test needs to be completed within two years from the date of inclusion of his name in the database. (MCA has increased the time period 1 year to 2 years in respect of every individual whose name is so included in the data.)

• An individual who obtains a score of 50 or more in the proficiency exam will be deemed to have passed such test.

• Exemption from passing the online proficiency test is provided to an individual who has served for a total period of more than 3 years as Key Managerial Personnel (KMP) in public Companies/Body corporate or holding a Designation in organizations specified by the Central Government.

Amendment in the time period to pass the online proficiency exam

With this notification, the Ministry of Corporate Affairs has provided relief in the time period to pass the online proficiency exam. Now, an individual will pass the online proficiency exam within a period of two years from the date of inclusion of his/ her name in the database.

Relief to Foreign Director, Bureaucrat/ Public officials

With these new amendments, MCA has provided relief to Foreign Directors who are also now eligible for an exemption for writing the test. MCA has also given relief to Bureaucrat/ Public officials who are also now eligible for an exemption for writing the test. This will enable Indian companies to retain and attract high calibre public officials as Directors.

Exemption from passing the online proficiency test

After this amendment, an individual will not be required to pass the online proficiency self-assessment test when he/she has served for a total period of not less than three years as on the date of inclusion of his/her name in the data bank. It applies to the following individuals;

• A director or key managerial personnel in one or more of the following organizations:
  • Listed public Company
  • Unlisted Public Company having a paid-up share capital of rupees ten crores or more
  • Body or corporate listed on a categorized stock exchange or
  • Body or corporate incorporated outside India having a paid-up share capital of US $ 2 million or more
  • Statutory Corporation set up under an Act of parliament or any state Legislature carrying on commercial activities
• Director of Ministry of Corporate Affairs or the Ministry of finance or Ministry of Commerce and Industry or Ministry of Heavy Industries and Public Enterprises and having the experience in handling the matters relating to corporate laws or securities laws or economic laws
• Chief General Manager or above in the Securities and Exchange Board or the Reserve Bank of India or the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority and having the experience in handling the matters relating to corporate laws or securities laws or economic laws

Minimum Marks Requirement

• As per the amendment, only 50% mark is sufficient to pass the online proficiency test.

Other Announcements

The MCA stated that for calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as a director or as key managerial personnel in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.

The notification pertaining to the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules 2020 is attached below for reference:

FifthAmdtRules_18122020