PP Chaudhary also emphasised that independent directors should exercise special care in issues of conflict of interests in related party transactions as well as those related to managerial remuneration.
The government is looking at setting up a database of independent directors, who form the fulcrum of corporate governance framework, Union Minister PP Chaudhary said on Thursday.
He also emphasised that independent directors should exercise special care in issues of conflict of interests in related party transactions as well as those related to managerial remuneration as they are the watchdogs of companies.
The Minister of State for Corporate Affairs said, "In the best interest of the company, the issue of conflict of interest in related party transactions needs to be looked at judiciously. Independent directors have to exercise special care while looking into such related party transactions."
He noted that caution must be exercised by independent directors while evaluating issues related to remuneration of the management.
Chaudhary was speaking at the inaugural function of the two-day orientation programme for newly-appointed independent directors of public sector banks and undertakings organised by the Indian Institute of Corporate Affairs (IICA) at its campus in Manesar, Gurgaon.
He said that Section 150 of the Companies Act mandates the government to maintain a database of independent directors.
"Now, the government is seriously considering implementing the mandate of Section 150 for maintaining the database and utilising the institute (IICA) for this purpose," he noted.
As it continues efforts to curb illicit fund flows, the ministry has already deregistered more than 2.26 lakh firms for being inactive for long apart from disqualifying over 3 lakh directors. Many of these firms are into illegal activities, Chaudhary said, adding that "if the independent directors with respect to public companies...are vigilant then such type of happenings will not be there".
There is an urgent need to carry out concerted efforts for continually supporting and strengthening the institution of independent directors in the country, he said.
IICA DG & CEO Gyaneshawar Kumar Singh said independent directors are supposed to the custodians of corporate governance.Gopal Krishan Agrawal, a member of IICA's Board of Governors, said independent directors bring their experience of diverse fields to a company's board. Among others, Madhhukar Gupta, Additional Secretary at the Department of Public Enterprise, was present.