MCA Clarification on Exemption from Appointment of Independent Director by an Unlisted Public Company under Joint Venture/ Arrangement
The MCA has issued a Clarification on Exemptions given to certain unlisted public companies under joint venture/ arrangement from from the appointment of independent directors under the Companies (Appointment and Qualification of Directors) Rules, 2014, as under:
1. 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.