IS INTEREST OF AN INDEPENDENT DIRECTOR IS AT STAKE DUE TO IBC 2016?

Whether Independent Director of a Company be restrained from transferring his Assets until Insolvency Process is over as held in Jaiprakash Associates case?

IS INTEREST OF AN INDEPENDENT DIRECTOR IS AT STAKE DUE TO IBC 2016?

Recent Supreme Court judgement restraining independent directors of Jaiprakash Associates from transferring any personal assets over a group company’s insolvency issue has sent shock waves through the independent directors’ fraternity, with experts warning that there would be few takers for this role. 

There is a general view It is unfair to place the entire onus on independent directors who are only privy to the information shared with them by the management,” “Instead of penalising independent directors, the management and promoters should be penalised.

It is urged that an independent director said they should be “provided immunity and protection except in cases of wilful fraud or gross neglect.

INDEPENDENT DIRECTORS SHOULD NOT BE HELD LIABLE?

It is argued that Independent Directors used to spend so much time and energy to understand issues although the compensation for the same is not adequate enough,”

Many industry and legal experts said independent directors should not be held liable for operational issues, while others defended the court’s decision saying such directors cannot alienate themselves from affairs of companies. 

WHETHER INDEPENDENT DIRECTOR SHOULD BE GIVEN IMMUNITY?

Independent directors need to be given immunity and protection except in cases of wilful fraud or gross neglect. They should not be held liable for the business losses or business financial failure of the company.

People of calibre are wary of joining boards and the recent order may be a jolt to the office of independent directors as it has given a new dimension to this office.

Experts warned that people will now think long and hard before joining the board of companies.

Some is of the view that however, said independent directors are bound to closely monitor operations of the company on which they are a board member.

“While the Supreme Court judgement may be seen as harsh, independent directors cannot alienate themselves from company issues. 

Courtesy : The Economic Times