Independent directors: SECP to allow institutes, bodies to maintain data bank

The Securities and Exchange Commission of Pakistan (SECP) has decided to allow institutes, bodies or associations to create and maintain the databank of independent directors, disclosing basic particulars of such directors. The SECP has issued SRO 359(I) 2018 here on Saturday to issue draft of the Companies (Manner and Selection of Independent Directors) Regulations, 2018.
According to the regulations, the regulations shall apply to any institute, body or association, notified by the Commission for maintaining and creating databank of directors, and the companies or entities that are required to select independent directors under any law, rules, regulations or code, unless any other mechanism is provided their respective law for the time being in force.
Explaining the databank of independent directors, the SECP said that any institute, body or association as may be notified by the Commission, shall create and maintain the databank. The databank referred shall, at the minimum, maintain the details about persons including name as per computerized national identity card (CNIC) or passport; CNIC number or passport number, gender, occupation, contact number and email address, current service designation, educational and professional qualifications; experience or expertise or specialized skill, region/city in which the professional is serving currently, list of companies in which directorship is/was held, nature of directorship held (executive, non-executive, independent) along with duration, separately for each company/(s) and details of directors'' training program attended or, exemption availed.
The institute shall place the databank on its website and ensure that basic particulars of persons in databank, as mentioned in sub-regulation (2), are assessable, searchable, legible and downloadable in the format that is convenient for online viewing and printing. The institute may, with the prior approval of the Commission fix reasonable fee to be charged from companies for allowing them access to the information in databank.
The SECP said that every person whose name is included in the databank shall be responsible for the accuracy, adequacy and completeness of the information and particulars provided by him/her to the institute and in case of any subsequent change therein. Any person desirous of including his/her name on the databank referred to shall fulfill the educational and other requirements. A person who either holds at least a graduate degree from a university recognized and approved by the Higher Education Commission of Pakistan or is a member of a professional body.
The expression, "professional body" means established in Pakistan, governed under a special enactment of the federal government as a self-regulatory organization managed by a representative National Council, and has a prescribed minimum criterion of examination and entitlement of membership of such body, or established outside Pakistan and established under a special enactment in the country of its origin and which is a member of the international body relevant for such field.
The expression, "professional body" means that it has at least five years of relevant experience in one or more of the fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company''s business.
The expression, "professional body" means that it has at least fifteen years of relevant work experience in one or more of the fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company''s business.
The SECP said that the person is willing to act as an independent director and can confirm that on appointment, would devote reasonable time to the affairs of the company in order to enable him/her to discharge his/her stewardship responsibilities as given under the applicable law, corporate governance directives and where applicable, licensing requirements.
Every independent director, after being appointed/ elected on board, shall complete Directors'' Training Program (DTP) or avail exemption from the Commission as per the requirements of Regulation 20 of the Listed Companies (Code of Corporate Governance) Regulations, 2017, the SECP said. The institute, with the prior approval of the Commission, may fix a fee to be paid by the applicants for inclusion of their names in the databank.
The institute shall place the information on process of registration in databank, eligibility criteria, fees and documents and other relevant details on its website and the institute must ensure that information shall be in the format easily accessible and downloadable by the applicants. The institute may determine the necessary measures and conditions for retaining details of individuals in the databank.
The institute shall provide access to the databank to companies for appointment of independent directors. Every company shall be responsible for exercising its own due diligence before selecting an individual from the databank for appointment as independent director. In particular, every company shall require such individual to submit an undertaking on a judicial stamp paper that he/she meets the requirements of regulation along with relevant information supporting the same.
The institute shall conspicuously display the following disclaimers on its website: "It is responsibility of every person appointing independent director, to exercise due diligence in terms of requirements of the Act or applicable laws for purpose of selecting a person from the data bank; inclusion in databank does not guarantee selection as an independent director; and institute shall neither be responsible for any contravention of any law committed by any company or its directors by the reason of the fact that the person appointed by the company as an independent director was selected from the databank nor it will be a defense in any court of law."
Procedure and manner for including names of persons on databank is that any eligible person desirous of including his/ her name on the databank shall make an application to the institute along with all the relevant information. Every director''s training organization, duly approved by Commission, shall provide the name and CNIC/passport number to the institute within 15 days of the individual completing the directors training program.
The institute, if satisfied with all the requirements of the Act and these regulations are fulfilled, shall enter or provide manner of inclusion of, relevant details of individuals in databank, names of persons who have successfully completed the Directors'' Training Program (DTP) or obtained exemption under the Listed Companies (Code of Corporate Governance) Regulations, 2017, subject to the condition that each applicant complies with the eligibility criteria as prescribed.
The databank of independent directors shall not include names of person who has been ineligible, under any applicable law or debarred by the Commission, from acting as a director of a company; been convicted by a court of any offence involving moral turpitude or fraud; been convicted in the mismanagement of investments in any capacity; been involved in the management of a company whose registration or license has been revoked or cancelled or which has gone into liquidation or other similar proceedings due to mismanagement of affairs, financial misconduct or malpractices and entered into a plea bargain arrangement with the National Accountability Bureau (NAB), the SECP added.