No action against independent directors without evidence: MCA

The Ministry of Corporate Affairs assured that prosecution proceedings will not be initiated against independent and non-executive directors without strong evidence of their complicity in frauds committed by the companies.

Amidst the instances of independent and non-executive directors coming under the scanner for alleged corporate wrongdoings, the ministry has sent out a circular to its Regional Directors, Registrars of Companies (RoCs) and official liquidators with respect to prosecution proceedings.

“In case, lapses are attributable to the decisions taken by the Board or its Committees, all care must be taken to ensure that civil or criminal proceedings are not unnecessarily initiated against the Independent Directors (IDs) or the Non-Executive Directors (NEDs), unless sufficient evidence exists to the contrary,” the communication said.

As per the circular, in case of any doubt about liability of any person for any proceedings, guidance can be sought from the ministry through the office of the Director-General of Corporate Affairs. Any such proceedings must be initiated after receiving due sanction from the ministry, it added.

The ministry also said that all Registrars should immediately and scrupulously follow the standard operating procedure mentioned in the circular immediately and scrupulously “with respect to all ongoing cases”.

With respect to cases where prosecution may have been already filed and does not meet the criteria mentioned in the circular, then such cases “may be referred to the ministry for necessary examination and further direction”, it noted.