“Independent directors are directors who apart from receiving director’s remuneration do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiar

Pecuniary relationship between a company and its Independent Director raises serious concerns on the independence of the director. Such a relationship may adversely influence an Independent Director's objectivity when it comes to taking key decisions and also results in conflict of interest of the concerned director. Section 149(6)(c) of Companies Act, 2013 requires that an independent director should have no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year. MCA vide a General Circular in 2014 has issued the following clarifications with respect to 'Pecuniary Relationship' of Independent Director: In case, a company carries out transactions in the ordinary course of business at arm's length price with an Independent Director, such Independent Director would not be said to have 'pecuniary relationship' with the company. In case of Independent Directors, 'Pecuniary Relationship' does not include receipt of remuneration by way of sitting fees, reimbursement of expenses for participation in the Board and other meetings and remuneration in the form of commission. The matter has been examined in consultation with SEBI and it is clarified that 'pecuniary relationship' provided in section 149(6)(c) of the Act does not include receipt of remuneration, from one or more companies, by way of fee provided under sub-section (5) of section 197, reimbursement of expenses for participation in the Board and other meetings and profit related commission approved by the members, in accordance with the provisions of the Act.