Explain the manner in which the appointment of a 'nominee director' is regulated under the provisions of the Companies Act, 2013 and also state : (i) Whether the 'nominee director' can be called 'independent director'?

Appointment of Nominee Directors Explanation to Section 149(7) of the Companies Act, 2013 defines the term 'nominee director'. Accordingly, it means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government or any other person to represent its interests. Nominee Director shall not be deemed to be independent director as per Section 149(6). Companies, which secure financial assistance from the financial institutions, banks, major shareholders, debenture holders, etc. usually confer on their lenders, power to appoint and terminate the appointments of their nominees on their Boards. Such power is conferred by incorporating appropriate provisions in the financial assistance agreements. These institutions/banks etc. also insist on borrowing companies to alter their articles of association so as to empower them to appoint and terminate the services of their nominee directors on the Board of the company as and when they like. These directors are known as nominee directors. They are not liable to retire by rotation and hold office at the pleasure of their nominating agencies. Accordingly: (i) The answer to the first question, nominee directors cannot be called 'independent director'.