Independent Director Appointment Letter (Word Format)

The following format is drafted keeping in view the below mentioned things. Hope it will be useful.

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An Independent Director is a type of director in a Company who is not in whole-time employment (executive directors) viz. Managing Director, Whole-time Director, etc.

While the executive directors are responsible for day-to-day functioning of the Company, an Independent Director has a critical advisory position in major decision making processes which are carried out in a meeting of the Board of Directors.

An Independent Director is appointed as per the conditions prescribed under the Companies Act, 2013 (ref: Section 149).

An Independent Director is expected to be impartial when it comes to decision making, he should support the decisions which will be in the best interest of the Company and its stakeholders, and not to prioritize the interest of the promoters or other chief executives.

An Independent Director only gets reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the shareholders.

Schedule IV of the Companies Act, 2013 prescribes that the appointment of independent directors shall be formalised through a letter of appointment and also sets out the broad points of the contents of such letters.

Key elements to be covered in an appoint letter of the independent director:

(1) Effective date of appointment;

(2) Term - Period of holding office;

(3) Remuneration - Fixed and variable i.e. claims at actuals;

(4) Role and functions, duties, guidelines of professional conduct;

(5) Other information on - committee of the board of directors, Directors and Officers insurance policy (D & O policy), terms of termination of directorship, intimation on disclosures of interests and change in personal details promptly and any other important information about the company that may concern the independent director.