The Ministry of Corporate Affairs, vide its General circular number 09/2017 dated 5th September, 2017, has clarified Rule 4 of the Companies (Appointment and Qualification Directors) Rules, 2014 as amended by the Companies (Appointment and Qualification Directors) Amendment Rules, 2017 dated 5th July, 2017.
According to the Companies (Appointment and Qualification Directors) Amendment Rules, 2017, the following classes of unlisted public company shall not required to appoint at least two directors as independent directors on their Board :-
- a joint venture;
- a wholly owned subsidiary; and
- a dormant company as defined under section 455 of the Act.
Various stakeholders had sought clarifications with regard to the meaning of joint venture for the purposes of availing exemption under Rule 4 of the aforesaid Rules since the term is not defined in the Companies Act, 2013.
The circular dated 5th September, 2017 states that, ‘joint venture’ means a joint arrangement, entered into in writing, whereby the parties have joint control of the arrangement, have rights to the net assets of the arrangement.
The usage of the term is similar to that under the Accounting Standards.
The circular is available on the MCA website at the following link:
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