Independent Directors of CPSEs under DPE Guidelines and the IICA Proficiency Test
This article sets out who qualifies as an Independent Director of a Central Public Sector Enterprise (CPSE) under the Guidelines on Corporate Governance issued by the Department of Public Enterprises (DPE), the qualification, age and experience requirements, the disclosure duty, and the separate exemptions from the IICA online proficiency self-assessment test.
It matters to practitioners advising CPSE boards and candidates for appointment because the DPE definitions differ from the Companies Act, and because registration in the independent directors' databank is compulsory even where the test is exempt.
Where your candidate stands: independence
Situation 1: Does the person meet the DPE test of independence
Under the DPE Guidelines, an Independent Director is a part-time Director who satisfies all of the following:
- Apart from remuneration, has no material pecuniary relationship or transaction with the company, its directors, senior management, holding company, subsidiaries or associates that may affect independence.
- Is not related to persons in management at Board level or one level below.
- Was not a senior executive or managerial personnel of the company in the preceding three financial years.
- Is not, and was not in the preceding three years, a partner or executive of a statutory, internal, tax, energy, management, risk or insurance audit firm associated with the company, nor of any panel advocate, legal firm, consultant or expert with a material association with the company.
- Is not a material supplier, service provider, customer, lessor or lessee whose relationship may affect independence.
- Is not a substantial shareholder, meaning a holder of 2% or more of the block of voting shares.
The criteria are cumulative. Failing any one disqualifies the candidate.