2024-03-14 22:13:19
Bangladesh Bank has issued a new circular regarding the appointment of independent directors in finance companies, their responsibilities, duties and honorarium. These instructions have been issued to protect the interests of finance companies and depositors.
On Wednesday (March 13), the Financial Institutions and Markets Department of Bangladesh Bank issued instructions in this regard to the chairman, board of directors, chief executive officer and managing director of all finance companies operating in the country.
According to the circular, suitable and professionally competent persons must be appointed as independent directors on the board of directors of finance companies. For this purpose, new policies have been issued to appoint independent directors of finance companies and determine their responsibilities and powers.
According to the definition of independent director, as per Section 14 of the Finance Companies Act, 2023, ‘independent director’ means ‘a person who is independent from the management and shareholders of the finance company and who gives his opinion only in the interest of the finance company. Has no past, present or future interests with the finance company or any person associated with the finance company.’
A finance company shall have a maximum of 15 directors including at least two independent directors. In case of appointment as an Independent Director the person concerned should have at least 10 years of management or business or professional experience and the minimum age shall be 45 (forty five) years and the maximum age shall be 75 years. He/she should possess Bachelor’s or Master’s degree in Economics, Banking, Finance, Business Administration, Law, Accountancy from a recognized university.
Preference will be given to those who are independent directors:
Faculty of Business Education in Government or Private or Autonomous Universities or experienced teachers in Business Administration, Management, Law and Information Technology; Persons engaged in legal profession, persons with professional degree in accountancy engaged in accounting profession, experienced bankers, Ministry of Commerce, Financial Institutions Department of Ministry of Finance and experienced officers of Finance Department, Ministry of Industry and Ministry of Law can be considered on priority basis.
Those who cannot be independent directors:
No person concerned with the interests of any finance company shall be employed as a director on behalf of any other finance company, banking company, insurance company or any such company and any subsidiary company. Moreover, the designated individual director cannot act as a director on behalf of any company or organization that has control, joint control or significant influence over the said finance company, banking company or insurance company.
Persons convicted of any criminal offence, involved in forgery, financial crimes and illegal activities, defaulters, convicted by court judgment in civil or criminal cases cannot be independent directors. A person listed as a willful defaulter shall not be eligible to become a director of a finance company until 5 years have elapsed.
According to the circular, the person serving as an independent director of the finance company will receive a maximum of 50 thousand taka per month as a permanent remuneration, considering the company’s own capacity. A maximum of Tk 10,000 (subject to deduction of applicable tax) will be received as honorarium for attending each meeting of the Committee. Attendance at two meetings of the Board, two meetings of the Executive Committee, one meeting of the Audit Committee and one meeting of the Risk Management Committee will be paid per meeting per month.
Tenure and Removal of Independent Director:
Generally the individual directors shall be appointed for a term of 3 years and at the end of the term may be elected for a further term subject to the provisions of Sections 15 and 16 of the Finance Companies Act, 2023. The Board of Directors may request the Bangladesh Bank to remove the individual director concerned by specifying specific reasons. Besides, the individual director himself can resign on 7 days notice.
These guidelines are issued under the powers provided in Sections 14, 15 and 41 of the Finance Companies Act, 2023. The directors of the finance company shall submit a self-contained working paper to the board meeting within the next two months for the information and necessary action to be taken on the matters mentioned in this circular.