(1) It shall be duty of the State Government to ensure that the Board of Directors of the State Distribution Licensee has an optimum combination of functional, nominee and independent directors:
8 THE HIMACHAL PRADESH ELECTRICITY DISTRIBUTION MANAGEMENT RESPONSIBILITY ACT, 2014
Provided that the number of functional directors (including Chairmancum-Managing Director/Managing Director) shall not exceed fifty percent of the actual strength of the Board:
Provided further that the number of nominee Directors appointed by the State Government shall be restricted to a maximum of two:
Provided further that the number of Independent Directors shall be as per provisions under the Companies Act, 2013.
Explanation:-‘Independent Director’ shall mean a part-time director of the distribution licensee who,-
(a) apart from receiving director’s remuneration, does not have any material pecuniary relationship or transaction with the State Distribution Licensee, its Directors, its senior management, its holding company, its subsidiaries and associates, and the State Government, which may affect the independence of the Director;
(b) is not related to persons occupying management positions at the Board level or at one level below the Board;
(c) is not a partner or an executive, or was not a partner or an executive during the preceding three years, of any of the following:-
(i) the statutory audit firm or the internal audit firm or tax audit firm or energy audit firm or management audit firm or risk audit firm or insurance audit firm, that is associated with the State Distribution Licensee; and
(ii) the panel of advocate(s) or legal firm(s) or consultant(s) and consulting firm(s) or expert(s) that have a material association with the State Distribution Licensee;
(d) is not a material supplier, service provider or customer or a lessor or lessee of the State Distribution Licensee, which may affect the independence of the Director;
(e) is not a substantial shareholder of the State Distribution Licensee i.e. owning 2% or more of the block of voting shares; and
(f) is a person of ability, integrity and standing, having qualification in engineering or law or economics or commerce or finance or management and having knowledge and experience in the areas of generation or transmission or distribution of electricity.
(2) The State Government shall lay down a code of conduct in line with the Guidelines on Corporate Governance for Public Sector Enterprises, as notified by the Department of Public Enterprises, Government of India, for all Board Members and senior management of the State Distribution Licensee, THE HIMACHAL PRADESH ELECTRICITY DISTRIBUTION MANAGEMENT 9 RESPONSIBILITY ACT, 2014 which shall include but be not limited to a clear delineation of the roles and division of responsibilities between the Board and the management.