“DIRECTORS” UNDER THE COMPANIES ACT, 2013
INDEX Definitions Roles of Director Number of directors Number of directorships Changing Roles Board Meetings Committees Vigil Mechanism Duties of Directors Powers of Directors Appointment /Removal & Resignation
DEFINITION :DIRECTOR
DEFINITION “BOARD OF “ DIRECTOR ” DIRECTORS” OR “BOARD” • “ DIRECTOR ” means a director • “BOARD OF DIRECTORS” or appointed to the Board of a “BOARD”, in relation to a Company. Section 2(34 ) company, means the collective body of the directors of the Company . Section 2(1)(10)
ROLES OF DIRECTOR
ROLES OF DIRECTOR Managing Director Key Managerial Personnel Whole time Director Officer who is in Default
MANAGING DIRECTOR & MANAGER “MANAGING DIRECTOR ” Section 2(54) “MANAGER” Section 2(53) • An individual who, subject to the • Director by virtue of superintendence, control and Articles/Agreement/Shareholders’ direction of the Board of Directors Resolution • Has the Management of the whole, • Entrusted with substantial powers or substantially the whole, of the of management of the affairs of affairs of a Company Company • Includes a director occupying the • Includes a director occupying the position of Manager, by whatever position of Managing Director, by name called whatever name called
WHOLE TIME DIRECTOR & OFFICER IN DEFAULT “ WHOLE TIME DIRECTOR ” Section 2(94) • Includes a Director in the whole-time employment of the Company . OFFICER WHO IS IN DEFAULT Section 2(60) • Includes a director in the following instances: • Whole-time director • Key Managerial Personnel (KMP) • In case of no KMP, director as specified by Board who has so consented. If no Director, then all Directors • Person with whose advice BOD is accustomed to act, (other than in professional capacity) • Every director, in respect of a contravention, who is aware of such contravention by virtue of the receipt by him of any proceedings of the board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance .
AREAS FOR DISCUSSION Issue: What is the scope of this provision: Every director in respect of a contravention, who is aware of such contravention by virtue of the receipt by him of any proceedings of the board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance .
NUMBER OF DIRECTORS
NUMBER OF DIRECTORS (Sec 149) Board of Directors consisting individuals as directors. Private Company : 2 Directors Public Company : 3 Directors One Person Company : 1 Director Maximum number :15 (earlier 12)
NUMBER OF DIRECTORSHIPS
NUMBER OF DIRECTORSHIPS (Sec 165) Director in max of 20 companies Directorship to include alternate directorship Of these 20 companies, he cannot be a Director of more than 10 public companies (including private companies which are holding or subsidiary companies of public companies) Members can specify lesser number of companies for directorship by passing special resolution Penalty for contravention to be not less than Rs. 5,000, but not to exceed Rs. 25,000 for every day during which the default continues
CHANGING ROLE
CHANGES IN LAW At least 1 director to be a At least 1 woman director for person who has stayed in India prescribed class or classes of for atleast 182 days in the companies (Sec 149) previous calendar year (Sec 149) (As per Draft Rules: Listed Company, and every other public company having paid up capital of 100 cr rupees or more; or turnover of 300 cr rupees or more. Respective transaction periods also provided)
CHANGES IN LAW Amount to be deposited along Companies with prescribed with notice of nomination of number of small shareholders any person to the office of or paid up capital and listed director has been increased Companies to have 1 director from Rs 500 to Rs 100000 or elected by Small Shareholders such higher amount as may be (Sec 151) prescribed (As per Draft Rules: A listed company may suo moto or upon the notice of not less than five (As per Draft Rules: rules hundred or one-tenth of the total prescribed for manner of number of small shareholders, notice of candidature of a whichever is lower, elect a small person for directorship) shareholders’ director from amongst the small shareholders)
ADDITIONAL/ALTERNATE/NOMINEE DIRECTOR … NOTIFIED SECTION 161 Person who fails to get appointed as a director in a general meeting, cannot be appointed as an Additional Director Alternate director can only be appointed in case director leaves India for period of not less than 3 months Subject to Articles, Board can appoint director nominated by any institution in pursuance of any law or agreement has been specified in the law specifically
INDEPENDENT DIRECTOR (Sec 149) Every listed public Company to have at least one-third of the total number of directors as Independent Directors (ID) Central Government to prescribe the minimum number of Independent Directors in case of any class or classes of public Companies. ( As per Draft Rules: Public Companies having paid up share capital of Rs. 100 cr or more, Public Companies having turnover of Rs. 300 cr or more, Public Companies which have, in aggregate, outstanding loans or borrowings or debentures or deposits, exceeding Rs. 200 c r) Every existing company to have IDs within one year from commencement of the Act or from the date of notification of the Rules
AREA FOR DISCUSSION 1. Qualification for Independent directors made stringent. 2. Liabilities of Independent director
DECISION MAKING BY DIRECTORS DECISION MAKING BY DIRECTORS Board meeting Resolution by circulation Committee meetings
BOARD MEETING (Sec 173) First Board Meeting to be held within 30 days of incorporation . Notice of Board meeting shall be given to all directors, whether he is in India or outside India by hand delivery or by post or by electronic means. At least one independent director to be present at a Board Meeting called at shorter notice to transact urgent business. In case of absence of independent directors from board meeting, decisions taken at meeting shall be circulated to all the directors and shall be final if ratified by a independent director . Director can participate in the Board meeting through video conferencing or other audio visual mode as may be prescribed. (As Per Draft Rules procedure and manner of such process provided for)
BOARD MEETING At least 4 Board meetings should be held each year, with a gap of not more than 120 days between two Board meetings No requirement of Holding the Board Meeting in every quarter In case of only One Director in OPC, requirement of holding meeting will not apply Resolution by circulation shall be approved if consented by majority of Directors instead of the requirement of consent of all Directors present in India or by majority of them (as was provided in the Companies Act 1956)
NOMINATION AND RENUMERATION COMMITTEE (Sec 178) For listed and other prescribed class of Companies (As per Draft Rules: Nomination and Remuneration Committee of the Board for every listed company , and every other public company having paid up capital of Rs. 100 cr or more; or which have, in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 200 cr) 3 or more non-executive directors out of which not less than one half shall be independent directors Nomination and remuneration committee to formulate the criteria for: Determining qualifications, positive attributes and independence of • director • Recommending to the board a policy relating to remuneration for directors , KMP and other employee.
SHAREHOLDERS GRIEVENCE COMMITTEE (Sec 178) • For company which consists of more than 1000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a FY • Chairperson : non-executive director and other members as may be decided by the Board Committee shall consider and resolve the grievances of security holders of the • company
AUDIT COMMITTEE (Sec 177) Every listed company and such other class of company shall constitute an Audit committee. (As per Draft Rules: Audit Committee of the Board for every listed company , and every other public company having paid up capital of Rs. 100 cr or more; or which have, in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 200 cr) Committee shall consist of minimum three director with the independent director forming majority Auditors and KMP have right to be heard in the meeting of committee Board’s report to disclose Composition of the audit committee and Any recommendation which has not been accepted by the board.
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