companies act 2013 nihal kare
DESCRIPTION
A simple general overview of Chapter 11 of the new Companies Act 2013TRANSCRIPT
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Companies Act 2013
CHAPTER - XIAPPOINTMENT AND QUALIFICATION
OF DIRECTORS
AN ANALYSISBy: Nihal Kare
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Company to have Board of Directors – Sec. 149 (old Act Sec. 252,253,259)
Minimum number of directors in case of PRIVATE and PUBLIC companies is 2 and 3 respectively
Limit on Maximum number of Directors: Increased to 15 Directors from 12 in the old Act. OLD Act: to increase Directors more than 12 => Approach
the Central Government. NEW Act: to increase Directors more than 15=> just pass a
Special Resolution in the General Meeting
Introduced concept of ONE PERSON COMPANIES (OPC)• OPC needs to have minimum 1 director
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Introduced requirement for a RESIDENT Director: one Director who has to be present in INDIA for minimum period of 182 days in the previous CALANDER Year.
Mandatory WOMEN Directors:– For all LISTED Companies– For Companies with Paid-Up Capital of Rs. 100
Crores and more.
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INDEPENDENT DIRECTORS (ID’s)
Introduced & defined INDEPENDENT DIRECTORS which was inspired from the Listing Agreement
• All Public companies to have 1/3 ID’s• Nominee Director/ Representative Director to be excluded
from ID’s (contradicts existing clause 49)• Every Year the ID to give a Declaration of his
Independence.• Only 3 Sources of Income for ID’s:
1. Remuneration by way of Fee2. Reimbursement of Expenses for participation in Board & other
meetings3. Profit related Commission
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Life of Independent Directors on the Board
No requirement to retire by RotationCan hold office for a consecutive term of 5
yearsSecond continuous term of 5 years => granted
by passing of a special resolution at a GMBut no more than 2 consecutive terms allowed
=> mandatory cool off period of 3 years During the cool off period: No association with the
Company permitted.
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Database of ID’s – Sec. 150
× Bodies, Institutions or Associations approved by the Central Govt. to create a database of potential ID’s.
× Companies can appoint ID’s from such databases maintained by such Bodies, Institutions or Associations
× Central Govt. to prescribe the manner and procedure of selection of Independent directors.
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Appointment of Directors – Sec. 152
First Directors to be the Subscribers to the Memorandum and Articles of Association of the Company
Every Director thereafter to be appointed at a General Meeting– Special Business
• Ordinary Resolution
Small Share Holders can appoint Director – Sec. 151 (Old Act Sec. 252)
Retirement by rotation - provisions remain the same as the Old Act – except for the exclusion of the Independent Directors from the calculation
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Provisions of DIN - Sections 153, 154, 155, 156, 157, 158, 159
• 153: To apply for DIN if intending to get appointed
• 154: CG to allot DIN to the applicant within one month
• 155: Not allowed to have more than 1 DIN
• 156: Existing Director to intimate DIN to all Companies within 1 month
• 157: Company to inform DIN to ROC within 15 days (instead of a week) of the receipt of the same from the Director
• 158: Obligation to mention DIN
• 159: Punishment for contravention of sections 155, 156o 6 months imprisonment or fine upto Rs. 50,000/-o Continuing offence – fine of Rs. 500/- per day
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Right of persons other than Retiring Directors to stand for Directorship – Sec.
160 (Old Sec. 257) ‽ Deposit for proposing a Candidate increased
exponentially to Rs. 1 Lakh from Rs. 500/- ‽ Refund only if the Director elected or gets 25%
or more of the Total valid Votes Cast‽ Member to inform the Company of their
intent to appoint Director at least 14 days before the Meeting along with the deposit
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Section 161 (old sections 260,262 & 313)• Additional Director: If someone’s resolution for
appointment as a Director, gets defeated in a GM, then that person cannot be appointed as an additional director
• Alternate Director (AD): • 1) BOD may appoint, if authorised by AOA otherwise
the GM2) The said appointee should not be holding alternate directorship for any other director in the Company3) If he is an AD to any ID, then AD also needs to satisfy the criteria laid for ID
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Appointment to be voted Individually – Sec. 162
A single resolution not allowed for appointing 2 or more persons as directors of the Company
UNLESS
Such a motion has first been agreed to, at the meeting, without any vote being cast against it.
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Proportional Representation – Sec. 163 (old section 265)
The AOA of the Company may provide appointment of not less than 2/3 of the total number of the Directors of the Company in accordance with principles of Proportional representation by a single transferable vote or by a system of cumulative voting or otherwise
Such appointment may be made once in every 3 years
Casual vacancies can be filled in by the Board
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Disqualification for Appointment of Director - Sec 164 (old section 274)
Apart from the existing disqualifications, the additions are as below:– Conviction of an offence dealing with related party transactions
at any time during the last preceding 5 years– A person who has been convicted of any offence and sentenced
in respect thereof to imprisonment for a period extending to 7 years or more
– A person who has not obtained a DIN
(Imp Note: Old Sec. 274(1)(g) mentioned of Public Company only; but the New Section 164(2) has removed the word Public, so makes it applicable to all Companies)
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Number of Directorships – Sec. 165
Maximum number of directorships is 20 (increased from 15), within which maximum limit for public limited companies directorships is 10.
Including alternate directorships Including directorship in private companies that are either holding
or subsidiary company of a public company If the members so want, they may by SR, specify a lesser number of
directorships for their directors
(Transition period of 1 year has been provided to the directors to comply with the said maximum number of directorships limit)
Penalty for Contravention: min Rs. 5000/- but may extend to Rs. 25000/- per day of default.
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Duties of Directors – Sec. 166
• Act in good faith • Promote the objects of the Company• Work for the Benefit of its members, in the interest of the
Company, its employees, Shareholders, the Community & Protection of the Environment
• To exercise duties with due & reasonable care, skill and diligence
• Not to achieve any undue gain/advantage• Penalty for contravention of the provisions of the
Company: Min Rs. 1 Lakhs which may extend to Rs. 5 Lakhs
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Vacation of the Office of Director – Sec. 167
Absence from all the meetings of the BOD held during a period of 12 months with or without seeking LOA of the Board (Section 167(b))
Along with the disqualification mentioned in the Act, a Private Company may specify additional grounds for disqualification of Directors
Penalty of Min Rs. 1 Lakhs which may extend to Rs. 5 Lakhs + Imprisonment upto 1 year OR Both if the Director continues to act as director even when he knows that the office has become vacant, due to disqualifications specified in the Act
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Resignation of Director – Sec. 168
• Director also needs to forward to ROC, a copy of his resignation along with detailed reasons within 30 days of resignation in the prescribed manner
• Where all directors have resigned, the
promoter or in his absence, the Central Government shall appoint the required number of directors. These directors to hold office till the directors are appointed in the General Meeting
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Removal of Director – Sec. 169(Old Sec. 284)
• The provisions remains the same• The words Central Government have been
replaced by Tribunal• Penalty for contravention have been greatly
increased u/s 172:– Every defaulting officer & the Company– Fine of Min Rs. 50,000/- which may extend 10
times more.
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Registers – Sec. 170 (old Sec 303 & Sec 307)
The register shall contain: - Particulars of its Directors - Key Managerial Persons (KMP)
Details to be included: - Securities held by each of the Directors & KMP’s in the Company
or its Holding, Subsidiary, Subsidiary of Company’s Holding Company or Associate Companies
- Other details as may be prescribed A return for Appointment OR any change too shall have to be filed
for both Directors and KMP’s
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Members Right to Inspect – Sec. 171(old Sec. 304)
• New provisions for Extracts added• As per Sec 304 of the old Act: any member (without charge)
and any other person (Re. 1.00 to be charged) for every inspection
• Open for All & Extracts to be given to members free of cost and within 30 days
• To be kept open for inspection at every AGM & made accessible to ANY person attending the meeting
• If Company defaults in allowing Inspection or providing extracts in time specified, application can be made to the Registrar, who would then intervene and order the Company: Immediate Inspection & Supply of extracts
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End
Thank You