Embed Size (px)
Citation preview
FREE BOOK
concept book
Separate Free E book
available for question
bank
CA/CWA/CS FINAL –
CORPORATE, ALLIED &
ECONOMIC LAWS
BOTH OLD & NEW SYLLABUS
ABOUT CA A.K.S. KRISHNAN:
Chartered Accountant at the age of 21
6 years of teaching Experience especially in Law and Audit
Visiting faculty in SIRC, ICAI and also takes classes at various intitutions across South
India
Wrote 12 books for CA IPCC Final level in Law and Audit
Gives practical and live example in class and relates the topic with rhings happening
around
Handles Private Equity fund companies of Rs. 350 crores in Chennai as full time
consultant
Did more than 100 company audits across various industries till 2013 and from then
he started consultancy.
His free lecture videos can be viewed from his you tube channel – AKS Krishnan
Can can be reached via whatsapp too – 9940512888
He too clarifies doubt for each and every students who use his books and does self
study.
In this document we attach one chapter from his book – “Directors” which has
weightage of 12 marks in CA final both syllabus.
His books can be purchased from www.instamojo.com/letspassca
No CA student is ready to take risk of buying new book in market even though it is worth buying.
Every one wants to follow the books used by their seniors. Here we are with Free E Book on
Directors Chapter – WORTH 12 MARKS in CA final Law – Both Syllabus
Download “E BOOK” for Directors Chapter for Free
www.instamojo.com/letspassca
Not every one can attend class physically due to audit commitments. Here we are with Pendrive
classes. Watch full “Directors” Chapter – 12 marks
Take a note book and Pen – listen to the videos – take notes. 12 marks for sure.
Directors Chapter – Part 1
https://youtu.be/hRz9Z1qLNFA
Directors Chapter – Part 2
https://youtu.be/Yz9gC1DqrLg
Directors Chapter – Part 3
https://youtu.be/cvmwc6u2Qb4
Directors Chapter – Part 4
https://youtu.be/_I1m0b5bfng
If you find this useful – share with your friends.
DISQUALIFICATION OF DIRECTORS & TYPES OF DIRECTORS
149. COMPANY TO HAVE BOARD OF DIRECTORS
(1) Every company shall have a Board of Directors consisting of individuals as directors and
shall have—
(a) Minimum number of Directors:
three directors in the case of a public company,
two directors in the case of a private company, and
one director in the case of a One Person Company; and
(b) a maximum of fifteen directors:
If a company, wants to appoint more than fifteen directors it can be done after passing a special
resolution in general meeting.
Alteration of AOA has to be done to give the effect if needed. For that Special resolution has to be
passed.
FROM 13.06.2017 – Max no. of directors clause is not applicable to Sec. 8 companies.
MAXIMUM No. of DIRECTORS IS NOT APPLICABLE FOR GOVERNMENT COMPANY
also FROM JUNE 2015.
DRAFT RESOLUTION FOR INCREASING NO. OF DIRECTORS AND ALTERATION OF
AOA
"RESOLVED THAT pursuant to the provisions of section 149 of the Companies Act,2013 and
subject to the limits as prescribed in the articles of association of the company, the consent of
the shareholders be and is hereby accorded to increase the number of directors of the
company from to ."
“RESOLVED FURTHER THAT pursuant to the provisions of section 14, 149 of and all other
applicable provisions of the Companies Act 2013 and the rules made thereunder, the consent
of the shareholders be and is hereby accorded for alteration of articles of the company by
insertion of the following clause : The existing Clause …. of the articles of association Regarding
maximum number of directors be and is hereby deleted and in its place the new clause named
as Clause …… is inserted
Appointment of Women Directors:
Listed company and
Public company having
Paid up capital of Rs. 100 Crores or more or
Turn Over of Rs. 300 crores or more
Transition provision – 6 Months, Vacancy caused to be filled within 3 months/ next Board
Meeting which ever is LATER.
IMPORTANT DEFINITION:
2 (64) “paid-up share capital” or “share capital paid-up” means such aggregate amount of
money credited as paid-up as is equivalent to the amount received as paid- up in respect
of shares issued and also includes any amount credited as paid-up in respect of shares of
the company, but does not include any other amount received in respect of such shares, by
whatever name called
Inference: PUC = Equity + preference. (Share application money received cannot be
considered.
2 (91) “turnover” means the aggregate value of the realization of amount made from the
sale, supply or distribution of goods or on account of services rendered, or both, by the
company during a financial year
T.O = only realized. (But interpretation is possible)
Reading with Sec. 128, turnover shall be interpreted as accrual only.
DRAFT RESOLUTION
“RESOLVED THAT pursuant to Sections 149, 152, 164 read with the rule of the Companies
(Appointment and Qualifications of Directors) Rules 2014, and any other applicable
provisions of the Companies Act, 2013 and the Companies (Appointment & Qualification of
Directors) Rules, 2014 Mrs. Chandini Hariharan , who was appointed as Additional Director
by the Board of Directors of the company pursuant to section 161(1) of the Companies Act,
2013 and who holds office upto the conclusion date of this AGM and in respect of whom the
Company has received a notice under section 160(1) of Companies Act, 2013 from a
member proposing her candidature for the office of a Director, be and is, hereby, appointed
as the Director of the Company liable to retire by rotation.”
Explanatory Statement:
In order to strengthen the Board and to empower women and in compliance of Section 149(1)
of Companies Act, 2013 board of directors had appointed Mrs. Chandini Hariharan as
Additional Director of the company under the provision of sec. 161(1) of the Companies Act,
2013 with effect from ……..to hold office up to conclusion of the following AGM. Notice in
writing from member under sec. 160(1) of the Companies Act 2013 has been received along
with a deposit of Rs. 1,00,000/- proposing the appointment of Mrs. Chandini as Director.
Mrs. Chandini Hariharan , if appointed, will be liable to retire by rotation.
The Company has received from Mrs. Chandini (i) consent in writing to act as director in
Form DIR-2 pursuant to Rule 8 of Companies (Appointment & Qualification of Directors)
Rules, 2014 and (ii) intimation in Form DIR-8 in terms of Companies (Appointment &
Qualification of Directors) Rules, 2014 to the effect that she is not disqualified under sub
section (2) of section 164 of the Companies Act, 2013,.
Her brief resume is provided in the corporate governance report forming part of the Annual
report.
The relatives of Mrs. may be deemed to be interested in the resolutions set out at Item
No. of the Notice, to the extent of their shareholding interest, if any, in the Company.
No director, Key Managerial Personnel or their relatives, except Mr. Name of the intersted
Directors ( if any) , is interested or concerned in the resolution.
The Board recommends the ordinary resolution set forth in Item No. for the approval of
the members.
(3) RESIDENT DIRECTOR: Every company shall have at least one director who has stayed in India
for a total period of not less than one hundred and eighty-two days in the previous calendar
year. DURING THE FINANCIAL YEAR (From May 2018 via companies Amendment Act
2017)
Provided that in case of a newly incorporated company the requirement under this sub-
section shall apply proportionately at the end of the financial year in which it is
incorporated.
(4) APPOINTMENT OF INDEPENDENT DIRECTORS:
Every listed company shall have at least one-third of the total number of directors as
independent directors (For the purposes of this sub-section, any fraction contained in such
one-third numbers shall be rounded off as one) and
Public companies (as on latest audited balance sheet date) having
Paid up capital of Rs. 10 Crores or more or
Turnover of Rs. 100 Crores or more or
Loans, debentures and deposits from Public – Exceeding Rs. 50 crores
Has to appoint minimum 2 independent directors
Non applicability of ID: (05.09.2017)
For a period of 3 continuous year if none of the above mentioned condition satisfied, then
they need not appoint ID.
For Wholly Owned Subsidiary, Joint Ventures, Dormant companies
(6) Who is said to be Independent:
An independent director in relation to a company, means a director other than a managing
director or a whole-time director or a nominee director,—
(a) who, in the opinion of the Board (in case of government company- in the opinion of
government), is a person of integrity and possesses relevant expertise and experience;
Expert in the field of finance, management, marketing, research, administration, sales and
law
(b)
(i) who is or was not a promoter of the company or its holding, subsidiary or associate
company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or
associate company;
PECUNIARY RELATIONSHIP FOR AN INDIVIDUAL
Before Amendment Act, 217
(c) who has or had no pecuniary relationship with the company, its holding, subsidiary
or associate company, or their promoters, or directors, during the two immediately
preceding financial years or during the current financial year;
After Amendment Act, 2017: - (Amendment Applicable from May 2018)
" who has or had no PECUNIARY RELATIONSHIP, OTHER THAN REMUNERATION
AS SUCH DIRECTOR OR HAVING TRANSACTION NOT EXCEEDING TEN PERCENT
OF HIS TOTAL INCOME OR SUCH AMOUNT AS MAY BE PRESCRIBED”
(THIS CLAUSE IS NOT APPLICABLE FOR GOVERNMENT COMPANY WHERE
100% SHARES ARE HELD BY SG/ CG FROM 05.06.2015)
(Further Amendment in Nov 2018)
“Provided that the total pecuniary relationship with the company, its holding, subsidiary
or associate company, or their promoters or directors, shall not exceed 12 per cent of his total
income, of which, professional or any services rendered by him, other than such services, as
may be prescribed, shall not account for more 10% of his total income:
Provided further that the remuneration received under section 197 and expenses incurred
for participation in the Board and other meetings shall not be accounted for determining the
total pecuniary relationship, unless otherwise provided
PECUNIARY RELATIONSHIP FOR RELATIVES OF THE INDIVIDUAL
none of whose relatives has or had pecuniary relationship (monetary
relationship)or
transaction with the company, its holding, subsidiary or associate company, or their
promoters, or directors,
Amounting to two per cent. or more of its gross turnover or total income or
Rs. 50 lakhs,
Whichever is lower, during the two immediately preceding financial years or during the
current financial year;
AFTER COMPANIES AMENDMENT ACT, 2017 (Amendment Applicable from May
2018)
(i) is holding any security of or interest in the company, its holding, subsidiary or
associate company during the two immediately preceding financial years or during the
current financial year:
Provided that the relative may HOLD SECURITY or interest in the company of face
value not exceeding Rs. 50 lakhs or 2% of the paid-up capital of the company, its holding,
subsidiary or associate company or such higher sum as may be prescribed;
(ii) is INDEBTED to the company, its holding, subsidiary or associate company or
their promoters, or directors, in excess of such amount as may be prescribed during the
two immediately preceding financial years or during the current financial year;
(iii) has given a GUARANTEE or provided any security in connection with the
indebtedness of any third person to the company, its holding, subsidiary or associate
company or their promoters, or directors of such holding company, for such amount as
may be prescribed during the two immediately preceding financial years or during the
current financial year; or
(iv) has any other pecuniary TRANSACTION or relationship with the company, or
its subsidiary, or its holding or associate company amounting to 2% or more of its gross
turnover or total income singly or in combination with the transactions referred to in sub-
clause (i), (ii) or (iii);
(d) who, neither himself nor any of his relatives—
(i) holds or has held the position of a key managerial personnel or
is or has been employee of the company or its holding, subsidiary or associate
company in any of the three financial years immediately preceding the financial year in
which he is proposed to be appointed;
AFTER AMENDMENT ACT 2017
"Provided that in case of a relative who is an employee, the restriction under this clause
shall not apply for his employment during preceding three financial years
(ii) is or has been an employee or proprietor or a partner of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the
company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the
company, its holding, subsidiary or associate company amounting to ten
per cent. or more of the gross turnover of such firm;
in any of the three financial years immediately preceding the financial year
(iii) holds together with his relatives two per cent. or more of the total voting power
of the company; or
(iv) is a Chief Executive or director of any non- profit organization that receives
twenty-five per cent or more of its receipts from the company, or any of its (of that
NPO/NGO) promoters, directors or its holding, subsidiary or associate company or that
hold two per cent. or more of the total voting power of the company;
Note:
An ID of a company can also be ID of its holding or subsidiary company also.
Independent directors shall abide by the provisions specified in Schedule IV.
Contents of Sch IV:
Professional Mis conduct
Roles and functions
Duties
Appointment and Re appointment Procedure
Resignation, Removal
Separate meeting of ID
Evaluation of Performance of ID
Sch IV required IDs should have atleast 1 meeting in every calendar financial year (AMENDED ON
2.07.2017) without having participation of normal directors.
(9) Remuneration to ID
Sitting Fees as per Sec. 197 – Upto Rs. 1 Lakh
reimbursement of expenses for participation in the Board and other meetings and
profit related commission as may be approved by the members in general meeting.
Even though there is no fixed percentage specified, overall % shall not cross 11% (as per sec. 197 of
comp. act, 2013)
ID should not be given any remuneration other than these three, even ESOP should not be given.
(10) Tenure: up to five consecutive years on the Board of a company,
eligible for re- appointment on passing of a special resolution by the company but no
independent director shall hold office for more than two consecutive terms, without having a
cooling period of three years
(12) Liability of ID:
shall be held liable, only in respect of such acts of omission or commission by a company which
had occurred with his knowledge, attributable through Board processes, and with his consent or
connivance (willingness to allow) or where he had not acted diligently.
Additional Point: From LODR
A ID can be ID of maximum 7 listed companies as per Regulation 25 of Listing obligations and
Disclosure Requirements. In case ID being whole time director of any listed companies – Then he can
be ID for only 3 listed companies
Casual Vacancy if ID shall be filled “WITHIN 3 MONTHS” OF VACANCY [FROM 5TH JULY 2017].
But it need not be filled if the balance ID satisfies the numbers required under this section.
DRAFT RESOLUTION FOR APPOINTMENT OF INDEPENDENT DIRECTOR
“RESOLVED THAT pursuant to the provisions of Sections 149, 152 read with Schedule IV and all
other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and
Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement, Mr. who was
appointed as a Director liable to retire by rotation and in respect of whom the Company has received a
notice in writing under Section 160 of the Companies Act, 2013 from a member proposing his candidature
for the office of Director, be and is hereby appointed as an Independent Director of the Company to hold
office for the period …… to ……., whose period of appointment shall not be liable to retire by rotation.”
Explanatory Statement
Mr………… is a Non- executive Director of the Company liable to retire by rotation.
It is proposed to appoint Mr. as independent director in terms of Section 149 and any other
applicable provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement to hold office for
a period of five years consecutive years.
Notice in writing from member under sec. 160(1) of the Companies Act 2013 has been received along with
a deposit of Rs. 1,00,000/- proposing the appointment of Mr. as independent director.
The Company has received consent in writing from Mr. to act as Director in Form DIR-2
pursuant to Rule 8 of Companies (Appointment & Qualification of Directors) Rules, 2014. The Company
has received a declaration from Mr. that he meet the criteria of independence as prescribed
under sub-section (6) of Section 149 of the Companies Act, 2013 and the Listing Agreement. In the opinion
of the Board Mr. fulfill the conditions for appointment as Independent Director as specified in
the Companies Act, 2013. Mr. are independent of the management.
Further, Mr. is not disqualified from being appointed as Director in terms of Section 164 of the
Companies Act, 2013 and have given their intimation in Form DIR-8 in terms of Companies (Appointment
& Qualification of Directors) Rules, 2014 to the effect that they are not disqualified under sub section (2) of
section 164 of the Companies Act, 2013.
Copy of the draft letters for his appointment as Independent Director setting out the terms and
conditions are available for inspection by members at the Registered Office of the Company between
11.00 A.M. to 1.00 P.M. on any working day upto the date of the AGM.
Mr. is interested in the resolutions set out respectively at Item No. of the Notice with
regard to their respective appointments.
The relatives of Mr. may be deemed to be interested in the resolutions set out respectively
at Item No. of the Notice, to the extent of their shareholding interest, if any, in the Company.
Except Mr. ( Name of the appointee director )none of the other Directors / Key Managerial Personnel
of the Company / their relatives are, in any way, concerned or interested, financially or otherwise, in
these resolutions.
150. Manner of selection of independent directors and maintenance of databank of
independent directors
CG will provide data bank for ID.
151. APPOINTMENT OF DIRECTOR ELECTED BY SMALL
SHAREHOLDERS
For the purposes of this section “small shareholders” means a shareholder holding shares of
nominal value of not more than Rs. 20,000 or less or such other sum as may be prescribed
A listed company (applicable for them only)
may have one director elected by such small shareholders in such manner and with such terms
and conditions as may be prescribed.
Procedure:
14 days’ notice to be received from
at least 1000 small shareholders / one tenth of small shareholders whichever is less
The proposed director should give his consent, DIN, declaration of not being disqualified, name
and address, shares held in the company
He cannot be SSD in more than 2 companies also those two companies should not be competing
companies.
Tenure: 3 years, Non Rotational
On the expiry of the tenure, such director shall not be eligible for re-appointment.
No person shall hold the position of small shareholders’ director in more than two companies at
the same time.
Provided also that the second company in which he has been appointed shall not competing to the
first company.
SSD shall have qualities of Independent director else he will be vacating the office. He may also be
regarded as ID in case the company thinks fit.
152(1) APPOINTMENT OF FIRST DIRECTOR
Person named in Articles as first director will be the first director
Where no provision is made in the articles of a company for the appointment of the first
director,
the subscribers to the memorandum who are individuals shall be deemed to be the first
directors of the company
until the directors are duly appointed in general meeting and
in case of a One Person Company an individual being member shall be deemed to be its first
director until the director or directors are duly appointed by the member in accordance with the
provisions of this section.
152 (2) every director shall be appointed by the company in general meeting unless otherwise
mentioned i.e, 161 (1), (2) etc
DRAFT RESOLUTION
“RESOLVED THAT the consent of the shareholders of the Company be obtained in terms of Section
152(2) and other applicable provisions, if any, of the Companies Act, 2013 to appoint Mr. …………, from
whom the notice of candidature has been received from a member along with the prescribed amount of
deposit and who has given his written consent in Form DIR -2 to be appointed as Director of the
Company and a declaration in Form DIR 8 that he is not disqualified under Section 164 of the Companies
Act, 2013, as director of the Company to hold office w.e.f. …………...
FURTHER RESOLVED THAT Mr./ Ms. ………., Director of the company / Professional in Practice be
and is hereby authorized to File Form No. DIR-12 with Registrar of Companies, ……………,.
152 (3) Director shall be allotted DIN/ any other number as may be prescribed (inserted via
Amendment Act 2017) as per sec. 154.
152 (4) Director shall give declaration that he has not disqualified.
152 (5) He has to give consent to appoint as director in DIR 2 to the company, and after
appointment company has to file DIR 12 with ROC within 30 days.
CONSENT IS NOT APPLICABLE FOR GOVT. COMPANY AND SECTION 8 COMPANIES
FROM 05.06.2015
152 (6) (a) Rotational Directors
in public company (only) –
Unless the articles provide for the retirement of all directors at every annual general meeting, not
less than two-thirds of the total number of directors shall retire by rotation (any fraction round of
to next digit) out of which one- third shall retire at every AGM (any fraction round off to nearest
digit).
Director who shall be excluded from total no. of directors while computing 2/3rd for the purpose
of calculating rotational directors - Independent director,
Proportional representation director, MD/WTD/Manager to be accommodated in Non rotational
portion.
Additional directors should reduced after computing 2/3rd rotational director and before
counting 1/3rd rotational director.
Directors who shall be accommodated in total no. of non-rotational directors - nominee directors,
Small shareholder’s director.
How to decide who shall retire?
shall be those who have been longest in office since their last appointment,
In case many persons appointed in same date?
subject to any agreement among themselves or
be determined by lot.
UNDERSTANDING RETIRING BY ROTATION:
21 directors and out of which, 7 Independent director, 2 are nominee director, 1 MD, 4 Directors
appointed in 1st AGM out of which one is women, 4 directors appointed in 2nd AGM. Out of the 4
directors appointed in 2nd AGM one died and in his place board has appointed Casual vacancy
director. 1 SSD appointed in 2nd AGM for 3 years. 2 Additional director were there in the board.
Who will retire in 3rd AGM.
Calculate 1/3rd for ID – i.e 7. Reduce 7 from 21. Balance = 14.
Calculate 2/3rd of 14 – any fraction rounded off to next digit – so 10. Hence 4 will be Non
rotational.
Who shall be accommodated in Non rotational slot – 2 nominee- 1 MD, 1 SSD
In Rotational slot – 10 directors represented by – 2 Additional and 8 Normal Directors.
Out of 10 – 2 Additional will vacate first.
From Balance 8 – calculate 1/3rd = 3.
Out of 4 directors appointed in 1st AGM – 3 will retire in mutual agreement.
Assumption: Since the company should have atleast 1 women director, she will not be retiring as
per mutual agreement.
152 (6) (E) RE APPOINTING RETIRING DIRECTOR/ APPOINTING
ANOTHER PERSON IN THE PLACE OF RETIRING DIRECTOR
the company may fill up the vacancy by appointing the retiring director or some other person
thereto.
152 (7) (A) AUTOMATIC RE APPOINTMENT
If the vacancy of the retiring director is not so filled-up and
the meeting has not expressly resolved not to fill the vacancy,
the meeting shall stand adjourned till the same day in the next week, at the same time and
place, or if that day is a national holiday, till the next succeeding day which is not a holiday,
at the same time and place.
If at the adjourned meeting also, the vacancy of the retiring director is not filled up and
that meeting also has not expressly resolved not to fill the vacancy,
the retiring director shall be deemed to have been re-appointed at the adjourned meeting,
unless—
(i) at that meeting or at the previous meeting a resolution for the re-appointment of such
director has been put to the meeting and lost;
(ii) the retiring director has, by a notice in writing addressed to the company or its Board
of directors, expressed his unwillingness to be so re-appointed;
(iii) he is not qualified or is disqualified for appointment;
(iv) a resolution, whether special or ordinary, is required for his appointment or re-
appointment by virtue of any provisions of this Act; (for example – a new director stands
in election needs a resolution) or
(v) section 162 is applicable to the case – appointed by en-block resolution
SEC. 152 (6), 152 (7) IS NOT APPLICABLE FOR GOVERNMENT COMPANY where 100% shares
are held by SG/ CG FROM 05.06.2015.
SEC. 152 (6), 152 (7) IS NOT APPLICABLE FOR ALL UNLISTED GOVERNMENT COMPANY
& THEIR SUBSIDIARIES FROM 13.06.2017.
153. APPLICATION FOR ALLOTMENT OF DIRECTOR IDENTIFICATION
NUMBER
Every individual intending to be appointed as director of a company shall make an application
for allotment of Director Identification Number to the Central Government (power is delegated to
RD, JD, AD – ROC Noida) in DIR 3 providing (i) Photograph, (ii) Proof of identity (iii) proof of
residence (iv) DIR -4 (verification (v) Specimen signature
AFTER AMENDMENT ACT 2017,
CG may prescribe an identification number which shall be treated as Director Identification
number.
154. ALLOTMENT OF DIRECTOR IDENTIFICATION NUMBER
The Central Government (power is delegated to RD, JD, AD – Northern Region - Noida) shall,
within one month from the receipt of the application under section 153, allot a Director
Identification Number to an applicant.
155. PROHIBITION TO OBTAIN MORE THAN ONE DIRECTOR
IDENTIFICATION NUMBER
Only one DIN for one person. No individual, who has already been allotted a Director
Identification Number under section 154, shall apply for, obtain or possess another Director
Identification Number
156. DIRECTOR TO INTIMATE DIRECTOR IDENTIFICATION NUMBER
Every existing director shall, within one month of the receipt of Director Identification Number
from the Central Government, intimate his Director Identification Number to the company or all
companies wherein he is a director
157. COMPANY TO INFORM DIRECTOR IDENTIFICATION NUMBER
TO REGISTRAR
Every company shall, within fifteen days of the receipt of intimation under section 156, furnish the
Director Identification Number of all its directors to the Registrar or any other officer or authority.
If a company fails to furnish Director Identification Number before the expiry of the period the
company shall be punishable with fine which shall not be less than Rs. 25 thousand and in case
the failure continues Rs. 1,000 per day (Companies Amendment ordinance 2018) subject to
maximum of Rs. 1 lakh and every officer of the company who is in default shall be punishable
with fine which shall not be less than Rs. 25 thousand and in case the failure continues Rs. 1,000
per day (Companies Amendment ordinance 2018) subject to maximum of Rs. 1 lakh.
158. OBLIGATION TO INDICATE DIRECTOR IDENTIFICATION
NUMBER
Every person or company, while furnishing any return, information or particulars as are required
to be furnished under this Act, shall mention the Director Identification Number in such return,
information or particulars in case such return, information or particulars relate to the director or
contain any reference of any director
159. PUNISHMENT FOR CONTRAVENTION
If director of a company, contravenes any of the provisions of section 152 , section 155 and section
156, such individual or director of the company shall be punishable with imprisonment for a term
which may extend to six months or with fine which may extend to Rs. 50 thousand and where the
contravention is a continuing one, with a further fine which may extend to Rs. 500 hundred for
every day after the first during which the contravention continues
After Companies Amendment Ordinance 2018:
No more imprisonment. Use the word Penalty instead of Fines.
PROCEDURE FOR OBTAINING DIN
(i) e-Form DIR-3 has to follow the online e-Filing process.
(ii) Attach the photograph and scanned copy of supporting documents i.e.
(a) High resolution photograph of the applicant.
(b) PAN is mandatory now. So copy of pan is mandatory for identity, name, father’s name and
date of birth. Proof of father’s name is not required in the case of foreign nationals.
(c) Copy of passport is mandatory as an id proof in the case of foreign nationals.
(d) Present Address proof, which should not be older than 2 months
(iii) Along with the supporting documents, Verification as per Form DIR-4 shall also be attached.
This shall contain the Name, Father’s name, date of birth and text of declaration and physical
signature of the applicant.
(iv) The eForm shall have to be digitally signed and shall be uploaded on MCA21 portal.
(v) Upon upload, pay the fees for eForm DIR-3. Only electronic payment of the fees shall be
allowed (I.e. Netbanking / Credit Card). No challan payment will be accepted under revised
procedure of DIN allotment.
The applicant is required to get himself/herself registered on the MCA21 Portal to obtain login id,
which is necessary for payment of the fees. After obtaining the login-id, Login to the MCA21 portal
and click on 'eForm upload' link available under the 'eForms' tab for uploading the eForm DIR-3.
eForm DIR-3 will be processed only after the DIN application fee is paid.
(vi) Upon upload and successful payment, Form DIR-3 is mandatorily to be signed by an applicant
and a practicing professional or secretary (who is a member of ICSI) in whole time employment or
the Director of the existing company.
Approved DIN shall be generated in case the form is being signed by a practicing professional and
details have not been identified as potential duplicate. Provisional DIN shall be generated in case
form is signed by secretary in whole time employment or Director of existing company and details
have been found as potential duplicate. A suitable informational message and an email shall be
provided to the user that the DIN shall be approved after due verification by the DIN cell.
(vii) Processing of e Form DIR-3: In case, DIR-3 gets certified by the professional (i.e. CA (in whole
time practice)/ CS (in whole time practice)/ CWA (in whole time practice)/, the DIN will be
approved by the system immediately online (in case it is not potential duplicate).
(viii) Post-approval changes in particulars of Form DIR-3: If there is any change in the particulars
submitted in eform DIR-3, applicant can submit e-form DIR-6 online. For instance in the event of
change of address of a director, he/ she is required to intimate this change by submitting eform
DIR-6 along with the required attested documents
Procedure for DIN Correction:
Director has to file form DIR 6 along with declaration under DIR 7 with necessary documents and
which shall be signed by CA/CS/CMA in practice to Central government.
160. RIGHT OF PERSONS OTHER THAN RETIRING DIRECTORS TO
STAND FOR DIRECTORSHIP
A person who is not a retiring director be eligible for appointment to the office of a director at any
general meeting provided:
Condition:
a. if he is a member , or some member intending to propose (nominates) him as a director,
b. has, not less than fourteen days before the meeting, left at the registered office of the company, a
notice in writing under his hand signifying his candidature as a director or, as the case may be, the
intention of such member to propose him as a candidate for that office,
c. along with the deposit of Rs. 1 lakh (in case of nidhi company Rs.1 L has to be substituted with
Rs. 10 K) which shall be refunded to such person or, as the case may be, to the member, if the person
proposed gets elected as a director or
Board shall refund if he gets appointed /or got more than twenty-five percent of total valid votes
cast either on show of hands or on poll on such resolution
If he has secured less than 25% of the voting, then board may decide to forfeit or refund the deposit
amount.
THIS SECTIONS NOT APPLICABLE TO PRIVATE COMPANY , Sec. 8 Company and
GOVERNMENT COMPANY WHERE 100% SHARES ARE HELD BY SG/ CG FROM
05.06.2015
AFTER AMENDMENT ACT 2017
Rs. 1 Lakhs deposit is not applicable for appointment of Independent Director and Directors
nominated by nomination and remuneration committee
161 (1) APPOINTMENT OF ADDITIONAL DIRECTOR
The articles of a company may confer
Board of Directors - power to appoint any person as an additional director at any time, other than a
person who fails to get appointed as a director in a general meeting.
Tenure: who shall hold office up to the date of the next annual general meeting (commencement)
or the last date on which the annual general meeting should have been held, whichever is earlier.
Additional director cannot be appointed in GM as the act specifically given power to board.
(Interpretation)
DRAFT RESOLUTION FOR REGULATION OF DIRECTOR APPOINTED IN BOARD
“RESOLVED THAT pursuant to Sections 149, 152, 160 and any other applicable provisions of the
Companies Act, 2013 and the Companies (Appointment & Qualification of Directors) Rules, 2014
Mr.________ (DIN ), who was appointed as Additional Director by the Board of Directors of the
company pursuant to section 161(1) of the Companies Act, 2013 and who holds office upto the date of
Commencement this AGM and in respect of whom the Company has received a notice under section
160(1) of Companies Act, 2013 from a member along with requisite deposit, proposing his candidature
for the office of a Director, be and is, hereby, appointed as the Director of the Company liable to retire
by rotation.”
Explanatory Statement
Mr.___ who was appointed as Additional Director of the company under the provision of sec. 161(1) of
the Companies Act, 2013 with effect from ___to hold office up to Commencement of the following AGM.
Notice in writing from member under sec. 160(1) of the Companies Act 2013 has been received along
with a deposit of Rs. 1,00,000/- proposing the appointment of Mr.____as Director. Mr.___ if appointed,
will be liable to retire by rotation.
Her brief resume is provided in the corporate governance report forming part of the Annual report.(if,
listed company)
The relatives of Mr.____may be deemed to be interested in the resolutions set out at Item No. _ of the
Notice, to the extent of their shareholding interest, if any, in the Company.
No director, Key Managerial Personnel or their relatives, except Mr. _______(if any ), is interested or
concerned in the resolution
161 (2) APPOINTMENT OF ALTERNATE DIRECTOR
The Board of Directors (not by any individual director) of a company may,
if so authorised by its articles or
by a resolution passed by the company in general meeting,
appoint a person in the board, not being a person holding any alternate directorship for any other
director in the company, to act as an alternate director for a director during his absence for a period
of not less than three months from India:
Note: A person cannot hold 2 alternate directorships in same company.
Note 2: Before Amendment Act, 2017 it was interpreted that a director of the company can also act as
alternate director of some other director of the same company so he will have 2 votes.
After Amendment Act 2017
Board can appoint a person in the board meeting, not being a person holding any alternate
directorship for any other director in the company OR HOLDING DIRECTORSHIP IN THE
SAME COMPANY, to act as an alternate director for a director during his absence for a period of
not less than three months from India
Impact:
One person one vote only.
No person shall be appointed as an alternate director for an independent director unless he is
qualified to be appointed as an independent director under the provisions of this Act:
Note: Alternate director for an independent director should be a person who is capable of being
appointed as independent director.
Note: Alternate director for a women director need not be women. (Act is silent). But technically
going by spirit of law, alternate for women shall be women.
Tenure: an alternate director shall not hold office for a period longer than that permissible to the
director in whose place he has been appointed (Tenure of original director) and shall vacate the
office if and when the director in whose place he has been appointed returns to India - Whichever
is earlier. (the original director reaches India to catch a connecting flight and still continue to be
outside India – alternate director can continue)
If the term of office of the original director is determined before he so returns to India, any provision
for the automatic re-appointment of retiring directors in default of another appointment shall
apply to the original, and not to the alternate director.
161 (3) APPOINTMENT OF NOMINEE DIRECTOR
Subject to the articles of a company, the Board may appoint any person as a director
nominated by any institution in pursuance of the provisions of any law for the time being
in force or
of any agreement or
by the Central Government or the State Government
by virtue of its shareholding in a Government company.
Tenure: 3 Years. Non rotational.
Note: Banks which gave loan – in case in the loan agreement if they have condition stating banks have
right to appoint director – then they can, else they cannot.
161 (4) CASUAL VACANCY DIRECTOR
In the case of a public company, ( removed by amendment ac t 2017)
WHAT IS CASUAL VACANCY
If the office of any director appointed by the company in general meeting is vacated before his
term of office expires in the normal course, - that amounts to casual vacancy
AUTHORITY AUTHORISED FILL THE VACANCY?
The resulting casual vacancy may, in default of and subject to any regulations in the articles of the
company, be filled by the Board of Directors at a meeting of the Board: WHICH SHALL BE
SUBSEQUENTLY APPROVED BY MEMBERS IN THE IMMEDIATE NEXT GENERAL
MEETING (inserted via Amendment Act, 2017)
Tenure: person so appointed shall hold office only up to the date up to which the director in whose
place he is appointed (tenure of earlier director) would have held office if it had not been vacated.
Note: Casual vacancy director cannot be appointed for another casual vacancy director since he
was appointed by board. Instead they can appoint additional director.
Note 2: Casual vacancy for Independent Director dealt in Sch IV – within 3 months and Women
director dealt in 149 (1) – Three months or Next board meeting which ever is later.
Note 3: Casual vacancy of MD,WTD – to be filled by BOD within 6 months.
Before Amendment Act 2017:
161 (4) applicable only for Public company.
After Amendment Act 2017:
161 (4) applicable to all company
DRAFT RESOLUTION
"RESOLVED THAT pursuant to the provisions of section 161(4) of the Companies Act, 2013 , read
with Articles of Association of the Company, Sh. who has signified his consent in the
Form DIR-2, be and is hereby appointed as Director of the Company in order to fill the casual
vacancy caused by the death/removal /resignation of Sh. _______, a Director of the Company.
FURTHER RESOLVED THAT Shri , Managing Director of the Company be and is
hereby authorized to file necessary return with the Registrar of Companies to give effect to the said
resolutions"
162. APPOINTMENT OF DIRECTORS TO BE VOTED
INDIVIDUALLY
At a general meeting of a company, a motion for the appointment of two or more persons as
directors of the company by a single resolution shall not be moved unless a proposal to move such
a motion has first been agreed to at the meeting without any vote being cast against it. i.e 100%
voting to be favorable for considering a resolution for appointing more than one director in a single
resolution.
A resolution moved in contravention of the above shall be void, whether or not any objection was
taken when it was moved. i.e, even if no objection raised by the shareholders for appointing 2 or
more directors in a single resolution, it is void. Since the procedure is, they have to pass unanimous
resolution to accept to pass this kind of resolution.
A motion for approving a person for appointment, or for nominating a person for appointment as
a director, shall be treated as a motion for his appointment
Even if the director are appointed just by passing ordinary resolution in the general meeting and
where NO OBJECTION is raised – it does not have validity.
THIS SECTION NOT APPLICABLE TO PRIVATE LIMITED COMPANY & GOVERNMENT
COMPANY where 100% shares are held by SG/ CG FROM 05.06.2015.
163. DIRECTOR APPOINTED IN PRINCIPAL OF PROPORTIONAL
REPRESENTATION
Notwithstanding anything contained in this Act, the articles of a company may provide for the
appointment of not less than two-thirds of the total number of the directors of a company in
accordance with the principle of proportional representation,
Tenure: three years
casual vacancies of such directors shall be filled as provided in 161 (4).
THIS SECTION NOT APPLICABLE TO PRIVATE LIMITED COMPANY &
GOVERNMENT COMPANY where 100% shares are held by SG/ CG FROM 05.06.2015.
There are 2 types of system for appointing director in proportional representation.
1. Single transferable vote
2. Cumulative vote
PRACTICAL EXAMPLE for single transferable voting system – (NOT FOR EXAM)
a. No. of Persons standing in Election 6
b. No. of Position Vacant 4
c. No. of members came for voting 100
d. Each member has 6 votes. Give preference. That they can use / may not use.
Candidate A B C D E F Total
e. Votes cased in favour (1st Preference) 26 25 15 20 8 6 100
Votes required per director (quota) (c/b+1) 20 20 20 20 20 20 120
Surplus 6 5 11
Whether selected Y Y N Y N N 0
Distribution of surplus of A 3 2 1 6
Distribution of surplus of B 3 1 1 5
Revised Votes secured 21 11 8 40
Whether selected Y 0
164. DISQUALIFICATIONS FOR APPOINTMENT OF DIRECTOR
(1) A person shall not be eligible for appointment as a director of a company, if —
(a) he is of unsound mind declared by a court; - lunatic
(b) he is an undischarged insolvent; - cannot pay his debt
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been convicted by a court of any offence, whether involving moral turpitude or
otherwise (offence under companies act), and sentenced in respect thereof to imprisonment for not
less than six months and a period of five years has not elapsed from the date of expiry of the
sentence:
Provided that if a person has been convicted of any offence and sentenced in respect thereof to
imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a
director in any company; - For his life
INTERPRETATION: “Or otherwise” include only companies act offence and not for any other act
violation – i.e if he is imprisoned under SEBI/ FEMA – it is not considered. (but Sch V says CG
permission needs to be obtained)
(e) an order disqualifying him for appointment as a director has been passed by a court or
Tribunal and the order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for the payment
of the call;
(g) he has been convicted of the offence dealing with related party transactions under
section 188 at any time during the last preceding five years; or
(h) he has not complied with sub-section (3) of section 152. – Provisions relating to Director
Identification Number
(i) Not complied with Provision of Sec. 165 (Max. no. of directorships) (inserted via
Companies Amendment Ordinance 2018)
(2) No person who is or has been a director of a company shall be eligible to be re-appointed as
a director of that company or appointed in other company for a period of five years from the date
on which the said company fails to:
(a) file financial statements or annual returns for any continuous period of three financial
years;( i.e, Annual a/c or annual return not filed any one – amount to disqualification. i.e, either of
the two) or
(b) has failed to repay the deposits accepted by it or pay interest on deposits or to redeem
any debentures on the due date or pay interest due on debenture or pay any dividend declared -
and such failure to pay or redeem continues for one year or more.
AFTER AMENDMENT ACT 2017
1 additional proviso added to Sec. 164 (2)
What will happen to a director appointed after the company defaulted for filing Annual
accounts / returns / non payment of dues
Provided that where a person is appointed as a director of a company which is in default of clause
(a) or clause (b), he shall not incur the disqualification for a period of six months from the date of
his appointment
Note: Default in dues for bank and financial institutions are not covered here.
Note: clause 1 takes immediate effect – so 5 years = 5 years and clause 2 takes effect after giving
grace of 1 year, hence 5 years = 1 + 4 years.
THIS SUBSECTION IS NOT APPLICABLE TO GOVERNMENT COMPANY where 100%
shares are held by SG/ CG FROM 05.06.2015
PRIVATE COMPANY TO HAVE ADDITIONAL DISQUALIFICATION
(3) A private company may by its articles provide for any disqualifications for appointment
as a director in additional disqualification
APPEALING AGAINST DISQUALIFICATION
The disqualifications referred to in clauses (d) - conviction, (e) order of disqualification and (g)
related party of sub-section (1) shall not take effect—
(a) for thirty days from the date of conviction or order of disqualification;
(b) where an appeal or petition is preferred within thirty days as aforesaid against the
conviction resulting in sentence or order, until expiry of seven days from the date on which such
appeal or petition is disposed off; or
(c) where any further appeal or petition is preferred against order or sentence within seven
days, until such further appeal or petition is disposed off.
INTERPRETATION: This appealing clause applies only for private limited companies. So for a
private company – if a director appealed – he will not be disqualified till it is disposed off.
AFTER THE AMENDMENT ACT 2017
APPEAL AGAINST DISQUALIFICATION:
Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall
continue to apply even if the appeal or petition has been filed against the order of conviction or
disqualification
MONITORING MECHANISM
Director has to give declaration when he is appointed in the company that he has not
disqualified (Form DIR 8)
Company shall submit a form to ROC whenever a director gets disqualified (Form DIR 9)
Auditor has to report in his audit report issued U/s. 143
DRAFT RESOLUTION
"RESOLVED THAT on the basis of the written representation received in from all the directors of the
Company in “Form DIR-8” and as placed before the Board, duly initialed by the Chairman for the
purpose of identification, the Board of directors of the Company be and is hereby state and confirm that
none of the directors of the Company are disqualified pursuant to section 164 of the Companies Act,
2013 and they may continue as directors of the company.
FURTHER RESOLVED THAT , the Director/Company Secretary be and is hereby
authorised to submit a copy of the above said resolution to the Auditors of the Company for the purpose
of their comments in the Auditor's Report."
NOTE ON CONDONATION OF DELAY SCHEME 2018
Directors who failed to file Annual accounts/ return for 3 years from 2013-14 to 2015-16 can make use of
CODS from 01.01.2018 to 30.06.2018. If they filed 31.03.2014 FS within 30.06.2018 – No disqualification
will take place.
165. NUMBER OF DIRECTORSHIPS
including any alternate directorship - not more than twenty companies at the same time
(include private limited company also)
Sub limit: the maximum number of public companies in which a person can be appointed
as a director shall not exceed ten
THIS IS NOT APPLICABLE TO SECTION 8 COMPANIES FROM 05.06.2015.
i.e sec. 8 companies will not be counted in counting directorships held.
AFTER AMENDMENT ACT 2017
Dormant Company shall not be included in the limit of 20 companies
Also the word used in the section is “company”, so
private companies that are either holding or subsidiary company of a public company shall be
included in public company’s count
Foreign company is treated as Body corporate and not come under the definition of company
under companies act. Hence directorship in foreign company can be excluded.
members of a company may, by special resolution, specify any lesser number of
companies in which a director of the company may act as directors.
Transition period: 1 Years. Within which he has to resign from additional companies.
Contravention:
shall be punishable with fine which shall not be less than Rs. 500 but which may extend to Rs. 25
thousand for every day if contravention continues.
After Companies Amendment ordinance 2018
shall be liable to pay penalty of Rs. 500 for every day if contravention continues.
166. DUTIES OF DIRECTORS
(1) a director of a company shall act in accordance with the articles of the company.
(2) A director of a company shall act in good faith in order to promote the objects of the
company for the benefit of its members as a whole, and in the best interests of the
company, its employees, the shareholders, the community and for the protection of
environment.
(3) A director of a company shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.
(4) A director of a company shall not involve in a situation in which he may have a direct
or indirect interest that conflicts, or possibly may conflict, with the interest of the
company.
(5) A director of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates and if such
director is found guilty of making any undue gain, he shall be liable to pay an amount
equal to that gain to the company.
(6) A director of a company shall not assign his office and any assignment so made shall
be void. – delegation is different from assignment.
(7) No person can appoint successor. No person can be appointed for Life time.
Contravention : shall be punishable with fine which shall not be less than Rs. 1 lakh but which
may extend to Rs. 5 lakh
167. VACATION OF OFFICE OF DIRECTOR
(1) The office of a director shall become vacant in case—
a. he incurs any of the disqualifications specified in section 164
AFTER AMENDMENT ACT 2017
Provided that where he incurs disqualification under sub-section (2) of section 164, the office of
the director shall become vacant in all the companies, other than the company which is in default
under that sub-Section.
b. he absents himself from all the meetings of the Board of Directors held during a
period of twelve months with or without seeking leave of absence of the Board;
c. he acts in contravention of the provisions of section 184 ( relating to entering into
contracts or arrangements in which he is directly or indirectly interested);
d. he fails to disclose his interest in any contract or arrangement in which he is directly or
indirectly interested, in contravention of the provisions of section 184;
e. he becomes disqualified by an order of a court or the Tribunal;
f. he is convicted by a court of any offence, whether involving moral turpitude or otherwise
and sentenced in respect thereof to imprisonment for not less than six months:
AFTER AMENDMENT ACT, 2017
1 additional provision inserted after clause (f):
"Provided that the office shall not be vacated by the director in case of orders referred to in clauses
(e) and (f)—
(i) for thirty days from the date of conviction or order of disqualification;
(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction
resulting in sentence or order, until expiry of seven days from the date on which such appeal or
petition is disposed of; or
(iii) where any further appeal or petition is preferred against order or sentence within seven days,
until such further appeal or petition is disposed of.
Provided that the office shall be vacated by the director even if he has filed an appeal against the
order of such court;
INTERPRETATION: Even if a person is not disqualified U/s. 164 (3) proviso– he has to vacate the
office before filing an appeal. But this applies only if he is convicted for moral turpitude – so for
related party violation, if he appealed – he is not disqualified as well as he need not vacate.
g. he is removed in pursuance of the provisions of this Act;
h. he, having been appointed a director by virtue of his holding any office or other
employment in the holding, subsidiary or associate company, ceases to hold such
office or other employment in that company.
(2) Contravention: If a person, functions as a director even when he knows that the office of
director held by him has become vacant, shall be punishable with imprisonment for a term
which may extend to one year or with fine which shall not be less than Rs. 1 lakh but which
may extend to Rs. 5 lakh, or with both.
(3) Where all the directors of a company vacate their offices, the promoter or, in his absence,
the Central Government shall appoint the required number of directors who shall hold
office till the directors are appointed by the company in the general meeting.
(4) A private company may, by its articles, provide any other ground for the vacation of the office
of a director in additional vacation points.
Interpretation before Amendment:
If a director got disqualification U/s. 164 (2), he has to vacate the office from that company where
he got disqualified. He can continue in all other companies till his tenure get completed. But he
cannot be re appointed for next 5 years.
Interpretation after Amendment:
If a director got disqualification U/s. 164 (2), he has to vacate the office from all the companies.
But If a director got vacated office for not attending Board meetings, he shall vacate only from
that company where he is defaulted. But not from any other companies.
168. RESIGNATION OF DIRECTOR
A director other than Independent Director may resign from his office by giving a notice
in writing to the company and MAY (From May 2018 - amendment act 2017) also forward a
copy of his resignation along with detailed reasons for the resignation to the Registrar within
thirty days of resignation in Form DIR 11 and the Board shall on receipt of such notice take
note of the same and the company shall intimate the Registrar by filing form DIR 12 and shall
also place the fact of such resignation in the report of directors laid in the immediately
following general meeting by the company.
In case of Director being Independent director - he shall forward a copy of his
resignation along with detailed reasons for the resignation to the Registrar within
seven days of giving notice in such form and manner as may be prescribed (From
Nov 2018 – Amendment)
Note: Even though a director gets resigned after filing DIR 11 – his name will still appear in
MCA portal as director of the company –till Company file DIR 12.
The resignation of a director shall take effect from the date on which the notice is received by
the company (immediately – no need of approval) or the date, if any, specified by the director
in the notice, whichever is later:
“Provided that resignation of an independent director shall take effect on the thirtieth
day from the date of receipt of notice by the company under sub-section (1) or such
later date as may have been specified in the said notice. (From Nov 2018 –
Amendment)
Liability of director who resigned the office: for the offences which occurred during his
tenure he still be liable.
When after the no. of directors who resigned, vacated the total no. of directors came to less
than statutory minimum, then the promoter or, in his absence, the Central Government shall
appoint the required number of directors who shall hold office till the directors are appointed
by the company in general meeting
IN CASE IF A FOREIGN DIRECTOR WANTS TO RESIGN HE MAY GIVE POWER TO
A PRACTICING CA/ CS/ ANY DIRECTOR OF THE COMPANY TO FILE DIR 11,
PROVIDED THE COMPANY ALREADY FILED DIR 12.
Note: In case a director sends his resignation letter by post, his resignation takes effect only
on the date the company receives it.
DRAFT RESOLITION
"RESOLVED THAT the resignation of Shri ________ from the directorship of the Company be and is
hereby accepted with immediate effect".
"RESOLVED FURTHER THAT the Board places on record its appreciation for the assistance and
guidance provided by Shri, …….. during his tenure as Director of the Company".
RESOLVED FURTHER THAT _______, be and is hereby severally authorized to do all the acts, deeds
and things which are necessary to the resignation of aforesaid person from the directorship of the
Company."
169. REMOVAL OF DIRECTORS
(1) A company may, by ordinary resolution, remove a director before the expiry of the period of his
office after giving him a reasonable opportunity of being heard: except the director appointed
by the Tribunal under section 242 and proportional representation director.
Provided that an Independent Director who got re appointed for Second term by passing
special resolution in General meeting shall be removed by passing special resolution.
(Amendment in Nov 2018)
Impact of Amendment: All ID requires Spl. Resolution for removal.
(2) A special notice shall be required of any resolution, to remove a director under this section,
or to appoint somebody in place of a director so removed, at the meeting at which he is
removed. The company shall forward the notice to members along with explanatory
statement explaining the reason for such removal, even if the member does not mention the
reason in the special notice.
(3) On receipt of notice of a resolution to remove a director under this section, the company shall
forward a copy to the director concerned, and the director, whether or not he is a member of
the company, shall be entitled to be heard on the resolution at the meeting.
(4) If the director concerned makes any representation in writing to the company and
requests it to circulate , then the company shall, along with notice send to member about
removal shall, if the time permits
a. state the fact of the representation been made; and
b. send a copy of the representation to every member of the company to whom
notice of the meeting is sent (whether before or after receipt of the representation
by the company),
and if a copy of the representation is not sent as aforesaid due to insufficient time or for the
company’s default, the director may without prejudice to his right to be heard orally require that
the representation shall be read out at the meeting:
Exception: copy of the representation need not be sent out and the representation need not be
read out at the meeting if, on the application either of the company or of any other person who
claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are
being abused to secure needless publicity for defamatory matter.
A vacancy created may get filled by the appointment of another director in his place at the
meeting at which he is removed.
If the vacancy is not filled, it may be treated as a casual vacancy and the board can fill the
vacancy but the director who was removed from office shall not be re-appointed as a director by
the Board of Directors
Tenure: A director so appointed shall hold office till the date up to which his predecessor would
have held office if he had not been removed.
The person who got removed is eligible for compensation.
Note: Proportional representation director, Small Shareholder Director (without the approval of
small shareholders), Nominee Directors, Directors appointed by Tribunal /central government
cannot be removed.
170. REGISTER OF DIRECTORS AND KEY MANAGERIAL
PERSONNEL AND THEIR SHAREHOLDING
A register containing particulars of its directors and key managerial personnel like DIN, name,
parents & spouse name, DOB, address, nationality, occupation, appointment date, cessation date PAN,
which shall include the details of securities held by each of them in the company or its holding,
subsidiary, subsidiary of company’s holding company or associate companies shall be kept at
registered office.
A return containing such particulars and documents as may be prescribed, of the directors and the
key managerial personnel shall be filed with the Registrar within thirty days from the appointment
of every director and key managerial personnel, as the case may be, and within thirty days of any
change taking place – Form DIR 12.
When ever a director is getting appointed, resigned or removed – make an entry here. Also
mention in board report about new appointment, removal and resignation.
As per sec. 171 this shall be available for inspection for members.
Section 170 IS NOT APPLICABLE FOR GOVT. COMPANY WHICH 100% HOLDING BY CG,
SG.
Sec. 171 – Members right to inspect
• Sec. 170 register shall be open for inspection during business hours and the members shall
have a right to take extracts therefrom and copies thereof, on a request by the members,
be provided to them free of cost within thirty days; and
• shall also be kept open for inspection at every annual general meeting of the company
and shall be made accessible to any person attending the meeting.
• Note: Member attending EGM cannot ask the company to show KMP register at EGM. He
can go to R.O. at working day during business hours.
• If any inspection is refused, or if any copy required under that clause is not sent within
thirty days from the date of receipt of such request, the Registrar shall on an application
made to him order immediate inspection and supply of copies required thereunder
172. PUNISHMENT
If a company contravenes any of the provisions of this Chapter (149- 171) and for which no specific
punishment is provided in respective sections, the company and every officer of the company who
is in default shall be punishable with fine which shall not be less than Rs. 50 thousand but which
may extend to Rs. 5 lakh.
Example for 172: Fails to appoint minimum directors, more than 15 director without proper
approval, failed to appoint women director, fail to have resident director,
TYPES OF DIRECTORS
161 (1) Appointment of additional director
161 (2) Appointment of alternate director
161 (3) Appointment of Nominee director
161 (4) Casual Vacancy Director
151 Appointment of director elected by small shareholders
152(1) Appointment of first Director
152 (2) Director to get appointed in General meeting
152 (6) (a) Rotational Directors
152 (6) (e)
Re Appointing retiring director/ Appointing another person in the place of retiring
director
163 Director appointed in principal of Proportional Representation:
149 (4-6) Independent Director
149 (1)
proviso Women Director
149 (3) Resident Director
162 Enblock Resolution Director (Director to be appointed individually)
Test your Knowledge
DIRECTORS QUESTIONS
NO. TEST YOUR KNOWLEDGE
1 The AOA of the company prescribes maximum no. of directors to be 14. The
board wants to increase it to 15 directors. Explain procedure.
2 Unlisted public company with paid up capital of Rs. 100 crores and 2000
shareholders. State whether Sec 151 applies?
3 Which directors are not liable to retire by rotation?
4 What are the exemptions given for Section 8 companies?
5 Does the rotational director retire on the date of AGM ought to have been held
or the date of AGM actually held?
6 Can additional director be appointed at the AGM?
7 Can a director appoint alternate director?
8 Can a casual vacancy director be appointed for another casual vacancy director?
9
Three directors have been appointed in a single resolution and no objection was
raised by any member. Explain procedure in case the company opts to do so.
What is the validity of resolution passed by them?
10 There has been a default in payment of interest to bank and financial institution.
Are the directors of that company liable for disqualification?
11 Insolvency application is pending against person. State whether he is qualified
to get appointed as director?
12 A person caught in embezzlement and imprisoned for 2 months. State whether
he is qualified to get appointed as director?
13 A person is a director of 10 public companies, and 5 private companies. Can he
accept the appointment of 1 more public company?
14
A private company which is a subsidiary of public company / holding company
of public company, whether it should be included in the limit of 10 public
companies.
15 MD refuses resignation of a director. Is it possible?
16 Is explanatory statement required to be attached for a special notice received
from member for removal of directors?
17 Who cannot be removed u/s 169?
18 Can a MD be removed u/s 169?
19 When the additional director is not regularized in the AGM, can he be appointed
as additional director by the board?
20 Can an alternate director be again appointed as alternate director for some other
director?
21 What is the tenure of casual vacancy director?
22 Explain restriction on number of directorships. What are all the companies
excluded from counting ceiling limit?
23 When will the resignation of directors become effective?
24 A listed company wants to appoint a person as SSD who is already holding SSD
position in 2 companies. Is that possible?
25 Original Director out of country for 5 months. Can BOD appoint alternate
director, if Articles is silent?
26 Explain provisions regarding time limit for filling woman Director vacancy.
27 Sec. 8 companies wants to increase number of directors beyond 15. Is special
resolution required?
28 Public Company having PUC Rs. 10 Crores, state whether ID needs to be
appointed.
29 Public Company having PUC Rs. 2 Crores, state whether ID needs to be
appointed.
30 Whether KMP be appointed as ID?
31 A person together with his relative holds 3% shares in a company. Can he be
appointed as ID?
32 A listed company has 5000 shareholders. It receives notice to appoint SSD from
400 small shareholders. But BOD refuses. Is it valid?
33
State applicability of woman director in following situation:
(a) Company is listed. (b) Unlisted public company PUC Rs. 50 crores and TO
Rs. 200 crores
34 State procedure regarding changes to DIN particulars which have been
submitted already.
35 Public company having 11 directors. PUC Rs. 300 crores. T.O. Rs. 500 crores.
Explain provisions relating to appointment of woman and independent director
36 A person had been convicted and imprisoned for a period of one year, 8 years
ago. Can be appointed as director now?
37 Mr. D, director of DRT Limited had not filed annual return for 2016, 2015 and
2014 year end. Can he be appointed in XYZ Private limited as director?
38
Mr. F is director holding directorship in 4 public, 10 private, 2 sec. 8 companies.
He received offer to be director in 7 public, 6 private and 2 Sec. 8 companies. His
order of preference is 1st public, then private.
39 Mr. A is appointed as Independent Director for 3 years and later reappointed
for 5 years. Can he be again reappointed for 2 more years?
41
Appointment of director was defective and was found out later. However, such
director has done certain transaction on behalf of the company. Advice validity
of acts.
42 Define small shareholders. State the procedure of their appointment.
43 Is it possible to appoint a person who is not a small shareholder as shall
shareholder director?
44 What is tenure of SSD? Can he be re-appointed?
45
Company appointed additional director on March 2017. Before AGM, due to
natural calamity, the company got destroyed. With the permission of ROC,
AGM got extended. Comment on the status of additional director.
46
Listed company has 7 directors – out of which 3 Independent and 4 directors.
One director and ID (person is woman) vacates the office. Explain how to fill
the vacancy.
47 Director resigned the office and filed DIR 11. Company failed to file DIR 12.
What is the status?
48 Bank which financed the company wants to appoint nominee director. Is that
allowed?
49 What is the tenure of additional director?
50 8 directors are there in a company. Write provision on retirement of directors
and automatic reappointment.
51 woman director resigned 30.06. Next board meeting 10.09. In that meeting filled
vacancy. In case in board meeting held on 08.11
52 Provisions regarding resident director appointment.
53 A person has not paid the call money and it is overdue for more than 5 months
from due date. Can he be appointed as director of that company?
54 A director of the company not filed annual return of the company for past 3 year.
Can he be appointed as director in another company
55
Mr. V, director of T Ltd defaulted in filing returns for 3 continuous year.
Whether Mr. V can continue in T Ltd as well as G Ltd where he is director? Can
he be re appointed? In case Mr. V is nominee director, will your answer be
different? Imagine the company is Pvt. Co. What will be your answer
56
A public company having turn over Rs. 60 crores appoints a woman director.
She already hold directorship in 12 companies including 10 public companies
and she is also CWA in practice
57
A person holds directorships in 8 public companies, out of which 2 MD & 6
normal. In addition, she is offered to be appointed as alternate director in 3
public companies and ID in 3 companies. Can she accept office?
58 Can an ID be also appointed as ID in holding/ subsidiary/ associate companies?
59
Mr. A proposes his candidature and deposited Rs. 1 lakh, but failed to get
appointed. But gets 30% vote. Mr. A asked refund for deposit and the company
denied. Explain.
60 While counting number of directorship u/s 165, state whether Section 8
company and foreign company to be included in the count?
61
An additional director has been appointed in circular resolution to fill casual
vacancy. On the due date, AGM could not be held. Explain full procedure to be
followed.
62
Total directors – 11 as per AoA. Explain –
a. How many can be non rotational?
b. How many have to retire every AGM?
c. Time limit for nomination u/s 160?
d. Can they appoint 1 more non rotational director?
63
An unlisted public company with PUC 100 crores and turnover 300 crores.
a. How many ID should be there in this company.
b. What is the maximum sitting fees can be paid?
c. AOA allows Rs. 40,000 as sitting fees. Can board pay Rs. 50,000 to ID and Rs.
30,000 to woman director?
64 A employee who got retired recently and receiving pension. Can he be
appointed as ID?
Directors
No
Sec
No Section Reference - Answer
1 149
Maximum directors = 15. In order to increase, Articles to be amended by passing
SR.
2 151 No. Applicable only to listed companies.
3 152
Independent, small shareholders, nominee, WTD, MD, proportional
representation directors
4
i. SR need not be passed to increase number of directors more than 15.
ii. Consent by director to file DIR-2 u/s 152(5) - not applicable.
Iii. Provisions relating to number of directorships u/s 165
5 Date on which AGM is actually held.
6 161(1)
No, additional directors are appointed by the Board provided the Articles
authorize it.
7 161(2)
No, Power to appoint alternate director is conferred upon the Board, provided
Articles authorize it.
8 161(4)
No, casual vacancy is created by vacation of office by any director appointed in
general meeting. Vacation of office by director appointed to fill a casual vacancy,
does not create another casual vacancy.
9 162
Appointment of directors to be voted individually. Otherwise, unanimous
resolution to be obtained in the general meeting without any vote being cast
against it. Else, resolution passed shall be void, whether or not objection has
been taken.
10 164(2) No, default in payment of interest to bank & financial institution is not specified.
11 164 Person is disqualified to be appointed as director
12 164
No, such person can be appointed since imprisonment does not exceed 6
months.
13 165
No, since person can be director in maximum 20 companies. Out of which, only
10 public co is allowed.
14 165 Yes
15 168
No, law does not give an option to MD or Company or Board to reject
resignation of director & force him to continue.
16 169
Members are required to give special notice & company has to submit
explanatory statement for removal of director.
17 169
Nominee directors appointed by CG, proportional representation directors, SSD,
Tribunal appointed directors cannot be removed
18 169 Yes, MD can be removed
19 161(1) No
20 161(2) Person can be alternate director of only director of the Company.
21 161(4)
Date up to which director in whose place he is appointed would have held office
if it had not been vacated.
22 165
Maximum directorship (including alternate directorship) in 20 companies. To
exclude Section 8 company.
23 168
Date mentioned in the resignation notice or date of receipt of notice, whichever
is later
24 151
Director can be SSD in maximum 2 companies, provided there is no conflict of
interest.
25 161(2)
Articles to authorize the Board to appoint alternate director, else Co to obtain
OR
26 149 Within 3 months or next board meeting, whichever is later
27 No, since exemption has been granted to Section 8 companies.
28 149 Yes, ID to be appointed if PSC 10 crore or more
29 149 No, ID to be appointed if PSC 10 crore or more
30 149
No, since ID are those directors which are other than MD, WTD. KMP includes
MD, WTD.
31 149
No, since ID himself or relative or both shall not hold voting power of 2% or
more.
32 151
Notice to be received from not less than: 1000 small shareholders or 1/10th of
small SH - in this case 500. Hence, rejection by board is valid.
33
149(1)
Proviso
a. Listed Company - Woman Director is mandatory
b. Public Company - PSC >= 100 crores or Turnover >= 300 crores. Hence, not
applicable.
34
Director to fill up eForm DIR-6 for changes and upload the same. Verification as
per Form DIR-7 needs to be mandatorily attached.
35 149
(1) Proviso - Woman Director to be appointed.
(4) - Independent Director also to be appointed
36 164 Yes, since period of 5 years has elapsed
37 164(2) No, since this section is applicable to both private & public companies.
38 165
Remaining companies in which he can accept appointment: 20 - (4+10) = 6
Public - Can accept further 6, Private - None, Section 8 - 2.
39 149(11)
No, since independent director shall hold office for more than two consecutive
terms and shall be eligible for appointment after expiration of 3 years of ceasing
to become ID.
41 176 Defects in appointment of directors not to invalidate actions taken
42 151
Small SH means SH holding shares of nominal value of not more than Rs 20,000
or such other sum as maybe prescribed. Appointment possible on receipt of
notice from requisite number.
43 Yes, requisite notice to be received and eligibility criteria to be satisfied
44
Tenure of SSD is 3 years and reappointment is not possible. Cooling period is 3
years
45
Additional Director can continue his office upto the time the AGM has been
extended.
46 Vacancy to be filed within 3 months or next board meeting whichever is later
47 168
Failure of Co to file DIR 12 as required by Companies (Appointment &
Qualifications of Directors) Rules, 2014, does not impact the effectiveness of
resignation.
48 161(3)
Possible. Nominee directors can be appointed by BOD, in pursuance of
provision of law or agreement by CG or SG or by way of virtue of SH in
Government Company, subject to Articles.
49 161(1)
Upto next AGM or last date on which AGM ought to have been held, whichever
is earlier.
50 Explain provisions - 152(6) & (7)
51 149
Vacancy to be filed within 3 months or next board meeting whichever is later.
Here, by 08.11
52 149(3)
Every company to have atleast 1 resident director who has stayed in India for a
total period of not less than 182 days in the previous calendar year.
53 164(1)
No, person who has not paid call money due for a period exceeding 6months
from the date on which they should have been paid, is disqualified to be director
of that company.
54 164(2) Shall be disqualified to be re-appointed in the other company.
55 164
Mr. V will be disqualified with immediate effect from the defaulting company (T
Ltd).
Can continue office in the other company and will not be eligible for re-
appointment in other company.
Nominee directors cannot be removed (Sec 169)
Section is applicable to both Public & Private Companies
56 Woman director to choose directorship and continue within prescribed limits.
57
Person can be director in maximum 20 companies, out of which 10 public.
Remaining directorship = 20 - 8 = 12. Can further accept office in 2 ID which will
result to 10 public companies limit being exhausted or 2 public companies.
58 Yes, provided the criteria laid down in 149(6) is satisfied.
59
Company shall refund amount deposited along with candidature of a person
who has been elected as a director or has received more than 25% of total votes.
60 165 Section 8 Co is excluded and Foreign Co is included
61 Additional Director can hold office upto AGM date and then vacate office.
62
a. Maximum 1/3rd of total strength = 4 non rotational directors
b. Not less than 2/3rd retire at every AGM
c. 14 days before AGM date
d. Yes, provided 2 rotational directors are appointed. AoA to be amended and
special resolution to be passed.
63
a. Minimum 2 Independent Directors
b. Not less than 2/3rd retire at every AGM
c. Maximum sitting fees upto Rs 100,000. Women and ID cant be paid less
compared to others.
64 No. Cooling period - 3 years
