A.
Steps
for appointment of director: The steps for
appointment of director of a private
limited company are as follows :
Note: Only provision regarding
appointment of an additional director has been notified.
Step
1: Section 152[1]:
Ensure that the director has been allotted a director identification number.
Step
2: Section 149[2]:
Ensure that the number of director for a private company is a minimum of two in
number.
Step
3: Section 149[3]:
Ensure that the company has atleast one director who has stayed in India for a
total period of not less than 180 days in the previous calendar year. This
provision is applicable for all companies and all the companies existing on and
before the commencement of this act have to comply with this requirement within
one year from date of notification of the rules in this regard or from the
commencement of the act[4].
Step
4: Section 161[5]:
In case of appointment of additional director : Ensure that the director
to be appointed by board of directors exercising the power so conferred in them by the
Articles of the company is not such a person who has failed to get appointed as
a director in a general meeting. The additional director has to be appointed
till date of next AGM or last date on which AGM should have been held ,
whichever is earlier
Step
5: Section 161(2)[6]: In
case of appointment of an alternate director: Ensure that such director is
appointed as a director in place of a director during his absence from India
for a period not less than three months. Also ensure that such person is
appointed by the board on being so authorized by the AOA or resolution passed
in general meeting. Such director shall not be appointed as an alternate
director unless he is qualified to be an independent director under the
companies act.
Step
4: Section 160[7]: In
case of a person notifying his candidature: Notice must be given to the Company regarding proposal for
appointment of a person as a director not less than 14 days before the General
Meeting. Such notice should be given by deposit of Rs, 1 Lakh or any higher
amount which may be prescribed
Step
5: Section 152(5)[8]: In
case the person has not himself notified his candidature: Obtain consent from the person who is to be appointed
as Director. The consent should be in
form 11.2 (Chapter XI, Draft rules[9]). The format has changed
with respect to the old act.
Step 6: Hold and convene a board meeting and pass
resolution to the effect
Step 7: The consent
for appointment should be filed by the company with the Registrar in Form No.
11.8 along with the fee as provided in Annexure ‘B’. (Chapter XI, Draft rule
11.6[10]
)
Step 8: Section 170[11]- Make
necessary entries in the Register of Director
Changes vis-à-vis Companies Act, 1956:
1) In case of a person notifying his candidate
the person had to deposit Rs. 500 but according to the companies act, 1956 the
person has to deposit Rs. 1 Lakh or higher amount so prescribed.
2) Format for written consent has changed (The
format can be found at Form 11.2)
3) Provision regarding a resident director has
been introduced.
4) Changes have been introduced with respect to
additional director.
B.
Steps
for resignation of a director: The steps for resignation
of director of a private limited company according to companies Act, 2013 are as follows:
Note: None of the provisions have
been notified.
Step
1: Notice to be given by the director resigning to the company (Section 168[12])
Step
2: After the receipt of notice the
company should within thirty days from the date of receipt of notice from a
director, intimate the Registrar in Form No. 11.8 and post the information on
its website, if any. (Chapter XI, Rule 11.12[13]).
Step 3: Place
the fact of such resignation in the report of directors laid in the immediately
following general meeting by the company (Section 168[14]).
Step 4: The
director may within thirty days from the date of resignation, forward to the
Registrar a copy of his resignation along with reasons for the resignation in
Form No. 11.7 along with the fee as provided in Annexure ‘B’. (Chapter XI, Rule
11.13[15])
C.
Steps
for conducting a board meeting : The
procedure for conducting a board meeting according to the provisions of the
Companies Act, 2013 is as below:
Note: None of these
provisions have been notified
Step 1: Section 173[16]: Check
that four meetings of board of directors are being conducted every year and the
time period between two consecutive board meetings is not more than 121 days.
Step
2: Section 173[17]: Check
that a notice of not less than 7 days has been sent by hand or post or electronic
means to all the directors .
Step
3: Section 174[18]: The
quorum for meeting has to be seen. The quorum for the meeting should be 1/3 of
its total strength or two directors whichever is higher. The participation of
directors by video conferring and other audio visual means shall be also
counted for the purpose of quorum
Step
4: If the meeting is being conducted through audio visual means check that
requirements of Chapter XI [19]are
met.
Step
5: Section 118[20]: Ensure
that the minutes of the meeting are prepared and signed within 30 days of the
conclusion of the meeting.
D.
Independent
Director
: The
provisions regarding Independent director according to Companies Act, 2013 are
as follows:
Note: None of these
provisions have been notified
An independent director shall be
appointed for the following companies:
§ Section
149 (4) : Every listed public company shall have at least one-third of the
total number of directors as independent directors and the Central Government
may prescribe the minimum number of independent directors in case of any class
or classes of public companies.
The
classes of such public companies are mentioned in Chapter XI Rule 11.2. They
are:
§ Public Companies having paid up share capital
of one hundred crore rupees or more; or
§ Public
Companies having turnover of three hundred crore rupees or more;
§ Public
Companies which have, in aggregate, outstanding loans or borrowings or debentures
or deposits, exceeding two hundred crore rupees. (Chapter XI, Rule 11.2[21])
§ Applicable
to all companies be it public or private, provision ambiguous in nature : Section 135[22] : Every company having
net worth of rupees five hundred crore or more, or turnover of rupees one
thousand crore or more or a net profit of rupees five crore or more during any
financial year shall constitute a Corporate Social Responsibility Committee of
the Board consisting of three or more directors, out of which at least one director
shall be an independent director (This provision requires clarification and
clarification would be soon given as stated my Mr. Sachin Pilot. )
The
definition and requirements of an independent director is stated in Section 149
(6)[23].
The steps for appointment of independent Director are as follows:
Step
1: Ensure that the independent director meets the requirements stated in
Section 149 r/w Schedule VI [24]
Step
2: Ensure
that explanatory statement attached to the notice of the meeting for approving the
appointment of independent director includes a statement that in the opinion of
the Board, the independent director proposed to be appointed fulfils the
conditions specified in the Act and the rules made there under and that the
proposed director is independent of the management (Schedule VI of companies
Act, 2013[25])
Step
3: Getting the appointment of
independent director(s) approved at the meeting of the shareholders. (Schedule
VI[26])
Step 4:
Issuing a letter of appointment to the independent director enlisting
the term of appointment, the expectations, the fiduciary duties, code of
ethics, terms and conditions , remuneration etc (Schedule VI[27])
E.
Composition
of board ; The following is the composition of
Board in a private Limited company as per the Companies Act, 2013
Note : Only provision
regarding additional and nominee director has been notified.
I.
Minimum and maximum no of
directors: Section 149[28]:
Every company shall have board of directors constituting of individuals as
directors and shall have minimum of two directors in case of private limited
company and a maximum of 15 directors. A Company may appoint more than 15
directors after passing a special resolution.
II.
Resident Director Section 149 (3)[29]: Applicable to private company: 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.
Compliance time: Section 149(5)[30]: Every company existing
on or before the date of commencement of this Act shall, within one year from
such commencement or from the date of notification of the rules in this regard
as may be applicable, comply with the requirements of the provisions of resident
director[31].
III.
Additional director
: Section 161 (1)[32]:
Applicable
to private company:
The Additional director can be to be appointed by board of directors
exercising the power so conferred in
them by the Articles of the company till date of next AGM or last date on which
AGM should have been held , whichever is earlier but such a person should not
has failed to get appointed as a director in a general meeting.
IV.
Alternate Director:
Section 161(2)[33]:
Applicable
to private company:
Such director is appointed as a director in place of a director during
his absence from India for a period not less than three months. An Alternate
Director is appointed by the board on being so authorized by the AOA or
resolution passed in general meeting. A Person qualified to become an
independent director can only be appointed as an alternate director [34]
V.
Nominee Director: Section 161(3) [35]:
Applicable to private company:
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.
VI.
Key managerial personnel
: Section 203[36] :
applicable to listed company as well as
private company with paid up share capital of five crores or more[37]
:Every company belonging to such class or classes of companies as may be prescribed
shall have the following whole-time key
managerial personnel,—
(i) managing
director, or Chief Executive Officer or manager and in their absence,
a whole-time director;
(ii) company
secretary; and
(iii) Chief
Financial Office
Points to be taken into
consideration:
a)
Section 203 (2)[38]
: Every whole-time key managerial personnel of a company shall be appointed by means
of a resolution of the Board containing the terms and conditions of the
appointment including the remuneration.
b)
Section 203
(3)[39]: A Whole-time key
managerial personnel shall not hold office in more than one company except in
its subsidiary company at the same time.
Provided
that nothing contained in this sub-section shall disentitle a key
managerial personnel from being a director of
any company with the permission of the Board:
Provided
further that The whole-time key managerial personnel holding office in more
than
one company at the same time on the date of
commencement of this Act, shall, within a period of six months from such commencement, choose
one company, in which he wishes to continue to hold the office of key managerial
personnel
Provided
also that a company may appoint or employ a person as its managing director, if
he is the managing director or manager of one, and of not more than one, other
company and such appointment or employment is made or approved by a resolution
passed at a meeting of the Board with the consent of all the directors present
at the meeting and of which meeting, and of the resolution to be moved thereat,
specific notice has been given to all the directors then in India.
c)
In
case of vacation :Section
203(4)[40] : If the office of any
whole-time key managerial personnel is vacated, the resulting
vacancy shall be filled-up by the Board at a
meeting of the Board within a period of six months from the date of such vacancy.
Penalty
for contravention (Non appointment of KMP) : Section 203 (5)[41] : In case of
contravention of the provisions of the
section 203 , the company shall be punishable with fine which shall not be less
than one lakh rupees but which may extend to five lakh rupees and every
director and key managerial personnel of the company who is in default shall be
punishable with fine which may extend to fifty thousand rupees and where the
contravention is a continuing one, with a further fine which may extend to one
thousand rupees for every day after the first during which the contravention
continues.
VII.
Independent
Director : Not applicable to Private companies but section 135 of the act which is
related to corporate social responsibility states that Every
company having net worth of rupees five hundred crore or more, or turnover of
rupees one thousand crore or more or a net profit of rupees five crore or more
during any financial year shall constitute a Corporate Social Responsibility
Committee of the Board consisting of three or more directors, out of which at
least one director shall be an independent director .
VIII.
Women directors (Not applicable to private companies) :
Proviso to section 149 : The prescribed class or classes
of companies as may be shall have at least one woman director. The prescribed
companies[42]
are :
(i) every listed company - within
one year from the commencement of second proviso to sub-section (1) of section
149;
(ii) every other public company
having -
(a)
paid–up share capital of one hundred crore rupees or more; or (b) turnover of
three hundred crore rupees or more within three years from the commencement of
second proviso to sub-section (1) of section 149
[1] Not in force
[2] Not in force
[3] Not in force
[4] Section 149(5), not in force.
[5] In force , notification dated
14.09.2013.
[6] Not in force
[7] Not in force
[8] Not in force
[9] Not in force
[10] Not in force
[11] Not in force
[12] Not in force
[13] Not in force
[14] Not in force
[15] Not in force
[16] Not in force
[17] Not in force
[18] Not in force
[19] Not in force
[20] Not in force
[21] Not in force
[22] Not in force
[23] Not in force
[24] Not in force
[25] Not in force
[26] Not in force
[27] Not in force
[28] Not in force
[29] Not in force
[30] Not in force
[32] In force
[33] Not in force
[34] Provio to section 161, not in
force.
[35] In force
[36] Not in force
[37] Rule 13.6, Chapter XIII, not in
force
[38] Not in force
[39]
Not in force
[40] Not in force
[41] Not in force
[42] Rule 11.2, Draft Rules Chapter
XI, Not in force
