Mamta Binani presented on key changes to director requirements and qualifications under the Companies Act 2013. Some important provisions discussed include: - Minimum number of directors for private and public companies being 2 and 3 respectively. - Limit of maximum directors increased from 12 to 15. - Requirement for at least one woman director in certain classes of companies. - Requirement for one-third of directors to be independent in certain public companies. - Restrictions on number of directorships an individual can hold. - Increased qualifications, duties and disqualifications for directors. - Requirements regarding appointment, resignation and removal of directors.

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Companies Act, 2013
By CS Mamta Binani
Past Chairperson (Year 2010), EIRC of ICSI
Practising Company Secretary
At the ÝOU’ Grooming Institute
For Company Secretaries
mamtab@mamtabinani.com
dated : 14.09.2013

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Floor, Commerce House
2A, Ganesh Chandra Avenue, Kolkata 700013
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UNDER THE COMPANIES ACT, 2013
(Chapters XI, XII, XIII)
In this slide show – Chapter XI

3. Section 149 (old 252,253,259)
• Minimum number of directors in case of private
and public companies is 2 and 3 respectively
• The limit of maximum number of directors is
increased from 12 to 15
• In 1956 act, CG approval was required to go
beyond 12
• In 2013 act, SR will be required to go beyond 15.
No CG approval is required
• OPC needs to have minimum 1 director
• At least 1 director shall be a person - stayed in
India for a total period of not less than 182 days in
the previous calendar year

4. Women Director
•Prescribed class of companies to have 1
women director
•As per the draft rules: Listed and also
for companies with paid up capital of
Rs.100 crores and above

5. Independent Directors
• Public companies to have 1/3 ID’s
• Criteria: 1. Paid up capital >= Rs.100 crores
Outstanding loans/borrowings/debentures/deposits
> Rs.250 crores
• Nominee Director/ Representative Director not to
be considered as ID’s (in conflict with existing
clause 49)
• ID’s to abide by a detailed code of con (Schedule
IV)
• Issue of letter of appointment to ID mandatory
• Letter to contain terms of appointment, Board’s
expectations, fiduciary duties etc.
• Will not retire by rotation/ Transition period: 1

6. Independent Directors
•ID’s to hold 1 separate meeting in a year
without other directors and management
•Tenure restricted to 2 terms (5+5)
•Second term to require SR
•Then cooling period of 3 years
•Tenure served by ID before commencement
of new Act not to be counted
•Stock options not permitted for ID
(inconsistent with Listing Agreement)
• Profit related commission and sitting fees allowed

7. Qualifications of ID
• Appropriate balance of :
(i) skills
(ii) experience and
(iii)knowledge in one or more fields of finance, law,
management, sales, marketing, administration,
research, corporate governance, technical operations
or other disciplines related to the company’s business
• After the appointment of ID, the B/R shall have to
furnish a statement to the effect that in the opinion of
the Board, the ID possesses the appropriate balance of
skills, experience and knowledge

8. Database of ID’s-Section 150
• Anybody, Institute or Association
• Which has been authorised in this behalf by the CG
• Shall create and maintain a data bank of persons
• Willing and eligible to be appointed as ID
• Such data bank shall be placed on the website of MCA
• Or any other website as may be approved or notified
by the CG
• Details as mentioned in Rules to be put up on the site
• A disclaimer to be carried by the website
• ID may also apply
• Charges can be levied

9. Appointment of ID-OR
• The appointment has to be approved by the
Company
• In a general meeting
• Special Business
• Ordinary Resolution
• The explanatory statement (section 102 already
enforced), shall inter-alia, mention the
justification for choosing the appointee as the ID
and also a statement that in the opinion of the
Board, he fulfils the conditions specified in the
Act

10. Section 151 (old 252)-Small Sh
• Listed company may have one director elected by
such small shareholders
• There is a change vis-à-vis the Companies Act of
1956.
• Now, only listed companies
• Small shareholders has been explained in the
section itself as ‘a shareholder holding shares of
nominal value of not more than Rs.20,000 or such
other sum as may be prescribed

11. Small shareholder’s director
• Suo-motu - Listed Company or
• Upon the notice of not less than 500 or 1/10th
of the
total number of small shareholders, whichever is
lower
• Such director will be considered as an ID
• Shall not be liable to retire by rotation
• Not for a period exceeding 3 consecutive years
• On the expiry of the tenure, shall not be eligible for
re-appointment
• No person shall hold the office of small shareholders
director in more than 2 companies at the same time

12. Section 152-Appointment of Dir
• Every Director needs to furnish a declaration-Not
disqualified for being appointed as Director
• Valid DIN for getting appointed
• Consent letter made mandatory for private limited
companies also and needs to be filed with ROC even
• OPC-Individual member will be deemed to be the
first director unless specific appointment made
• Retirement by rotation-provisions remain the same.
To note that ID number not to be included in
reckoning total number of directors

13. Sections 153, 154, 155, 156,
157, 158, 159-Provisions of DIN
• 153: To apply for DIN if intending to get appointed
• 154: CG to allot DIN to the applicant within one
month
• 155: Cannot have more than 1 DIN
• 156: Existing Director to intimate DIN to all
Companies within 1 month
• 157: Company to inform DIN to ROC within 15 days
(instead of a week) of the receipt of the same from the
Director
• 158: Obligation to mention DIN
• 159: Punishment for contravention of sections 155, 156

14. Section 160 (old section 257)
• Right of persons other than retiring directors to stand
for directorship:
• Amount of deposit increased from Rs.500 to Rs.1.00
lac or such higher sum as may be prescribed
• Now, even if the person is not elected but the person
so proposed gets more than 25% of total valid votes,
the amount of deposit will be refunded
• 25%- be it by show of hands or on poll
• The manner in which the notice will be sent to the
shareholders will be prescribed by the Central
Government

15. Section 161 (old sections 260,262 & 313)
• Additional Director: If someone’s resolution for
appointment as a Director, gets defeated in a GM, then
that person cannot be appointed as an additional director
• Alternate Director : 1) BOD may appoint, if authorised by
AOA otherwise the GM
2) The said appointee should not be
holding alternate directorship for any other director in
the Company
3) If he is an AD to any ID, then AD
also needs to satisfy the criteria laid for ID
It is to be clarified here that a Director of the Company
may act in dual capacity, that is for himself and as an AD
for any other Director of the Company

16. En block resolution-Section 162
A single resolution not allowed for appointing 2 or
more persons as directors of the Company
unless
A proposal to move such a motion has first been
agreed to at the meeting without any vote being cast
against it.
(This provision now made applicable to private co. also)

17. Section 163 (old section 265)
• Principle of proportional representation
1. The AOA of the Company may provide for this
2. If it provides, then not less than 2/3 of the total
number
3. By a single transferable vote or by a system of
cumulative voting or otherwise
4. Such appointment may be made once in every 3
years
5. Casual vacancies to be filled in as in the case of
additional director
(It is to be noted that even a private limited company
can provide for this provision in its AOA)

18. Section 164 (old section 274)
• Disqualifications for appointment of Director
Apart from the existing disqualifications, the
additions are as below:
1. Conviction of an offence dealing with related party
transactions at any time during the last preceding 5
yrs
2. A person who has been convicted of any offence
and sentenced in respect thereof to imprisonment for
a period extending to 7 years or more
3. A person who has not obtained a DIN
(very important: old section 274(1)(g) mentioned of
public company only but the new section 164(2) has
removed the word public)

19. Section 165
• Maximum number of directorships is 20 (instead of 15 in
old law), within which maximum 10 public limited
companies
• Including alternate directorships
• Including directorship in private companies that are either
holding or subsidiary company of a public company
• If the members so want, they may by SR, specify a lesser
number of directorships for their directors
(It is to be noted that a transition period of 1 year will be
provided to the directors to comply with the maximum
number of directorships)
Very Important: 1. The Directors have to intimate their
choice to each of the company where they wish to
continue
2. Intimation to be given to the ROC also

20. Sec 166-Duties of Directors-Carved
•In line with the UK Companies Act, 2006
•In accordance with the Company’s AoA
• To act in good faith, to promote objects of
the company for benefit of members and
the best interest of the company,
employees, community and environment
•To exercise duties with due & reasonable
care, skill and diligence
•Not to achieve any undue gain/advantage

21. Sec 167-Vacation of office of Director
Inter-aia, If he absents himself from all the meetings
of the BOD held during a period of 12 months with or
without seeking LOA of the Board (Section 167(b))
Fine is hefty if he continues even after he should have
vacated his office
Resignation of Director (Section 168)
Director also needs to forward to ROC, a copy of his
resignation along with detailed reasons within 30 days
of resignation in the prescribed manner
Quick fix solution
Where all directors have resigned, the promoter or in
his absence, the CG shall appoint required number of
directors. These directors to hold office till the
directors are appointed in General Meeting

22. Section 169 (old section 284)
Removal of Director
•The provisions remains the same
•The words CG have been replaced by
Tribunal
•In case of contravention of the provisions of
this section, the penalty has been increased

23. Section 170 (old sections 303,307)
The register shall contain:
- Particulars of its Directors
- KMP
Details like:
- Securities held by each of them in the Company or its
holding, subsidiary, subsidiary of company’s holding
company or associate companies
- Other details as may be prescribed
(It is to be noted two separate registers-that of
directors and directors shareholding has been done
away with)
Very important: Return for appointment or any change
therein shall also be filed for appointment of KMP

24. Section 171 (old section 304)
• In the old section 304, the provision of inspection was
only there. No provision for extracts
• In the new law, provision for extracts included
• In old law, any member (without charge) and any
other person (Re. 1.00 for every inspection)
• In the new law, to members….
• and to any person attending the annual general
meeting (the provision u/s 171(1)(b) is to keep the
register open for inspection at every annual general
meeting of the company and that it shall be made
accessible to any person attending the meeting)

25. Section 172 (new)
•Punishment provisions
If a company contravenes any of the
provisions of Chapter XI and for which no
specific punishment is provided in the said
provisions of the Chapter, the company and
every officer of the company who is in
default shall be punishable with fine which
shall not be less than Rs.50,000 but which
may extend to Rs.5.00 lacs

26. Room No.6, 4th
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2A, Ganesh Chandra Avenue, Kolkata 700013
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(which consists of Sections 149 to 172)