Appointment & Qualification of Directors and Meetings of Board and its Powers Chapters XI and XII

1. Your Legal Team
Appointment & Qualification
of Directors
and
Meetings of Board and its Powers
Chapter XI and XII
1

2. Your Legal Team
Chapter XI
APPOINTMENT AND QUALIFICATIONS OF
DIRECTORS
2

3. Composition of Board - 149
Your Legal Team
Topic
CA 2013
CA 1956
Change/Remarks
Minimum No of
Directors
2- Private Co.
3-Publice Co.
1-One Man Co.
2- Private Co.
3-Publice Co.
1-One Man Co.
Maximum No. of
Directors
15 Directors
12 Directors
Limit of max No. of directors has been
increased from 12 to 15
Increase in no. of
directors beyond
Maximum Limit
Special Resolution required
C.G. Approval required
No need to go to C.G., shareholders
approval will do
Women Director
Foll Companies shall have at least 1 women
director:
Every listed company & every public company
having paid–up share capital(PUSC) of Rs.
100 crores or more; or turnover of Rs. 300
crores or more
No such provision
Liisted Co. to comply within 1 year and
public company within 3 years from the
commencement of this provision
Residential Status
Every Co. to have at least 1 director who has
stayed in India for a total period of not less
than 182 days in previous calendar year.
No such provision
New provision
Independent
Director
Every listed public company and public
companies having PUSC of Rs.100 crores or
more or Turnover of Rs.300 crores or more or
if aggregate outstanding loans or borrowings
or debentures or deposits, exceeding Rs. 200
crores, shall have at least one-third of the total
number of
directors as independent directors
No such provision
New provision
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4. Small Shareholder Director - 151
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ApplicabilityModified
• Only listed companies may appoint 1 Director
elected by small shareholders
• At present, Public Companies having a paid-up
capital of Rs. 5 Crores or more or having 1000 or
more small shareholders
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5. Appointment of Directors- 152
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Declaration from DirectorEvery Co.-New
• Person who is proposed as director in a general meeting, shall
furnish DIN & declaration that he isn’t disqualified from being
appointed as a director
Consent to act as DirectorEvery Co.-New
• Person appointed as director shall not act as a director unless he
gives his consent to hold office as director
Retirement through rotationModified
• Same as before.
• The only change is non-inclusion of independent director in the total
no. of directors, while calculating 2/3rd rotational directors.
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6. Right of persons other than retiring directors to stand for directorship 160
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Applicability-Modified
• Also applicable on private companies now.
• At present applicable on public and private companies which are
subsidiaries of public companies
Deposit Amount-Modified
• Amount to be deposited along with notice of nomination of any person
for the office of director has been increased from Rs. 500 to Rs. 1 Lakh
Refund of Deposit AmountModified
• Amount to be refunded, if elected as a director or gets more than 25%
of total valid votes cast either on show of hands or on poll on such
resolution
• At present, the amount is refunded, if the person gets elected as a
director
Mode of giving Notice to
Members-Prescribed-Modified
• 7 days advance notice through
• Either serving individual notices & through electronic mode to those,
who have opted for electronic mode and in writing to all other members
• Notice of such candidature or intention on the website of Co.
Exception to Individual Notice to
Members- same
• If Co. advertises such notice, not less than 7 days before the meeting
at least once in a vernacular newspaper in the district in which R.O. is
situated & at least once in English newspaper
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7. Appointment of Additional Director, Alternate Director &
Your
Nominee Director- Section 161- Notified (except Alternate Director) Legal Team
Additional Director (A.D.)Modified
Alternate Director-Modified
• Person who fails to get appointed as a Director in a general meeting, can’t be
appointed by Board as A.D.
• Shud not hold any other alternate directorship in the Co.
• Absence of a director for a period of not less than 3 months from India
(instead of State, where B.M. generally take place)
• Alternate Director to an I.D. shud also satisfy criteria for I.D.
• Alternate Director to vacate office, once the director returns to India.
Nominee Director- New
• Subject to AOA, Board may appoint nominee director, nominated by any
institution or under any agreement or by C.G. or State Gov. by virtue of its
shareholding in a Govt. Co.
Casual Vacancy- Modified
• Now not applicable on a private company, which is a subsidiary of a public
Co.
• Only applicable on a public company
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8. Appointment of directors to be voted individually
Sec 162-Notified
Your Legal Team
Section provides- At a general meeting of a Co., a motion for the appointment of 2 or more persons
as directors of the Co. 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- No Change
Modified- Now applicable on all companies. Earlier applicable only on public and its private
subsidiaries
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9. Option to adopt Principle of Proportional Representation
for appointment of directors- Section 163- Notified
Your Legal Team
Section provides- the articles of a Co. may provide for the appointment of not less than two-thirds of the total number
of the directors of a Co. in accordance with the principle of proportional representation, whether by the single
transferable vote or by a system of cumulative voting- No change
Modified- Now applicable on all companies
Earlier applicable on Public Companies or private companies, which are subsidiaries of public companies
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10. Disqualifications for Appointment of Director-164
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Disqualifications of
Directors-Modified
• A person who hasn’t obtained DIN
• Person has been convicted of any offence & sentenced to imprisonment for a
period of 7 years or more.
• Order disqualifying him for appointment as a director has been passed by a court
or Tribunal and the order is in force
• Convicted of offence dealing with RPTs, during the last preceding 5 years
Private Company also
included for Sec
274(1)(g)
• Non filing of accounts for 3 cont. F/Ys or non payment of div/deposit on due date
for 1 year.
• Such a director can’t be appointed in that Co. or any other Co. for 5 years
from such failure
Disqualifications shall
not take effect-
• for 30 days from the date of conviction or order of disqualification
• where an appeal or petition is preferred within 30 days as aforesaid against
conviction resulting in sentence or order, until expiry of seven days from the date
on which such appeal or petition is disposed off or
• where any further appeal or petition is preferred against order or sentence, within 7
days, until such further appeal or petition is disposed off
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11. Number of Directorships-165
Your Legal Team
Maximum Number of
Companies for directorshipModified
• Increased from 15 to 20
Maximum No. of Directorships
in Public Co.-New
• 10 & private companies which are either holding or subsidiary of a
Public Co. will be counted here
Power given to members-New
• Members may, by S/R decide lesser no. of companies in which a
director of Co. may act as director
Exceptions to Maximum LimitDropped
•
•
•
•
Private Companies
Alternate Directorships
Unlimited Companies
Sec 25 Co.
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12. Duties of Directors- 166- New Provision
Your Legal Team
Shall act acc. to AOA of Co., but subject to the Act.
Shall act in good faith in order to promote the objects of Co.
Shall act for the benefit of its members as a whole, and in the best interests of Co.
Shall act for the benefit of its employees, shareholders, community & for the protection of environment.
Shall exercise his duties with due & reasonable care, skill & diligence & shall exercise independent judgment
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 Co.
Shall not assign his office
Shall not achieve or attempt to achieve any undue gain or advantage either to himself or his relatives, partners, or
associates.
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13. Vacation of Office of Director - 167
Your Legal Team
Conditions of Vacation of
office-Modified
No Director Situation
• If he incurs any of disqualifications of a director
• If he absents himself from all B.M.s held during a period of 12
months with or without seeking leave of absence.
• The promoters & in their absence, C.G. shall appoint the required
no. of directors who shall hold office till directors are appointed by
Co. in general meeting
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14. Resignation of Director-168- New Provision
Your Legal Team
Notice of Resignation to Board
•Resigning Director may resign from his office by giving a notice in writing to Co. & Board
Duty of Board & Co.
•Board to take note of the same & Co. shall intimate ROC of the same in Form 11.8 within 30 days and also post the same on
website.
Disclosure in Directors Report
•Fact of such resignation shall be disclosed in Directors Report, laid in the immediately following G.M. of the Co.
Duty of Director
•Forward a copy of his resignation along with detailed reasons for resignation to ROC within 30 days, from date of resignation
in Form 11.7
Resignation effective from
•Either the date on which the notice is received by Co. or the date, if any, specified by director in the notice, whichever is later.
Liability for acts
•Director shall be liable even after his resignation for offences which occurred during his tenure
Resignation or vacation by all directors
•Promoters & in their absence, C.G. shall appoint the required no. of directors who shall hold office till directors are appointed
by Co. in G.M.
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15. Register of Directors and Key managerial personnel and
their shareholding- 170
Your Legal Team
Register of Director & Register of Director’s shareholding has been merged into one
Form of change in KMP, besides director, will also be required to be filed, within 30 days of
change in Form No. 11.8
Particulars of KMP will also be required to be mentioned in the Register.
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16. Your Legal Team
Chapter-XII
MEETINGS OF BOARD AND ITS POWERS
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17. Board Meetings- 173
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First Board meeting(B.M.)-New
• To be held within 30 days of incorporation for every Co.
Minimum No. of Meetings-Same
• At least 4 B.M. every year
Time Gap between 2 B.M.s-New
• Should not be more than 120 days
Video Conferencing(V.C.) New
Specified matters which cant be done
through V.C.
Time for Notice of B.M.- New
Mode of giving Notice of B.M.-New
Shorter Notice of B.M.-New
OPC, Dormant Co. & Small Co.-New
• Directors can attend the meeting through through video conferencing
or other audio visual means
• Approval of annual financial statements and Board Report
• Advance 7 days notice
• Can also be given through electronic mode (not specified)
• At least 1 independent director shud be present, if not , decisions
taken by Board, shall be ratified by at least 1 independent director.
• At least 1 .M. in each Half year and gap b/w 2 B.M. shall not be less
than 90 days.
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18. Quorum of Board Meetings -174
Your Legal Team
Quorum of B.M.- Same
V.C. presence-new
• 1/3rd of its total strength or 2 directors, whichever is higher
• Will now be included in quorum
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19. Passing of Resolution by Circulation- 175
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Draft Circular resolutionModified
No. of directors/members to
be present in India- Dropped
Passing of ResolutionModified
Circulation to be decided in
B.M.-Ne
Noting in Minutes-New
• Drafts of Circular resolution along with necessary papers to all the directors or
members of Comm., at regd address either by hand delivery, post or courier or
electronic means
• At present, drafts to be circulated, to all, who are present in India and to others at
their usual address
• Requirement of presence of quorum no. of directors/members in India has been
dropped
• Will be taken as approved if majority of directors/members who are entitled to vote
give consent.
• Earlier, either by all directors who are present in India or majority of directors, who
are entitled to vote.
• If 1/3rd of total no. of directors require, to decide the resn in a B.M., then the
Chairman shall do so.
• The C/R shud be noted down in the subsequent Board Meeting or Comm. Minutes
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20. Defects in appointment of Directors not to invalidate actions taken
Notified- No change- Section 176
Your Legal Team
No act done of a director shall be deemed to be invalid, notwithstanding that it was
subsequently noticed that his appointment was invalid by reason of any defect or
disqualification or had terminated by virtue of any provision contained in this Act or in the
articles of the company
Directors actions will not be valid, after his appointment has been noticed by the company to be
invalid or to have terminated.
Applicable on every Company.
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21. Audit Committee (A.C.)- 177
Your Legal Team
Which Co. to form Audit
Comm.-Modified
• Ever Listed Co. shall form this Comm. & public Co. of PUSC of Rs. 100 crores or more or whose
aggregate outstanding loans or borrs or deb or dep. exceeds Rs. 200 crores.
• At present, every Public Co. having P.U.C. not less than Rs. 5 crores shall form this Comm
Composition of Comm.Modified
• Min 3 directors, with majority of I.D., along with majority to read and understand financial stats
• At present 3 directors, of which 2/3rd shall be other than M.D. or W.T.D.
Terms of functioningModified
• Shall act acc. to terms of reference specified by Board- however, new terms have been specified, which
shall also be included.
Right to be heardModified-
• Auditors, KMP to shall attend Comm. meeting for consideration of auditor Report & will have a right to be
heard but not right to vote.
• At present, auditors and internal auditor don’t have right to be heard.
Chairman of A.C. to
attend AGM- Dropped
• No such requirement now
Recommendation of
A.C. binding- Dropped
• Recomm. on Financial Management matters & audit report, will no more be binding on Board.
Vigil Mechanism- New
• Every Listed Co. & prescribed companies to set up this mech. for directors and employees to report
genuine concerns.
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22. Nomination, Remuneration Comm.- New Provision- 178
Your Legal Team
Class of Companies to set
up Nomination &
Remuneration Comm.
Composition of Comm.
Chairperson of Co.
Role of Comm.
Remuneration Policy
Chairperson of Comm. to
attend General Meetings
Explanation
• Every Listed Co. & Co. which has accepted deposits from public or borrowed money from banks & P.F.Is
exceeding Rs. 50 crores.
• 3 or more non-executive directors, out of which not less than one-half shall be I.D.
• Can be a member of Comm. but not a Chairman of such Comm.
• Identify persons who are qualified to become directors & in senior management & recommend to Board
their appointment & removal & shall do evaluation of every director’s performance.
• Comm. shall form a criteria of qualifications, positive attributes and independence of a director and
recommend Board remuneration policy
• Either Chairperson & in his absence, any other member to attend all general meetings of Co.
• Senioe Management means personnel of Co., who are members of its core anagement team excluding
BODs comprising all members of management one level below the executive directors, including the
functional heads
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23. Stakeholders Relationship Comm.- New Provision -178
Your Legal Team
Which co. to form this Comm
Composition of Comm.
Role of Comm.
Chairperson of Comm. to attend
General Meetings
• Co. having more than 1000 shareholders, debenture-holders,
deposit-holders & any other security holders at any time during a
financial year
• Chairperson to be non-executive director & other members may be
decided by Board.
• Consider & resolve grievances of security holders of Co.
• Either Chairperson & in his absence, any other member to attend all
general meetings of Co.
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24. Powers of Board- 179
Your Legal Team
New Items which have to be taken up in a Board Meeting only are as follows:
To approve financial statement and the Board’s report
To diversify the business of Co.
To approve amalgamation, merger or reconstruction
To take over a company or acquire a controlling or substantial stake in another Co.
Prescribed- To make political contributions
To fill a casual vacancy in Board
To enter into a joint venture or technical or financial collaboration or any collaboration agreement
To commence a new business
To shift the location of a plant or factory or the registered office
To appoint or remove KMP & senior management personnel one level below KMP
To appoint internal auditors
To adopt common seal
To take note of the disclosure of director’s interest & shareholding
To sell investments held by Co. (other than trade investments), constituting 5% or more of paid up share capital & free reserves of investee Co.
To accept public deposits & related matters
To approve quarterly, half yearly and annual financial statements
Modified-To issue securities, including debentures, whether in or outside India & To grant loans or give guarantee or provide security in
respect of loans
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25. Restrictions of powers of Board- Sec 180-Notified
Your Legal Team
Powers that can be exercised by Board
only in a General Meeting-Modified
Applicability of section- Modified
Special Resolution- Modified
Undertaking and substantially the whole
of undertaking Defined
• sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of Co.
• to invest otherwise in trust securities the amount of compensation received by it as a result of
any merger or amalgamation(earlier it was compensation received from compulsory acquisition)
• To borrow money, where the money to be borrowed, together with the money already borrowed
by Co. will exceed aggregate of its paid-up share capital & free reserves
• to remit, or give time for the repayment of, any debt due from a director
• Contribution to Charitable funds as donation- Shifted to a new section-Sec181
• Now also applicable on private Companies
• Earlier on public companies and private companies, which were
subsidiaries of public companies
• Instead of ordinary resolution earlier, now we require special resolution
• Earlier the meaning of underatking and substantially the whole of the
underatking was not clear, in
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26. Company to contribute to bona fide and charitable funds, etc
Sec 181- Notified
Prior Members approval
Limit of Contribution
Your Legal Team
• Through ordinary resolution, if the contribution exceeds the foll
limit
• Approval is required if contribution in any financial year
exceeds 5% of its average net profits for the 3 immediately
preceding financial years.
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27. Disclosure of Interest by Director- Sec 184
Your Legal Team
When to disclose-Same
• At first B.M. in which he participates as a director
• Thereafter at the first B.M. in every financial year or
• Whenever there is any change in the disclosures already made, then at first B.M. oard meeting held after such change
• While the item is being discussed in B.M.- shall disclose at that time and shall not participate in that meeting
Parties to Contract
specified- New
• with a body corporate in which such director or such director in association with any other director, holds more than two
per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body
corporate
• with a firm or other entity in which, such director is a partner, owner or member
Notice to be given in last
month of F/Y- Dropped
Form of Disclosure
Duty of Director
Notices to be kept and
preserved
• Requirement of renewal of notice in the last month of F/Y has been dropped
• Form No. 12.1
• The notice shall be disclosed at the meeting held immediately after the date of notice
• To be kept at registered office. And be preserved for a period of 8 years, from the end of F/Y to which it relates and
shall be kept in the custody of the secretary of Co. or any other person authorized by Board
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28. Prohibition on forward dealings in securities of
Company by Director or KMP- Section 194- Notified
Your Legal Team
No director of a company or any of its key managerial personnel shall buy in the company, or in its holding, subsidiary
or associate company
a right to call for delivery or a right to make delivery at a specified price and within a specified time, of a specified
number of relevant shares or a specified amount of relevant debentures
a right, as he may elect, to call for delivery or to make delivery at a specified price and within a specified time, of a
specified number of relevant shares or a specified amount of relevant debentures
Contravention- liable to surrender securities to Co. company & Co. shalln’t register in his name , & if in Dmat form,
then inform depository not to record such acquisition
Relevant shares & ‘‘relevant debentures mean shares & debentures of Co. in which the concerned person is a WTD or
other key managerial personnel or shares and debentures of its holding & subsidiary companies.
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29. Your Legal Team
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