In the third series of company law amendments, I am posting the part 1 of the director amendments for the CA final students. Director chapter has the considerable weightage in the CA final's group 1 paper - Corporate & Allied Laws. I will post the remaining amendments of Director in the next series.
Woman
director
The class of
companies which require to act in accordance with the requirement of having at
least of one woman director are as follows: [section 149(1) of 2013 Act]
(i) Every
listed company, within one year from the beginning of second proviso to
sub-section (1) of section 149
(ii) Every
other public company that has paid–up share capital of one hundred crore rupees
or more, or a turnover of three hundred crore rupees or more within three years
from the start of second proviso to sub-section (1) of section 149
Number of directorship
The section
149(1) of 2013 Act extends the limit for
number of directorships that can be held by an individual from 12 to 15.
One director to be resident
in India
As per section
149(3) of 2013 Act , a new requirement regarding the directors is that at least one director
to have stayed in India for at least 182 days in the previous calendar year.
Independent
directors
One of the
important aspects of the 2013 Act is the attempt made towards incorporating
some of the significant requirements mandated by the SEBI in clause 49 of the
listing contract in the 2013 Act itself. To this effect, the section 149(4) of
2013 Act requires every listed public company to have at least one-third of the
total number of directors as independent directors. In addition, the central
government in the draft regulations has set the minimum number of independent
directors in case of the following classes of public companies.
(i) Public
companies having paid up share capital of 100 crore INR or more; or
(ii) Public
companies having turnover of 300 crore INR or more
(iii) Public
companies which have, in aggregate, outstanding loans or borrowings or
debentures or deposits, over and above 200 crore INR
The 2013 Act
also states that companies will have a period of one year to ensure compliance
with the 2013 Act and the Rules that are framed.
Conflicting
requirements
While there
have been attempts to match the requirements of SEBI and the 2013 Act was made,
there are quite a lot of aspects regarding the independent directors where the
requirements of the 2013 Act vary from that of clause 49 of the equity listing
agreement. The requirements of the 2013 Act and the way in which they vary from
those under the clause 49 of the equity listing agreement include the meaning
itself. The other main differences are as follows:
Clause 49 does not need the board
to implement its verdict and opine on whether the independent director is a
person of honesty or has appropriate capability or experience. This requirement
poses difficultly in terms of the way in which honesty of an individual can be
assessed by the board.
Clause 49 does not need assessment
of the independence of the relatives of independent directors. Extending the
disqualification of the independent directors to think the fiscal relationship
of the relatives would pose needless adversity for the independent directors.
Appointment of an additional director
It is important
to note that, in order to daunt inapt practices, the section 161 of 2013 Act mentions that any person who fails to
get selected as a director in the general meeting can no more be appointed as an additional director by the
board of directors.
Additional compliance requirements for private
companies
There are definite
increased fulfillment requirements mandated for private companies which, till
now, were compulsory only for public companies and private companies which are
subsidiaries of public companies. These include the following:
Appointment of director to be
voted individually
Alternative to adopt principle of
proportional representation for appointment of directors
Disqualification due to non-compliance with section 274(1))
(g) now extended for appointment or reappointment as a director in a private
limited company as well.
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Key
Points
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S.No.
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Particulars
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As per Companies Act 1956
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As per Companies Act 2013
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1
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Woman director
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No requirement of woman director
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Woman director is mandatory for every listed company and every
other public company that has paid–up share capital of one hundred crore
rupees or more, or a turnover of three hundred crore rupees or more
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2
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Number of directorship
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Number of directorships that can be held by an individual is 12
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Number of directorships that can be held by an individual is 15
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3
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Residential status of director
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No such requirement
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At least one director to have stayed in India for at least 182
days in the previous calendar year
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4
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Independent directors
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No requirement of independent directors
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Every listed public company to have at least one-third of the
total number of directors as independent directors
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5
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Appointment of an additional director
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Any person who fails to get selected as a director in the
general meeting can be appointed as an additional director by the board of
directors
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Any person who fails to get selected as a director in the
general meeting can no more be
appointed as an additional director by the board of directors
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6
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Additional compliance requirements
for private companies
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These requirements were compulsory
only for public companies and private companies which are subsidiaries of
public companies
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These following requirements are mandatory for private companies
as well:-
1. Appointment of director to be voted
individually
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2. Alternative
to adopt principle of proportional representation for appointment of
directors
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3. Disqualification due to non-compliance with section 274(1))
(g) now extended for appointment or reappointment as a director in a private
limited company as well.
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