APPOINTMENT AND QUALIFICATIONS OF DIRECTORS UNDER THE COMPANIES ACT, 2013

CHAPTER XI

APPOINTMENT AND QUALIFICATIONS OF DIRECTORS

OF

THE COMPANIES ACT, 2013

The Companies Act, 2013 is the new companies act 98 sections of this has been notified and are applicable from 12 September, 2013 rest of the sections ans rules are yet to be notified . Many of professionals are already well versed with the new provisions; still there are few of us who due to their busy schedule are unable to go through the new act. Here I am going to write comparative summary of chapters of the new act with that of the old act. Let’s start with Chapter XI : Appointment and Qualifications of Directors.

Section 149, the Companies Act, 2013: Company to have Board of Directors

Corresponding sections of the Companies Act, 1956: section 252, 253 & 259.

Ø   The new section provides for appointment of maximum of 15 directors, in old act maximum number was 12 directors. This maximum limit can be increased by passing a special resolution, for increasing this limit under old act central government permission was required.

Ø   The new section provides for appointment of at least one woman director in prescribed class of companies, this class has not been prescribed yet.

Ø   The new sections requires at least one of the directors to be resident of India i.e. residing in India at least 182 days in the previous calendar year.

Ø   The listed company shall have at least one third of total number of directors as independent director. Meaning of independent director also incorporated in the new section.

Ø    The term of office of independent directors shall be five years and an independent director can be appointed for only two such consecutive terms. After three years of expiration of such two consecutive terms the person may become eligible for being appointed as the independent director of the Company again.

Ø    The independent directors shall not be liable to retire by rotation.

Section 150, the Companies Act, 2013: Manner of selection of independent directors and maintenance of databank of independent directors

Corresponding sections of the Companies Act, 1956: None

Ø   The Company may select persons to be appointed as independent directors from the data bank created by the central government institutions and agencies.

Ø    The independent directors shall be appointed in the general meeting of the Company and in explanatory statement of such general meeting justification for appointment of that person as an independent director shall be given.

Ø The Central Government may prescribe the manner and procedure for selection of independent director.

Section 151, the Companies Act, 2013: Appointment of director elected by small shareholders.

Corresponding sections of the Companies Act, 1956: 252

Ø    Every listed company may have one director elected by small shareholders in the manner as may be prescribed. In the old act provision for appointment of small shareholder’s director was applicable on public companies having paid-up capital of Rs. 5 crore or more or having 1000 or more small shareholders.

Section 152, the Companies Act, 2013: Appointment of director

Corresponding sections of the Companies Act, 1956: 254, 255, 256, 264

Ø    The new provision says that a person shall not act as director unless his consent to act as a director i.e.  return of appointment has been filed with ROC

Ø    In case of appointment of independent director the explanatory statement attached to the notice of general meeting shall mention that in the view of the Board the person to be appointed as the independent director fulfills the criteria of an independent director.

Ø    For counting number of directors liable to retire by rotation, independent directors shall be excluded.

Section 153, the Companies Act, 2013: Application for allotment of Director Identification Number (DIN):

Corresponding sections of the Companies Act, 1956: 266A

Ø    Same provisions.

Section 154, the Companies Act, 2013: Allotment of Director Identification Number (DIN):

Corresponding sections of the Companies Act, 1956: 266B 

Ø  Same provisions.

Section 155, the Companies Act, 2013: Prohibition on obtaining more than one  Director Identification Number (DIN):

Corresponding sections of the Companies Act, 1956: 266C

Ø  Same provisions.

Section 156, the Companies Act, 2013: Director to intimate Director Identification Number (DIN):

Corresponding sections of the Companies Act, 1956: 266D

Ø  Same provisions.

Section 157, the Companies Act, 2013: Company to inform Director Identification Number (DIN) to Registrar:

Corresponding sections of the Companies Act, 1956: 266D, 266G

Ø  Same provisions for intimation only penalty for default has been increased from Rs. 5,000 of old act to Rs. 25,000 to Rs. 100,000 in the new act.

Section 158, the Companies Act, 2013: Obligation to indicate Director Identification Number (DIN):

Corresponding sections of the Companies Act, 1956: 266F

Ø  Same provisions.

Section 159, the Companies Act, 2013: Punishment for contravention:

Corresponding sections of the Companies Act, 1956: 266G

Ø   The old act provided for a fine of upto Rs. 5000 for each officer in default and Rs. 500  per day for each officer in default if the contravention is a continuing one. Where the new act provides for imprisonment upto 6 months or a fine of upto Rs. 50,000 for each officer in default and Rs. 500 per day for each officer in default if the contravention is a continuing one.

Section 160, the Companies Act, 2013: Right of persons other than retiring directors to stand for directorship

Corresponding sections of the Companies Act, 1956: 257

Ø   The amount deposit of Rs. 500 for proposing candidature of such a person as per the old act has been increased to Rs. 100,000 in the new act. The amount of Rs. 100,000 shall be refunded by the Company if the person so proposed being elected as director by the shareholder in general meeting or at least receive 25% of the valid votes casted on the matter. 
Ø   The manner for information by the Company for proposal of such a candidature to its members is yet to be prescribed in the new act.

Section 161, the Companies Act, 2013: Appointment of additional director, alternate director and nominee director

Corresponding sections of the Companies Act, 1956: 260, 262, 313

Ø   The additional director shall hold office till next AGM or the latest date at which the AGM should have been held, whichever is earlier; as per old act additional director shall hold office till next AGM.

Ø  One person shall be appointed as alternate director to only one director. The person  appointed as alternate to an independent director shall fulfill the criteria to be appointed as an independent director.

Section 163, the Companies Act, 2013: Appointment of directors to be voted individually

Corresponding sections of the Companies Act, 1956: 265

Ø  Same provisions.

Section 164, the Companies Act, 2013: Disqualification for appointment of director

Corresponding sections of the Companies Act, 1956: 274

Ø  Same provisions.

Section 165, the Companies Act, 2013: Number of directorships

Corresponding sections of the Companies Act, 1956: 275, 276, 278, 279

Ø  As per new act a person can be director of maximum 20 companies and maximum 10 public company, as per old act a person can be appointed director in maximum 15 companies. 
Ø  This new limit shall be complied within one year of the new act becoming effective.

Ø  Resignation given under this section shall be effective immediately.

Section 166, the Companies Act, 2013: Duties of directors

Corresponding sections of the Companies Act, 1956: None

Ø  This is a newly introduced section defining duties of directors.

Section 167, the Companies Act, 2013: Vacation of office of director

Corresponding sections of the Companies Act, 1956: 283

Ø  As per new act a director if absents himself from all the meetings of board of directors held during a period of 12 months with or without taking leave of absence shall disqualify from being a director. As per old act it was 3 consecutive meetings without taking leave of absence. 
Ø  The new act provides for appointment of new directors by promoters of the company or central government as may be prescribed if all the directors office become vacant due to their disqualification.

Section 168, the Companies Act, 2013: Resignation of directors

Corresponding sections of the Companies Act, 1956: None

Ø  This is a newly introduced section.  

Ø  As per this section the resignation shall become effective when received by the Company or on the date if any specified by the director in the notice given for resignation. 

Ø  As per this section the director shall also forward a copy of his resignation to the ROC within 30 days of his resignation, alongwith the detailed reason of resignation, in the manner prescribed.

Section 169, the Companies Act, 2013: Removal of Directors

Corresponding sections of the Companies Act, 1956: 284

Ø  Same provisions.

Section 170, the Companies Act, 2013: Register of Directors and Key Managerial Personnel and their shareholding

Corresponding sections of the Companies Act, 1956: 303, 307

Ø  The new section in addition to the directors’ shareholding (as per old provision) also requires shareholding disclosure of KMP

Section 171, the Companies Act, 2013: Members right to inspect

Corresponding sections of the Companies Act, 1956: 304

Ø  As per new act in case of refusal to inspection of register to members of the Company an application shall be made to ROC and ROC shall issue order for immediate action, in old act for refusal there was penalty of Rs. 500 per day for each day of default.

Section 172, the Companies Act, 2013: Punishment

Corresponding sections of the Companies Act, 1956: None

Ø  This section provides for penalty and punishment for default in the provisions of any of the sections of Chapter XI for which no specific punishment in specified in the related section, every officer of the Company who is in default shall be punishable with fine which shall not be less than Rs. 50,000 but may extend to Rs. 500,000.

~ By Nikita Singh~

The information given in this blog is the personal understanding of the writer and shall not be used as a conclusive material. The content stated/mentioned here is subject to changes by respective government/authorities in the applicable laws. The writer shall not be liable for any direct or indirect damages caused to any person acting solely on/based upon the information provided herein.