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PPT on company law

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PPT on Company Law by Experts

PPT on Company Law by Experts

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  • 1. Companies Act 2013 Dawn of new era for Corporate professionals Role of Directors & Related party transactions (chapters XI & XII)
  • 2. Disqualification & Vacation of office • Sec 164 – Disqualifications of Directors arises at the point of appointment. • Sec 167 – Vacation of office of Directors after his appointment.
  • 3. Section applies to All companies – private or public. All types of directors unless otherwise specified.
  • 4. Disqualifications - Section 164(1)(a)  he is of unsound mind  and stands so declared  by a competent court.
  • 5. Disqualifications Section 164(1)(b) and (c) • he is an un-discharged insolvent. • he has applied to be adjudged insolvent and his application is pending.
  • 6. Suppose a person made an application to the court on 1.1.2010 and the court adjudged him as insolvent on 31.12.2010,
  • 7. • the un-discharged insolvency period is, - 1.1.2011 to 31.12.2013 (3 years) – the time taken to sell all his assets and pay off the liabilities & - 1.1.2014 to 31.12.2020 (7 years) – the time specified by the court restraining him from doing further business.
  • 8. Thus, he cannot be a director from 1.1.2010 to 31.12.2020 (11 years) - 1.1.2010 to 31.12.2010 (1 year) – the time taken by the court to declare him as insolvent, - 1.1.2011 to 31.12.2013 (3 years) – the time taken to sell his assets & pay off the liabilities, - 1.1.2014 to 31.12.2020 (7 years) – the period specified by the court restraining him from doing further business.
  • 9. Disqualification - Section 164(1)(d)  he has been convicted by a court  for an offence whether involving moral turpitude or otherwise and  sentenced for imprisonment of not less than 6 months  a period of 5 years has not elapsed from the date of expiry of the sentence.
  • 10. Also, a person who has been convicted for any offence & sentenced in respect there of to imprisonment for 7 years or more, he shall not be eligible to be appointed as a director in any company.
  • 11. Disqualification - Section 164(1)(e)  an order disqualifying him has been passed by a court or tribunal  and the order is in force.
  • 12. Disqualification - Section 164(1)(f)     he has not paid his calls In respect of shares held by him whether alone or jointly and 6 months has elapsed from the last date fixed for the payment of calls.
  • 13. Disqualification - Section 164(1)(g) He has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding 5 years.
  • 14. Disqualification - Section 164(1)(h) He has not obtained DIN under section 152 (3)
  • 15. Disqualification – Sec 164(2)(a) No person who is or has been a director of a company which, (a) has not filed financial statements or annual returns for any continuous period of 3 financial years.
  • 16. Every company has to file with ROC Financial statements (consisting of Balance sheet, P&L account, Directors report and Auditors report) within 30 days of AGM and annual returns within 60 days of AGM.
  • 17. Failure should be to file financial statements or annual returns for any continuous 3 financial years Thus, if a company has filed  either financial statements or annual returns  the director is not disqualified.
  • 18. Suppose a company has filed any ONE of the following SIX documents - for the year 2010-11 F/S A/R - for the year 2011-12 F/S A/R - for the year 2012-13 F/S A/R Are the directors disqualified ? NO
  • 19. Intermittent failures within 3 years • Failure to file them should be for a continuous period of 3 years. • Thus, any intermittent failures for 3 years will not attract the disqualification.
  • 20. Can the default be subsequently rectified?  Even where the default is subsequently cured (by belated filing), the disqualifications shall remain. Once defaulted, subsequent rectification of default is of no consequence.
  • 21. Disqualification – Sec 164(2)(b) No person who is or has been a director of a company which has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or
  • 22.  pay any dividend declared and  such failure to pay or redeem continues for one year or more,  shall be eligible to be re-appointed as a director of that company or  appointed in other company  for a period of 5 years from the date on which the said company fails to do so.
  • 23. Disqualification - Sec 164(2)(b) What is a ‘deposit’? ‗Deposit‘ should not be understood as •‗Public deposit‘ or as •‗deposit as defined under section 73‘ but all deposits of money including dealer deposit, inter-corporate deposit, security deposit from employees etc.
  • 24. Failure to pay dividends? ‗failure to pay dividend declared‘ should be read as ‗failure to pay dividend declared but not paid within the time specified in section 123‘
  • 25. Non-payment of dividend, due to dividend not claimed or failure to keep in separate bank account sec 124 not paid into Investors education & protection fund - sec 125 shall not be deemed to be a ‗failure to pay dividend declared‘.
  • 26. Default to banks & financial institutions  Failure to pay interest / repayment of loans/ working capital taken from a Bank/ Public financial institution  does not attract the disqualification.
  • 27. Failure for one year or more The disqualification of Sec 164(2)(b) takes place only when such failure continues for one year or more, whereas in case of sec 164(2)(a), it takes place immediately on default.
  • 28. Consider the following situation DIRECTORSHIP STATUS Date of default Effective date of default (1.1.2013) (31.12.2013) situation – 1 yes yes situation – 2 yes no situation – 3 no yes situation – 4 yes no yes Only in situation – 1 the director stands disqualified
  • 29. • Sec 164(1)(b) will be attracted only when the default continues for one year and he was a director as on the date of default and continued as director till the effective date of default.
  • 30. Can be default be subsequently rectified? • Even where the default under sec 164(1)(b) is subsequently cured by the company after one year (by belated repayment), the directors shall continue to remain disqualified. • Once defaulted subsequent rectification of default is of no consequence.
  • 31. Section 164(1) (a) & (b)  Suppose a person is a director of ABC Ltd, the defaulting company,  he shall vacate his office of director not only in the defaulting company but also the office of director in all other companies and  shall not be eligible to be reappointed as a director of that company or appointed in any other company  for a period of 5 years.
  • 32. Period of disqualification • The disqualification is only for 5 years and after which he can be appointed or reappointed.
  • 33. How do you calculate the period of 5 years? • The disqualification under sec 164(2)(a), shall be for 5 years from the date of default, whereas, under sec 164(2)(b), shall be for 5 years from the date of default itself (or 4 yrs from the effective date of default).
  • 34. Section 164(2) monitoring mechanism 1. Declaration by the proposed director that he is not so disqualified. 2. Statutory auditor shall report under sec 143, as to whether the directors are so disqualified.
  • 35. Who can relax the disqualification in sec 164? Neither the company nor the Central Govt. can relax any of the disqualifications.
  • 36. Can articles provide for additional disqualifications 1. A private company can so provide in its articles. 2. They may provide for qualifications, experience, age, deposit requirements etc, 3. By implication, a public company cannot so provide other than those specified in sec 164.
  • 37. In a private company the disqualifications referred in section 164(1) (d), (e) and (g) shall not take effect for 30 days from the date of conviction or order of disqualification; where an appeal is preferred within 30 days of order, until expiry of 7 days from the date on which such appeal is disposed off; or where any further appeal is preferred within 7 days, until such further appeal is disposed off.
  • 38. However, the above proviso will not apply to public company. Hence, in a public company he shall be disqualified to be appointed as director from the date of court order.
  • 39. Can a minor be a director 1. Section 164 does not address this issue. 2. However by implication, a minor, being incompetent to contract, cannot file any valid consent, under section 152(5). 3. Hence he cannot be appointed as a director of any company.
  • 40. Minimum & maximum directors for a company – sec 149(1) Public company – minimum 3 directors Private company – minimum 2 directors One person company – minimum 1 director Maximum directors for all companies – 15 Articles can provide for lower maximum limit.
  • 41. For appointment of more than 15 directors Special Resolution required. Every company should comply with this section within 1 year of applicability
  • 42. Women director Every listed company should have atleast one woman director – section to be complied within 1 year. Every other company having paid up capital of Rs. 100 crores or more should also have atleast one woman director – section to be complied within 5 years.
  • 43. What are the consequences if the number of directors are reduced below the statutory minimum? 1. The legislative intention appears that the minimum directors must be maintained under all circumstances. 2. Hence the directors must be appointed within a reasonable period of time How ? - We can visualize three different situations!
  • 44. (a) the number of directors reduced below the statutory minimum but quorum can be formed 1. Convene BM or an EGM to appoint directors. 2. Any business transacted after such reduction is invalid. 3. Where there are 2 directors against the minimum 3, an allotment of shares is invalid, though 2 directors can form a quorum.
  • 45. (b) the number of directors reduced below the minimum required and no quorum for BM. Reg 69 of Table F provides, that the continuing directors may act,  for appointing directors to that fixed for the quorum, or  for summoning a General Meeting for appointing directors, but for no other purpose'.
  • 46. (c ) the company becomes directorless In such situation, directors are to be appointed as provided in section 168(3).(promoter and in his absence the CG will appoint the auditors)
  • 47. Number of directorships – sec 165 1. A person shall not be a director in more than 20 companies at the same time, including alternate directorships. 2. In case of public companies, the maximum number shall not exceed 10. 3. A private company which is a holding or a subsidiary of a public company, will be reckoned as public company for calculating the limit of 10 directors.
  • 48. 4. The members of a company may, by special resolution, specify the number less than 20 or 10 (as the case may be) companies in which a director of the company can act as director. 5. Penalty for contravention of section 165(1) shall be not less than Rs.5,000/- which may extend to Rs. 25,000/- for every day of contravention.
  • 49. 6. The limits are specified to ensure (a) directors spend more time for the affairs of the company (b) to prevent concentration of economic power in the hands of few persons.
  • 50. Transitory provision – sec 165(3)-(5) 1. Consequent to the reduction from 15 to 10 (public companies), the Director concerned has to, within 1 year of commencement of the Act,  choose the directorship in companies, not more than the specified limits;  resign as director in the other remaining companies;  intimate the choice to each of the companies; &  intimate the ROC.
  • 51. 2. Such resignation shall become effective immediately on dispatch to the company concerned. (irrespective of sec 168 regarding resignation of directors).
  • 52. Only individual to be the Director - Sec. 149(1) No body corporate, firm or association can become a director. Only an individual can be a director because his office is a office of responsibility, accountability and position of trust.
  • 53. Resident Director Section 149(2) Every company should have at least one director who stayed in India for not less than 182 days in the previous calendar year
  • 54. DIN for Directors Section 152 (3) & (4) Every person shall be allotted DIN before appointment as a director. Every such proposed person, before his appointment in the GM, shall furnish his DIN to the company and a declaration that he is not disqualified for the appointment under the act.
  • 55. Consent for directorship Section 152(5) 1. The section specifies two types of consents, applicable for all companies: First, consent to be filed by the director with the company on or before his appointment in Form no. 11.2, Second, consent to be filed by the company with the ROC within 30 days of appointment in Form no. 11.8
  • 56. 2. In case of independent directors appointed in GM, the explanatory statement shall include a statement that he fulfills the conditions specified in the Act for his appointment
  • 57. Appointment of a person as director other than retiring director – section 160 Members shall take the initiative for the appointment of a director other than retiring director (similar to special notice).
  • 58. What is special notice? • Normally in any GM, it is the board which proposes the items of business. • The shareholders, by resolutions, either approve or disapprove the items of business. • Special notice is a concept which enables the members themselves to take the initiative and propose the items of business.
  • 59. Procedure in section – 160 1. The proposer, shall give a 14 days notice to the company along with a deposit of Rs.1,00,000/-.
  • 60. 2. The company shall serve, at least 7 days before the meeting  individual notice to all the members in writing or through electronic mode and place notice on its website.  failing which two newspaper advertisements can be given.
  • 61. 3. At the general meeting after the regular items of business, the matters given in the special notice will be taken up for consideration. 4. If ordinary resolution is passed the director stands elected.
  • 62. Other issues in section 160 1. Appointment in AGM/EGM 2. Section 160 notice by member - irrespective of number of shares held by him 3. Preference shareholder can also give Section 160 notice.
  • 63. • Member can give section 160 notice - proposing himself - proposing any other member - proposing even an outsider • Outsider can give section 160 notice only - proposing himself
  • 64. Deposit for the candidature • A proposed candidate shall deposit Rs.1,00,000/- at least 14 days before the meeting. • The deposit will be refunded if the person proposed gets elected as a director or gets more than 25% of total valid votes cast.
  • 65. Sec 160 - the only route to enter the company Sec 160 must be complied with for appointment of director at any GM. Thus if an additional director, casual vacancy director or alternate director, after expiry of his office, is proposed to be appointed as a director at the GM, section 160 must be complied with.
  • 66. How about immediate appointment For immediate appointment of a director, Sec. 160 can be combined with sec 100 to requisition an EGM to appoint a director.
  • 67. Other procedural compliances 1. 2. 3. 4. 5. Filing of Form 11.8 – consent with ROC Updating ‗Register of Directors‘ Updating ‗Register of Directors shareholding‘ Informing stock exchange – for listed company. Refund of deposit.
  • 68. Differences between sec 161(1) and 161(4) Additional Director 1. Best interest of the co 2. Public & private co 3. Board meeting or resolution by circulation 4. Power derived from the articles 5. Holds office upto the next AGM Casual vacancy Director 1. Casual vacancy to arise 2. Only for public companies 3. Board meeting only 4. Power subject to articles 5. Holds office upto the period original director would have held office
  • 69. Alternate director- Sec 161(2) 1. Applicable to public & private companies 2. Board to appoint – not MD/Manager/sec 3. Appointment either at Board meeting or by resolution by circulation 4. Articles to specifically provide
  • 70. Who can appoint alternate director  The power to appoint has been given to the Board  and not to the original director who is absent.
  • 71. Can general meeting appoint alternate director 1. The power is vested only with the Board, and cannot be exercised by the GM. 2. The members by ordinary resolution can only authorise the Board to appoint, if articles doesnot authorise.
  • 72. Issues in appointment of alternate director 1. Alternate director can be appointed only when the director is absent for 3 months from INDIA.
  • 73. 2. His intention to be absent for 3 months from India, is a pre-requisite to form an opinion.  It does not refer to actual absence. The original director may return back before 3 months itself.
  • 74. 3. The phrase, "during his absence " suggests that the Original director is going to be outside India. But the phrase "returns to India " indicates the act of retuning back to India. 4. Thus alternate directors cannot be appointed in case of a director who resides outside India (and is already there) – foreign director/ NRI director
  • 75. 5. An alternate director to an independent director should also satisfy the criteria for independent directors.
  • 76. 6. The person to be appointed as the alternate director shall be the person other than person holding any alternate directorship for any other director in the company. However, a director of the company may act in dual capacity, i.e. for himself and as an alternate director for any other director of the company.
  • 77. Term of office of alternate director 1. An alternate director shall not hold office longer than that 'permissible' to the original director. 2. If the original director ceases due to death/ resignation/ removal or vacation of office, the alternate director shall immediately cease to hold his office.
  • 78. 3. The alternate director shall vacate, when the original director returns to India. 4. The office shall come to an end, irrespective whether the original director returns to India for attending a BM or for any other purpose.
  • 79. • However the Bombay High Court in Janson Engineering and Trading (Pvt) Limited (18 August 2011) held as under: • For an alternate director to cease to be a director, actual attendance at the board meeting of the director appointing him has not been contemplated under section 313 of the Companies Act, 1956. Consequently the return to the state would suffice though the director does not commence attending board meetings held after his return. The provisions in the section 313 of the 1956 Act would show not only a temporary return, but an intention to stay in that state so as to enable him to transact the business of the company.
  • 80. • If a director merely comes to the state and leaves India again he would not be able to transact business. Hence the alternate director would have continued. The term ―the original director returns to the state‖, must be read as contemplating a return which would have some amount of permanence. The director must return to carry on the business. He must return for a length of time. The intent of the director must be to return to India, not for a temporary period eg, on a holiday or on a vacation. Therefore, when the original director returned to India to carry on his business in India then the alternate director would vacate his office under section 313(2) of the 1956 Act.
  • 81. Status of alternate director 1. Alternate director is not a proxy of original director 2. Original director cannot influence him in the manner of exercise of powers. 3. He is in the same position as any other director as regards his rights, duties and liabilities.
  • 82. Appointment of alternate director as MD/WTD 1. If original director was MD, alternate director will not automatically become MD. 2. Alternate director can be appointed as MD, even if the original director was not so.
  • 83. Nominee Director - Section 161(3) Subject to the articles of a company, the Board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.
  • 84. Option to adopt principle of proportional representation for appointment of directors – sec 163  Notwithstanding anything contained in this Act,  the articles of a company may provide for the appointment of not less than two-thirds of the total number of the directors in accordance with the principle of proportional representation,  whether by the single transferable vote or by a system of cumulative voting or otherwise and  such appointments may be made once in every three years and casual vacancies of such directors shall be filled as provided in section 161(4).
  • 85. Principle of proportional representation Sec - 163 1. Directors are appointed by shareholders in proportion to the shares held by them. 2. Purpose of the section – to give effect to group interests, minority interests etc., 3. Section 163 overrides inconsistent sections like 152, 160, 162 etc.,
  • 86. 4. Applicable to all companies – Public & Private. 5. Articles to specifically provide. 6. Not less than 2/3rd of the total directors must be appointed under the principle – remaining directors shall be appointed as per the articles.
  • 87. 7. These directors can hold office for 3 years. 8. They cannot be removed from office under section 169 – hence permanent directors for 3 years. 9. After 3 years they shall be again appointed by the members based on shareholding pattern and the process carries on. 10. Any casual vacancy in the office shall be filledup under section 161(4) by the board.
  • 88. Vacation of office of Director - Sec 167 The implications of vacation of office are: 1. The vacation shall be automatic. 2. On happening of the events - forthwith cease to be a director. 3. No need for opportunity to show cause.
  • 89. 4. The Board need not pass a resolution. 5. The Board shall have no power to waive the event . 6. Where a director disputes the vacation, he shall first vacate the office, and then resort to the Court for a direction that the section was not applicable and that he be reinstated.
  • 90. The office of a director shall become vacant automatically in the following circumstances 1. if he incurs any of the disqualifications specified in section 164 (10 circumstances). Thus, it implies the disqualifications for a director would arise not only at the point of appointment but also during his tenure as director.
  • 91. 2. he absents himself from all the meetings of the board held during a period of 12 months with or without seeking leave of absence from the board.
  • 92. Issues Absent from all board meetings held in 12 months  With or without seeking leave of absence from the board absents himself – scope for legal & medical impossibility
  • 93.  The onus of proving rests on the company. It has to prove the following 1. The notice of the meeting was duly sent. 2. The director has received the notice. 3. The meeting was duly held. 4. The director did not attend the meeting.
  • 94. 3. he acts in contravention of section 184 relating to entering into contracts or arrangements in which he is directly or indirectly interested; 4. he fails to disclose his interest in any contract in which he is interested, in contravention of section 184; 5. he becomes disqualified by an order of a court or the Tribunal;
  • 95. 6. he is convicted by a court of any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than 6 months: Provided that the office shall be vacated by the director even if he has filed an appeal against the order of such court; 7. he is removed in pursuance of the provisions of this Act;
  • 96. 8. he, having been appointed a director by virtue of his holding any office or other employment in the holding, subsidiary or associate company, ceases to hold such office or other employment in that company.
  • 97. Penalties under sec 167(2) • If a person, functions as a director even when he knows that the office of director held by him has become vacant, he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than Rs. 1,00,000/- but which may extend to Rs. 5,00,000/-, or with both.
  • 98. Promoters to act as Directors • Where all the directors of a company vacate their offices under any of the disqualifications specified, the promoter or, in his absence, the CG shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting.
  • 99. Vacation of office of director - Pvt co • A private company may provide additional grounds in its articles. • By implication, a public company cannot provide for additional grounds.
  • 100. • A private company cannot circumvent section 169, in the guise of including additional grounds in its articles for the vacation of office by directors under section 167(4). • Whenever any such additional ground included virtually results in the removal of a director, the power in this behalf can only be exercised by the company in general meeting under section 169.
  • 101. Resignation of directors – Sec 168 1. A director may resign from his office by giving a notice in writing to the company and the Board shall take note of the same and the company shall intimate the ROC within 30 days in Form No. 11.8 and post the information on its website, if any, and shall also specify such resignation in the forthcoming Director‘s Report.
  • 102. 2. The resigning director shall forward a copy of his resignation letter with detailed reasons to ROC in Form No. 11.7 within 30 days of his resignation.
  • 103. 3. The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later. 4. The director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure.
  • 104. Promoters to act as Directors • Where all the directors resign from their offices, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting.
  • 105. Resignation of MD/WTD 1. There are no provisions in the Act regarding resignation of MD/WTD 2. It appears that, in case of resignation of MD/ WTD, apart from compliance of section 168, the resignation has to be accepted by the Board and he should be relieved from his duties.
  • 106. Right to resign • Where there were two directors, one died and the other wanted to resign, a letter of resignation to the company under intimation to ROC was enough to make the resignation effective. • It was not necessary that the surviving director should first co-opt a director and then hand over the resignation to him.
  • 107. Small shareholder’s Director – sec 151 1. A listed company may  suo motu or  upon the notice of not less than 500 or 1/10th of the total number of small shareholders,  whichever is lower,  elect one small shareholders‘ director from amongst the small shareholders.
  • 108. 2. Such small shareholders intending to propose a person as a candidate  shall leave a notice of their intention with the company at least 14 days before the meeting under their signature  specifying the name, address, shares held and folio number of the proposed person and of the small shareholders who are proposing such person.
  • 109. 3. Such notice shall be accompanied by a statement stating  his DIN;  that he is not disqualified to become a director; and  his consent to act as a director of the company. 4. Such director shall be considered as an independent director subject to his giving a declaration of his independence as specified.
  • 110. 5. The appointment of small shareholders‘ director shall be subject to section 152 except thatThe director shall not be liable to retire by rotation; The small shareholders‘ director‘s tenure shall not exceed a period of three consecutive years; and on the expiry of the tenure, the director shall not be eligible for re-appointment.
  • 111. 6. A person shall not be appointed as small shareholders‘ director, if the person is disqualified for appointment in terms of section 164. 7. A person appointed as small shareholders‘ director shall vacate the office if the director ceases to be a small shareholder, on and from the date of cessation; the director incurs any of the disqualifications specified in section 164;
  • 112. the office of the director becomes vacant under section 167; the director ceases to meet the criteria of independence as provided in section 149(6) 8. No person shall hold the office of small shareholders‘ director in more than two companies at the same time. 9. A small shareholder means a shareholder holding shares of nominal value of not more than Rs. 20,000.
  • 113. Removal of small shareholders director • He can be removed by ordinary resolution passed in the general meeting after compliance of the procedural requirements of section 169. • There is nothing in the act or in the rules which requires, obtaining the consent of small shareholders, for removal. • A Small Shareholders‘ Director can be removed only with the consent of all the shareholders of the company.
  • 114. Duties of Director – section 166 1. A director shall act in accordance with the articles of the company. 2. A director of a company shall  act in good faith to promote the company‘s objects for the benefit of its members as a whole, and  in the best interests of the company, its employees, the shareholders, the community and  for the protection of environment.
  • 115. 3. A director shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment. 4. A director 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 the company.
  • 116. 5. A director shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company. 6. A director of a company shall not assign his office and any assignment so made shall be void.
  • 117. 7. If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than Rs. 1,00,000/- but which may extend to Rs. 5,00,000/-
  • 118. Penalties – sec 172 If a company contravenes any of the provisions of this Chapter XI and for which no specific punishment is provided therein, the company and every officer in default shall be punishable with fine which shall not be less than Rs. 50,000/- but which may extend to Rs. 5,00,000.
  • 119. Director Identification Number (DIN) Sec 153-158 1. Every individual, who is to be appointed as director of a company, shall make an application electronically to CG for allotment of DIN (Form No. 11.3). 2. The CG shall allot a DIN, within 1 month of receipt of application.
  • 120. 3. No individual, who has already been allotted a DIN, shall apply for another DIN. 4. Every director shall intimate his DIN to the company or all the companies wherein he is a director within 1 month of receipt of DIN. 5. Every company shall furnish DIN of all its directors to ROC within 15 days of the receipt of the same from the directors.
  • 121. 6. Every person or company shall mention the DIN in returns, information or particulars filed under the Act. 7. Penalty for violation – Imprisonment upto 6 months or fine Rs. 50,000
  • 122. Independent Director – sec 149(6) 1. An independent director means  a director other than a managing director or a wholetime director or a nominee director, Should be a person of integrity and possesses relevant expertise and experience;
  • 123.  Such person should not have been  a promoter of the company or its holding, subsidiary or associate company or  related to promoters or directors in the company, its holding, subsidiary or associate company;  not have any pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
  • 124.  none of the relatives of such person must have pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to 2% or more of its gross turnover or total income or Rs 50 lakhs or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
  • 125.  who, neither himself nor any of his relatives— holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the 3 financial years immediately preceding the financial year in which he is proposed to be appointed;
  • 126.  is or has been an employee or proprietor or a partner, in any of the 3 financial years immediately preceding the financial year in which he is proposed to be appointed, of— (A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or (B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to 10% or more of the gross turnover of such firm;
  • 127.  holds, together with his relatives, 2% or more of the total voting power of the company; or  is a Chief Executive or director, by whatever name called, of any non profit organisation that receives 25% or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds 2% or more of the total voting power of the company; or
  • 128.  who possess appropriate balance of skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administr ation, research, corporate governance, technical operations or other disciplines related to the company‘s business:
  • 129. 2. Every listed public company; or  Public Companies having paid up share capital of Rs. 100 crores or more; or  Public Companies having turnover of Rs. 300 crores or more; or  Public Companies which have, in 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. Any fraction contained in such one-third number shall be rounded off as one.
  • 130. 3. 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 sub-section (3).
  • 131. 4. Every independent director shall  at his first Board meeting  and thereafter at the first Board meeting in every financial year or  whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence as provided in sub-section (6).
  • 132. 5. The company and independent directors shall abide by certain duties specified in Schedule IV. 6. An independent director shall not be entitled to any stock option and may receive remuneration by way of sitting fees, reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.
  • 133. 7. An independent director shall hold office for a term up to 5 consecutive years, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board's report.
  • 134. 8. No independent director shall hold office for more than two consecutive terms, but he shall be eligible for appointment after the expiration of three years of ceasing to become an independent director. Also, he shall not, during the said period of three years, be appointed in or be associated with the company in any other capacity, either directly or indirectly.
  • 135. 9. An independent director, a non-executive director not being promoter or key managerial personnel,  shall be held liable, only for such acts of omission or commission by a company  which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.
  • 136. 10.The provisions of retirement of directors by rotation, shall not be applicable to appointment of independent directors.

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