Chapter XI - Sec 149 to sec 172 of companies act 2013 - All provisions related to directors explained - Provisions relating to Appointment, qualification, duties, Vacancy, retirement explained - Provisions relating to independent director, small shareholders director, nominee director, additional director, alternate director, women director and resident director explained Especially for CA final

1. APPOINTMENT AND
QUALIFICATION OF
DIRECTORS
SECTION 149 TO SECTION 172

2. INTRODUCTION
• Board of directors
• Collective body of directors Section 2(10)
• Director
• A director appointed to the board section 2 (34)

3. COMPANY TO HAVE BOARD OF DIRECTORS
SECTION 149
• Number of directors in a company
• Minimum
• Public company – 3
• Private company – 2
• OPC – 1
• Maximum
• 15 directors
• If more than 15 special resolution needs to be passed
• This provision does not apply to government company

4. WOMEN DIRECTOR
• At least one woman director for following class of companies (notified by CG
from time to time)
• Every listed company
• Other public company having paid up capital more than hundred crores and
turnover more than 300 crores
• vacancy in the office of women director should be filled within 3 months or next
board meeting whichever is later

5. RESIDENT DIRECTOR
• At least one who stays in India for more than 182 days in previous calendar year

6. INDEPENDENT DIRECTOR
• Every listed company should have one third of total number of directors as independent
directors
• For class of companies at least two directors should be independent directors
• Address of companies means public company having paid up capital of 10 crore or more are
having turnover of 100 crore or more or having outstanding loans or borrowings of 50 crore or
more
• However the audit committee should consist of minimum of three directors with independent
directors forming majority
• Non applicability – if company ceases to fulfill any of the above conditions for three
consecutive years this provision is not applicable

7. WHO CAN BECOME INDEPENDENT DIRECTOR
SECTION 149(6)
• Person of integrity having relevant experience
• Not a promoter or not related to promoter of company its subsidiary holding or
associate
• No pecuniary relationship with company audit associate or its directors are
promoters during the two preceding financial year (not applicable two
government company)
• none of his relatives has pecuniary relationship or transactions more than 2% of
gross total turnover or 50 lakh rupees whichever is lower during the two
preceding financial years

8. Neither himself or his relatives holds
• Key managerial personnel and employee in company audit associate in three
preceding financial years
• employee or proprietor or partner in form of auditors, legal consulting firm
• OLX together with relatives more than two percent of total voting power
• Is a CEO or director of NPO which receives 25% or more of its receipts from the
company
Person who possesses such other qualifications as may be prescribed
WHO CAN BECOME INDEPENDENT DIRECTOR
SECTION 149(6)

9. OTHER PROVISIONS RELATING TO INDEPENDENT
DIRECTORS
• Declaration by independent director
• every independent director shall declare that he meets the criteria of independent director at
first meeting of the board as a director and on the first meeting of every financial year and ever
never change affects his position
• Code for independent directors
• Specified in schedule VI of companies act 2013
• Remuneration of independent directors
• entitled to fees, reimbursement of expenses summer profit related commission
• Not entitled to any stock option

10. OTHER PROVISIONS RELATING TO INDEPENDENT
DIRECTOR
• Tenure
• Term of five consecutive years
• Eligible for reappointment by passing special resolution
• Not more than two terms
• Eligible for appointment after expiry of three years of ceasing to be an independent director
• In the three years he should not work in any associate companies as director
• Liability – liable for omission or commission by a company which had occurred with his knowledge
• Rotation of directors not applicable to independent directors
• if he enters into transaction with company at arm's length price it doesn’t mean to have pecuniary
relation

11. LEGAL FRAMEWORK RELATING TO DIRECTORS
• Chapter XI of companies act 2013
• Section 149 to 172
• Company (appointment and qualification of directors rules) 2014
• Forms DIR

12. APPOINTMENT OF FIRST DIRECTORS
• For public companies and private companies
• As specifically stated in the articles of association
• if not, then subscribers of memorandum who are individuals
• For one person company
• An individual being membership Ltd need to be the first director until the
directors on newly appointed by member in accordance with section 152

13. APPOINTMENT PROCEDURES
• Save as otherwise provided under the act, every director to be appointed at General meeting
(section 152(2))
• He cannot be appointed as director and as he has been allotted DIN under section 154
• he cannot act as director unless has given his consent in DIR 2 to and the same has been filed
with ROC within 30 days of his appointment in DIR 12
• Obtain DIN in DIR 3
• Propose director to give information that he is not disqualified under section 164 (2) in DIR 8
• Give consent in DIR 2 to the board
• director to intimate change in interest to other companies in which he acts as director in form
MBP 1

14. DIRECTOR IDENTIFICATION NUMBER (DIN)
• Every director to have DIN before appointed as director
• It includes DPIN under LLP
• Application for allotment of DIN to be made in DIR 3 online using DSC at MCA
website along with fee of rupees 500
• Attachments to be made with application: photo, proof of identity, proof of residence,
signature verification
• DIR 3 to be certified by practicing CA/CMA/CS or CS of the company in which director
is going to be appointed for MD of the company or director
• DIN will be allotted in one month

15. • Every personal company should mention DIN in returns and informations related to
director
• Competent authority can cancel the DIN if found duplicate obtained in wrongful
manner or on death of the concerned individual
• No director should have more than one DIN – section 155
• After allotment of DIN, director should intimate to all the companies in which he is a
director - section 156
• Company within 15 days intimate the DIN to ROC
• For any changes in information, application is to be made in DIN 6
DIRECTOR IDENTIFICATION NUMBER (DIN)

16. SMALL SHAREHOLDER DIRECTOR
SECTION 151
• Small shareholders – holding nominal value of shares more than 20000 rupees
• a listed company may appoint small shareholders director on notice of 1000 or 1/10th
of small shareholders whichever is less, elected by such small shareholders
• small shareholder should give notice at least 14 days before meeting along with
proposed director’s DIN, declaration that he is not disqualified and his consent to act
as director
• Considered as independent director
• Shall not act as director for more than three consecutive years
• Not eligible for reappointment and should not associate with company after vacation
of office for 3 years

17. RETIREMENT BY ROTATION
SECTION 152(6)
• In every AGM, one third of the total number of directors are liable to retire by
rotation
• Total number of directors shall not include independent directors
• directors of those who shall be longest in office since the last appointment
• The company shall fill up the vacancy by retiring directors or some other person
thereto
• This section does not apply to government company

18. VACANCY IN CASE OF RETIRING DIRECTOR
SECTION 152 (7)
• If is not filed up and the meeting has not expressly resolved not to fill up vacancy, the meeting
shall stand adjourned to next week, same day, same place
• if in adjourned meeting also, vacancy is not filed, retiring director deemed to have been
reappointed unless
1. Expressly stated is unwillingness for director
2. He is disqualified
3. Section 162 is applicable
4. Ordinary or special resolution is necessary under the act
• This section shall not apply to government companyl

19. RIGHT OF PERSON OTHER THAN RETIRING PERSON TO
STAND FOR DIRECTORSHIP - SECTION 160
A person not a retiring director shall be eligible for appointment as director, if he or some member send notice to
registered office not less than 14 days before making intending his willingness to propose him as director and deposit a
sum of rupees 100000 or such higher
The deposit amount will be refunded if such person is appointed as director or obtain 25% of valid votes
The company shall serve individual notices of candidates at least 7 days before the meeting or playing notice in website
or by advertising in newspaper
Section 160 not applicable to
• Government company in which 100 % share capital held by CG or SG
• Subsidiary of government company in which 100% share capital held by government company
• Private company
• Section 8 company who’s article provides for election of directors by ballot

20. APPOINTMENT OF ADDITIONAL,
NOMINEE AND ALTERNATE
DIRECTOR
SECTION 161

21. ADDITIONAL DIRECTOR
SECTION 161(1)
• Articles authorise power to BOD to appoint additional director
• Hold office up to next AGM
• Person not appointed as director in AGM, cannot appointed as additional director

22. ALTERNATE DIRECTOR
SECTION 161 (2)
• board of authorised by articles, by a resolution in General meeting, appoint
alternate director in place of director during a period of not less than 3 months
from India
• A person cannot serve as alternate director for more than one director
• An alternate director cannot be appointed in place of independent director and
less he satisfy the criteria of an independent director
• Should vacate office is the term of original director ends or he returns to India

23. NOMINEE DIRECTOR
SECTION 161 (3)
• Board, if authorised by articles, may appoint a person as a director nominated by
any institution in pursuance to any agreement or by CG or SG by virtue of its
share holding
• Example: some Financial institutions will appoint its representative as a director in
the company

24. CASUAL VACANCY
• In public company, if a director vacates before time expires, casual vacancy filled
by board subject to regulation in articles
• First director will hold office until the term of director on whose place he is
appointed

25. APPOINTMENT OF DIRECTORS TO BE VOTED
INDIVIDUALLY - SECTION 162
• Each director should be appointed by a separate resolution
• To director should not be appointed by single resolution
• Contrevening this section – Void resolution
• the section does not applicable to government company or private company

26. OPTION TO ADOPT A PRINCIPLE OF
PROPORTIONAL REPRESENTATION - SECTION 163
• notwithstanding anything contained in the act, article may provide for
appointment of not less than two third of the total number of directors through
principle of proportional representation
• Such appointment made once in 3 years whether by single transferable vote or
by cumulative voting
• Single transferable vote means candidate will be elected if he gets number of
votes fixed by quota.

27. DISQUALIFICATION FOR APPOINTMENT OF
DIRECTOR - SECTION 164
• Unsound mind
• Undischarged insolvent or application is made for insolvency
• Sentenced for imprisonment for not less than 6 months for a period of 5 years
has not lapse since the date of expiry of such sentence
• an order by court disqualified him as director
• if imprisonment is for 7 years or more not eligible for appointment as director
• Not paid any calls and 6 months has lapsed from the last date of payment of call

28. • Convicted offence dealing with related party transactions in the last 5 years under
section 188
• Not complied with provisions relating to din under section 152 (3)
• a company under his directorship has not filed financial statements for three
consecutive years and fails to repay deposit accepted or fails To pay any declared
dividend and the such failure continuous for one year or more
• Articles of a private company may add additional points for this qualification
DISQUALIFICATION FOR APPOINTMENT OF
DIRECTOR - SECTION 164

29. NUMBER OF DIRECTORSHIP - SECTION 165
• no person after commencement of the act, shall hold office as director including
alternate directorship for more than 20 companies or for more than 10 public
companies at a time
• members of a company may by special resolution specify any lesser limits
• If he exceeds limit, he should resign according to the company’s in his own choice
• Not apply to section 8 companies

30. DUTIES OF DIRECTORS - SECTION 166
• Act in accordance with articles
• Act in good faith to promote objects
• Exercise his duties with due and reasonable care
• Not involve in a situation that conflict with interest of the company
• Not attempt to achieve any undue gain or advantage
• not assign his office, any such assignment is void
• Contravention – rupees 100000 to rupees 500000

31. VACATION OF OFFICE OF DIRECTOR
SECTION 167
• Disqualification under section 164
• Absent from board meeting for 12 months
• Contravention of section 184 (transactions directly interested)
• Disqualified by court or removed in pursuance of act
• if he appointed as director by virtue of holding office in any holding and
subsidiary company and vacates office in such company
• If all director vacates, CG may appoint director

32. RESIGNATION OF DIRECTOR
SECTION 168
• Director may resign his office by giving notice to board and forward your copy to
ROC within 30 days in form DIR 11
• Company shall within 30 days of notice filed with registrar in form DIR 12 and
post information in website and specify it in directors report in immediately
following General meeting
• Resignation will take effect of date of notice on date specified in notice which was
later
• Such director will liable for any offence occurred during his tenure

33. REMOVAL OF DIRECTORS
SECTION 169
• A company, by ordinary resolution remove a director, other than director appointed by tribunal
under section 242, before the expiry of this period after giving him an opportunity of being
heard
• Directors appointed on the principle of proportional representation cannot be removed by
ordinary resolution
• Special notice to be sent to all members
• Vacancy filled by board
• Removed director cannot be reappointed
• nothing in this section deprive director from receiving termination benefits or compensation
from company

34. REGISTER OF DIRECTORS AND KEY MANAGERIAL
PERSONNEL AND THEIR SHARE HOLDING - SECTION 170
• Every company maintain a register for directors and key managerial personnel
along with the share holding pattern
• Return filed with ROC within 30 days of appointment or any change taking place

35. OTHER PROVISIONS
• Members right to inspect - section 171
• The register of directors can be inspected by members during business horse by
making requests to ROC
• Open for inspection during every AGM
• Punishment – section 172
• Contravening the provisions of section 149 to section 171, company and every
officer is punishable with fine of rupees 50000 to rupees 5 lacs if no specific
punishment is given