A. Steps for appointment of director: The steps for appointment of director of a private limited company are as follows :
Note: Only provision regarding appointment of an additional director has been notified.
Step 1: Section 152[1]: Ensure that the director has been allotted a director identification number.
Step 2: Section 149[2]: Ensure that the number of director for a private company is a minimum of two in number.
Step 3: Section 149[3]: Ensure that the company has atleast one director who has stayed in India for a total period of not less than 180 days in the previous calendar year. This provision is applicable for all companies and all the companies existing on and before the commencement of this act have to comply with this requirement within one year from date of notification of the rules in this regard or from the commencement of the act[4].
Step 4: Section 161[5]: In case of appointment of additional director : Ensure that the director to be appointed by board of directors exercising the power so conferred in them by the Articles of the company is not such a person who has failed to get appointed as a director in a general meeting. The additional director has to be appointed till date of next AGM or last date on which AGM should have been held , whichever is earlier
Step 5: Section 161(2)[6]: In case of appointment of an alternate director: Ensure that such director is appointed as a director in place of a director during his absence from India for a period not less than three months. Also ensure that such person is appointed by the board on being so authorized by the AOA or resolution passed in general meeting. Such director shall not be appointed as an alternate director unless he is qualified to be an independent director under the companies act.
Step 4: Section 160[7]: In case of a person notifying his candidature: Notice must be given to the Company regarding proposal for appointment of a person as a director not less than 14 days before the General Meeting. Such notice should be given by deposit of Rs, 1 Lakh or any higher amount which may be prescribed
Step 5: Section 152(5)[8]: In case the person has not himself notified his candidature: Obtain consent from the person who is to be appointed as Director. The consent should be in form 11.2 (Chapter XI, Draft rules[9]). The format has changed with respect to the old act.
Step 6: Hold and convene a board meeting and pass resolution to the effect
Step 7: The consent for appointment should be filed by the company with the Registrar in Form No. 11.8 along with the fee as provided in Annexure ‘B’. (Chapter XI, Draft rule 11.6[10])
Step 8: Section 170[11]– Make necessary entries in the Register of Director
Changes vis-à-vis Companies Act, 1956:
1) In case of a person notifying his candidate the person had to deposit Rs. 500 but according to the companies act, 1956 the person has to deposit Rs. 1 Lakh or higher amount so prescribed.
2) Format for written consent has changed (The format can be found at Form 11.2)
3) Provision regarding a resident director has been introduced.
4) Changes have been introduced with respect to additional director.
B. Steps for resignation of a director: The steps for resignation of director of a private limited company according to companies Act, 2013 are as follows:
Note: None of the provisions have been notified.
Step 1: Notice to be given by the director resigning to the company (Section 168[12])
Step 2: After the receipt of notice the company should within thirty days from the date of receipt of notice from a director, intimate the Registrar in Form No. 11.8 and post the information on its website, if any. (Chapter XI, Rule 11.12[13]).
Step 3: Place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company (Section 168[14]).
Step 4: The director may within thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form No. 11.7 along with the fee as provided in Annexure ‘B’. (Chapter XI, Rule 11.13[15])
C. Steps for conducting a board meeting : The procedure for conducting a board meeting according to the provisions of the Companies Act, 2013 is as below:
Note: None of these provisions have been notified
Step 1: Section 173[16]: Check that four meetings of board of directors are being conducted every year and the time period between two consecutive board meetings is not more than 121 days.
Step 2: Section 173[17]: Check that a notice of not less than 7 days has been sent by hand or post or electronic means to all the directors .
Step 3: Section 174[18]: The quorum for meeting has to be seen. The quorum for the meeting should be 1/3 of its total strength or two directors whichever is higher. The participation of directors by video conferring and other audio visual means shall be also counted for the purpose of quorum
Step 4: If the meeting is being conducted through audio visual means check that requirements of Chapter XI [19]are met.
Step 5: Section 118[20]: Ensure that the minutes of the meeting are prepared and signed within 30 days of the conclusion of the meeting.
D. Independent Director: The provisions regarding Independent director according to Companies Act, 2013 are as follows:
Note: None of these provisions have been notified
An independent director shall be appointed for the following companies:
§ Section 149 (4) : Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies.
The classes of such public companies are mentioned in Chapter XI Rule 11.2. They are:
§ Public Companies having paid up share capital of one hundred crore rupees or more; or
§ Public Companies having turnover of three hundred crore rupees or more;
§ Public Companies which have, in aggregate, outstanding loans or borrowings or debentures or deposits, exceeding two hundred crore rupees. (Chapter XI, Rule 11.2[21])
§ Applicable to all companies be it public or private, provision ambiguous in nature : Section 135[22] : Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director (This provision requires clarification and clarification would be soon given as stated my Mr. Sachin Pilot. )
The definition and requirements of an independent director is stated in Section 149 (6)[23]. The steps for appointment of independent Director are as follows:
Step 1: Ensure that the independent director meets the requirements stated in Section 149 r/w Schedule VI [24]
Step 2: Ensure that explanatory statement attached to the notice of the meeting for approving the appointment of independent director includes a statement that in the opinion of the Board, the independent director proposed to be appointed fulfils the conditions specified in the Act and the rules made there under and that the proposed director is independent of the management (Schedule VI of companies Act, 2013[25])
Step 3: Getting the appointment of independent director(s) approved at the meeting of the shareholders. (Schedule VI[26])
Step 4: Issuing a letter of appointment to the independent director enlisting the term of appointment, the expectations, the fiduciary duties, code of ethics, terms and conditions , remuneration etc (Schedule VI[27])
E. Composition of board ; The following is the composition of Board in a private Limited company as per the Companies Act, 2013
Note : Only provision regarding additional and nominee director has been notified.
I. Minimum and maximum no of directors: Section 149[28]: Every company shall have board of directors constituting of individuals as directors and shall have minimum of two directors in case of private limited company and a maximum of 15 directors. A Company may appoint more than 15 directors after passing a special resolution.
II. Resident Director Section 149 (3)[29]: Applicable to private company: Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.
Compliance time: Section 149(5)[30]: 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 resident director[31].
III. Additional director: Section 161 (1)[32]: Applicable to private company:The Additional director can be to be appointed by board of directors exercising the power so conferred in them by the Articles of the company till date of next AGM or last date on which AGM should have been held , whichever is earlier but such a person should not has failed to get appointed as a director in a general meeting.
IV. Alternate Director: Section 161(2)[33]: Applicable to private company:Such director is appointed as a director in place of a director during his absence from India for a period not less than three months. An Alternate Director is appointed by the board on being so authorized by the AOA or resolution passed in general meeting. A Person qualified to become an independent director can only be appointed as an alternate director [34]
V. Nominee Director: Section 161(3) [35]: Applicable to private company:Board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.
VI. Key managerial personnel: Section 203[36] : applicable to listed company as well as private company with paid up share capital of five crores or more[37]:Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—
(i) managing director, or Chief Executive Officer or manager and in their absence,
a whole-time director;
(ii) company secretary; and
(iii) Chief Financial Office
Points to be taken into consideration:
a) Section 203 (2)[38]: Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.
b) Section 203 (3)[39]: A Whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time.
Provided that nothing contained in this sub-section shall disentitle a keymanagerial personnel from being a director of any company with the permission of the Board:
Provided further that The whole-time key managerial personnel holding office in more thanone company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel
Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.
c) In case of vacation :Section 203(4)[40] : If the office of any whole-time key managerial personnel is vacated, the resultingvacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.
Penalty for contravention (Non appointment of KMP) : Section 203 (5)[41] : In case of contravention of the provisions of the section 203 , the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.
VII. Independent Director : Not applicable to Private companies but section 135 of the act which is related to corporate social responsibility states that Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director .
VIII. Women directors (Not applicable to private companies) : Proviso to section 149 : The prescribed class or classes of companies as may be shall have at least one woman director. The prescribed companies[42]are :
(i) every listed company – within one year from the commencement of second proviso to sub-section (1) of section 149;
(ii) every other public company having –
(a) paid–up share capital of one hundred crore rupees or more; or (b) turnover of three hundred crore rupees or more within three years from the commencement of second proviso to sub-section (1) of section 149
[1] Not in force
[2] Not in force
[3] Not in force
[4] Section 149(5), not in force.
[5] In force , notification dated 14.09.2013.
[6] Not in force
[7] Not in force
[8] Not in force
[9] Not in force
[10] Not in force
[11] Not in force
[12] Not in force
[13] Not in force
[14] Not in force
[15] Not in force
[16] Not in force
[17] Not in force
[18] Not in force
[19] Not in force
[20] Not in force
[21] Not in force
[22] Not in force
[23] Not in force
[24] Not in force
[25] Not in force
[26] Not in force
[27] Not in force
[28] Not in force
[29] Not in force
[30] Not in force
[32] In force
[33] Not in force
[34] Provio to section 161, not in force.
[35] In force
[36] Not in force
[37] Rule 13.6, Chapter XIII, not in force
[38] Not in force
[39] Not in force
[40] Not in force
[41] Not in force
[42] Rule 11.2, Draft Rules Chapter XI, Not in force