40 58857 companies act 2013 chapter xi

8/13/2019 40 58857 Companies Act 2013 Chapter Xi

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Room No.6, 4thFloor, Commerce House

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Companies Act, 2013

By CS Mamta BinaniPast Chairperson (Year 2010), EIRC of ICSI

Practising Company Secretary

At the OU Grooming InstituteFor Company Secretaries

[email protected] : 14.09.2013


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Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 [email protected]


UNDER THE COMPANIES ACT, 2013

(Chapters XI, XII, XIII)

In this slide show Chapter XI


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Section 149 (old 252,253,259) Minimum number of directors in case of private

and public companies is 2 and 3 respectively

The limit of maximum number of directors isincreased from 12 to 15

In 1956 act, CG approval was required to go beyond

12 In 2013 act, SR will be required to go beyond 15. No

CG approval is required

OPC needs to have minimum 1 directorAt least 1 director shall be a person - stayed in

India for a total period of not less than 182 days inthe previous calendar year


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Women Director

Prescribed class of companies to have 1women director

As per the draft rules: Listed and alsofor companies with paid up capital of

Rs.100 crores and above


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Independent Directors Public companies to have 1/3 IDs

Criteria: 1. Paid up capital >= Rs.100 crores

Outstanding loans/borrowings/debentures/deposits> Rs.250 crores

Nominee Director/ Representative Director not to

be considered as IDs (in conflict with existingclause 49)

IDsto abide by a detailed code of con (Schedule IV)

Issue of letter of appointment to ID mandatory

Letter to contain terms of appointment, Boardsexpectations, fiduciary duties etc.

Will not retire by rotation/ Transition period: 1 year


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Independent Directors IDs to hold 1 separate meeting in a year

without other directors and managementTenure restricted to 2 terms (5+5)

Second term to require SR

Then cooling period of 3 years

Tenure served by ID before commencementof new Act not to be counted

Stock options not permitted for ID(inconsistent with Listing Agreement)

Profit related commission and sitting fees allowed


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Qualifications of IDAppropriate balance of :

(i) skills(ii) experience and

(iii)knowledge in one or more fields of finance, law,

management, sales, marketing, administration,research, corporate governance, technical operationsor other disciplines related to the companysbusiness

After the appointment of ID, the B/R shall have to

furnish a statement to the effect that in the opinion ofthe Board, the ID possesses the appropriate balance ofskills, experience and knowledge


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Database of IDs-Section 150Anybody, Institute or Association

Which has been authorised in this behalf by the CG

Shall create and maintain a data bank of persons

Willing and eligible to be appointed as ID

Such data bank shall be placed on the website of MCA

Or any other website as may be approved or notified bythe CG

Details as mentioned in Rules to be put up on the site

A disclaimer to be carried by the website

ID may also apply

Charges can be levied


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Appointment of ID-OR The appointment has to be approved by the

Company In a general meeting

Special Business

Ordinary Resolution

The explanatory statement (section 102 alreadyenforced), shall inter-alia, mention the

justification for choosing the appointee as the ID

and also a statement that in the opinion of theBoard, he fulfils the conditions specified in the Act


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Section 151 (old 252)-Small Sh

Listed company may have one director elected bysuch small shareholders

There is a change vis--vis the Companies Act of1956.

Now, only listed companies

Small shareholders has been explained in thesection itself as a shareholder holding shares of

nominal value of not more than Rs.20,000 or suchother sum as may be prescribed


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Small shareholders director

Suo-motu - Listed Company or

Upon the notice of not less than 500 or 1/10thof thetotal number of small shareholders, whichever is lower

Such director will be considered as an ID

Shall not be liable to retire by rotation

Not for a period exceeding 3 consecutive years

On the expiry of the tenure, shall not be eligible for re-

appointment No person shall hold the office of small shareholders

director in more than 2 companies at the same time


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Section 152-Appointment of Dir

Every Director needs to furnish a declaration-Notdisqualified for being appointed as Director

Valid DIN for getting appointed

Consent letter made mandatory for private limitedcompanies also and needs to be filed with ROC even

OPC-Individual member will be deemed to be the firstdirector unless specific appointment made

Retirement by rotation-provisions remain the same. Tonote that ID number not to be included in reckoningtotal number of directors


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Sections 153, 154, 155, 156,

157, 158, 159-Provisions of DIN 153: To apply for DIN if intending to get appointed

154: CG to allot DIN to the applicant within one month

155: Cannot have more than 1 DIN

156: Existing Director to intimate DIN to allCompanies within 1 month

157: Company to inform DIN to ROC within 15 days(instead of a week) of the receipt of the same from the

Director 158: Obligation to mention DIN

159: Punishment for contravention of sections 155, 156


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Section 160 (old section 257) Right of persons other than retiring directors to stand

for directorship:Amount of deposit increased from Rs.500 to Rs.1.00 lac

or such higher sum as may be prescribed

Now, even if the person is not elected but the person

so proposed gets more than 25% of total valid votes,the amount of deposit will be refunded

25%- be it by show of hands or on poll

The manner in which the notice will be sent to theshareholders will be prescribed by the CentralGovernment


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Section 161 (old sections 260,262 & 313)Additional Director: If someones resolution for

appointment as a Director, gets defeated in a GM, then

that person cannot be appointed as an additional directorAlternate Director : 1) BOD may appoint, if authorised by

AOA otherwise the GM

2) The said appointee should not beholding alternate directorship for any other director in theCompany

3) If he is an AD to any ID, then AD

also needs to satisfy the criteria laid for IDIt is to be clarified here that a Director of the Companymay act in dual capacity, that is for himself and as an ADfor any other Director of the Company


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En block resolution-Section 162

A single resolution not allowed for appointing 2 ormore persons as directors of the Company

unlessA proposal to move such a motion has first beenagreed to at the meeting without any vote being castagainst it.

(This provision now made applicable to private co. also)


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Section 163 (old section 265) Principle of proportional representation

1. The AOA of the Company may provide for this2. If it provides, then not less than 2/3 of the total

number

3. By a single transferable vote or by a system of

cumulative voting or otherwise

4. Such appointment may be made once in every 3 years

5. Casual vacancies to be filled in as in the case of

additional director(It is to be noted that even a private limited companycan provide for this provision in its AOA)


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Section 164 (old section 274) Disqualifications for appointment of Director

Apart from the existing disqualifications, theadditions are as below:

1. Conviction of an offence dealing with related partytransactions at any time during the last preceding 5 yrs

2. A person who has been convicted of any offence andsentenced in respect thereof to imprisonment for aperiod extending to 7 years or more

3. A person who has not obtained a DIN

(very important: old section 274(1)(g) mentioned ofpublic company only but the new section 164(2) hasremoved the word public)

S i 6


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Section 165 Maximum number of directorships is 20 (instead of 15 in

old law), within which maximum 10 public limited

companies Including alternate directorships

Including directorship in private companies that are eitherholding or subsidiary company of a public company

If the members so want, they may by SR, specify a lessernumber of directorships for their directors

(It is to be noted that a transition period of 1 year will beprovided to the directors to comply with the maximum

number of directorships)Very Important: 1. The Directors have to intimate theirchoice to each of the company where they wish to continue

2. Intimation to be given to the ROC also


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Sec 166-Duties of Directors-Carved

In line with the UK Companies Act, 2006

In accordance with the CompanysAoA

To act in good faith, to promote objects of

the company for benefit of members and thebest interest of the company, employees,community and environment

To exercise duties with due & reasonablecare, skill and diligence

Not to achieve any undue gain/advantage


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Sec 167-Vacation of office of Director Inter-aia, If he absents himself from all the meetings

of the BOD held during a period of 12 months with or

without seeking LOA of the Board (Section 167(b)) Fine is hefty if he continues even after he should have

vacated his officeResignation of Director (Section 168)

Director also needs to forward to ROC, a copy of hisresignation along with detailed reasons within 30 daysof resignation in the prescribed mannerQuick fix solution

Where all directors have resigned, the promoter or inhis absence, the CG shall appoint required number ofdirectors. These directors to hold office till thedirectors are appointed in General Meeting


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Section 169 (old section 284)

Removal of DirectorThe provisions remains the same

The words CG have been replaced by

Tribunal In case of contravention of the provisions of

this section, the penalty has been increased


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Section 170 (old sections 303,307) The register shall contain:

- Particulars of its Directors

- KMP

Details like:

- Securities held by each of them in the Company or its

holding, subsidiary, subsidiary of companys holdingcompany or associate companies

- Other details as may be prescribed

(It is to be noted two separate registers-that of directors

and directors shareholding has been done away with)Very important: Return for appointment or any changetherein shall also be filed for appointment of KMP


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Section 171 (old section 304) In the old section 304, the provision of inspection was

only there. No provision for extracts In the new law, provision for extracts included

In old law, any member (without charge) and anyother person (Re. 1.00 for every inspection)

In the new law, to members.

and to any person attending the annual generalmeeting (the provision u/s 171(1)(b) is to keep the

register open for inspection at every annual generalmeeting of the company and that it shall be madeaccessible to any person attending the meeting)


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Section 172 (new)

Punishment provisionsIf a company contravenes any of theprovisions of Chapter XI and for which no

specific punishment is provided in the saidprovisions of the Chapter, the company andevery officer of the company who is indefault shall be punishable with fine whichshall not be less than Rs.50,000 but whichmay extend to Rs.5.00 lacs


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[email protected]


(which consists of Sections 149 to 172)


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40 58857 companies act 2013 chapter xi

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