Director and the Board

The Companies Act 2013 (the Act) i.e. the principal legislation for Companies in India, requires every Company registered/incorporated in India requires every Company registered/incorporated in India under the Act to have a Board of Directors (the Board), a ‘collective body’ consisting of individuals appointed as ‘Directors’.

  • Every ‘Public’ Company is required to have a minimum of 3 Directors, 2 Directors in the case of a ‘Private’ Company, and 1 Director in the case of a ‘One Person’ Company; with an allowed maximum of 15 Directors (a Company may appoint more than 15 Directors after passing a ‘special resolution’).
  • At least one such Director must have stayed in India for a total period of not less than 182 days in the relevant previous calendar year.
  • Listed Public Company also required have at least 1/3rd of the total number of Directors as ‘Independent Directors’ (Central Government has also prescribed a minimum number of 2 Independent Directors in certain  classes of Public Companies).
  • No person under the Act can hold office as a Director, including any alternate Directorship, in more than 20 Companies at the same time (10 for Public Companies), and subject to the same, the Members of a Company may by ‘special resolution’ specify a lesser number.
  • At least 1 ‘woman’ Director in every listed Public Company and every other Public Company having paid–up Share Capital of Rs.100 crore or more, or with a turnover of Rs.300 crore or more.

MinusTax’ Taxation, Revenue and Company law professionals provide the complete spectrum of services (including via the e-medium i.e. email, skype, whatsapp etc) which include —

  • Advisory, Litigation and Compliance Services
  • Registration and Incorporation of Companies, LLPs and other entities
  • Drafting, Vetting and e-Filing legal documents/agreements/applications/e-forms etc.
  • Drafting Notice reply/objections, Appeals and Writ Petitions
  • Legal Representation before Adjudicatory Authorities (ROC, RD etc.), NCLT/NCLAT and High Courts
  • Prosecution Defence and Legal Representation for Economic/Criminal offences before relevant authorities (Special Courts/MM/NCLT/NCLAT/High Court)
  • Other Ancillary Services and Help


Request e-Help – Access Professional Services

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

 

Powers, Duties etc. and Key Issues

The overall control, management and stewardship of a Company lies with its Board, which is entitled to exercise all such powers through the Directors, and to do all such acts and things, as the Company is authorised to exercise and do.

  • Such powers are however subject to restrictions/provisions of the Act and those listed in the Company’s Memorandum of Association (MoA) or Articles of Association (Articles or AoA).
  • Subject to such said restrictions, the Board however also, by a Board Resolution, may delegate to any Committee of Directors, the Managing Director, the Manager or any other principal officer of the Company such as the Chief Executive Officer (CEO) etc. some of its powers as specified in the Act and on such conditions as it may specify.

 

Control” is defined by the Act to include the right to appoint majority of the Directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Key Managerial Personnel” (KMP) in relation to a Company has been defined by the Act to mean —

(i) the Chief Executive Officer or the Managing Director or the Manager;
(ii) the Company Secretary;
(iii) the whole-time Director (includes a Director in the whole-time employment of a Company);
(iv) the Chief Financial Officer; and
(v) such other Officer as may be prescribed.

Manager” has been defined by the Act to mean an individual who, subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a Company, and includes a Director or any other person occupying the position of a Manager, by whatever name called, whether under a contract of service or not.

Managing Director” has been defined by the Act to mean a Director who, by virtue of the Articles of a Company or an agreement with the Company or a resolution passed in its General Meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the Company and includes a Director occupying the position of Managing Director, by whatever name called.

Officer” is defined by the Act to include any Director, Manager or Key Managerial Personnel or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the Directors is or are accustomed to act.

Officer who is in default” for the purpose of any provision in the Act (which enacts that an officer of the Company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise) means any of the following officers of a Company —
(i) Whole-time Director;
(ii) Key Managerial Personnel (KMP);
(iii) Where there is no KMP, such Director(s) as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the Directors, if no Director is so specified;
(iv) Any person who, under the immediate authority of the Board or any KMP, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
(v) Any person in accordance with whose advice, directions or instructions the Board of Directors of the Company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;
(vi) Every Director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
(vii) In respect of the issue or transfer of any Shares of a Company, the share transfer agents, registrars and merchant bankers to the issue or transfer.

Promoter” is defined by the Act to mean a person (not acting merely in a professional capacity) —

(a) who has been named as such in a prospectus or is identified by the Company in its Annual Return; or
(b) who has control over the affairs of the Company, directly or indirectly whether as a shareholder, Director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the Company is accustomed to act.

Whole-time Director” includes a Director in the whole-time employment of the Company.


Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Subject to the right of a Company in a General Meeting to impose restrictions and conditions on the exercise by the Board of any of its powers hereinafter discussed under Section 179 of the Companies Act 2013 (the Act), the said section entitles^ the Board of Directors of a Company to exercise all such powers, do all such acts and things, as the Company is authorised to exercise and do, which are subject to the following –

  • Applicable and relevant provisions of the Act;
  • Memorandum or Articles of the Company;
  • Regulations^^ not inconsistent therewith and duly made thereunder (including regulations made by the concerned Company in the General Meeting)

^The Board cannot exercise any power or do any act or thing which is directed or required under the Act or by the Memorandum or Articles of the relevant Company, to be exercised or done by the Company in the General Meeting.

^^No regulation made by the Company in the General Meeting shall invalidate any prior act of the Board, which would have been valid if that regulation had not been made.


Board Resolutions

The Board of Directors of a Company can exercise the following powers on behalf of the Company by means of resolutions passed at Board meetings —

  • Make calls on Shareholders in respect of money unpaid on their Shares;
  • Authorise buy-back of securities under section 68 of the Act;
  • Issue securities, including debentures, whether in or outside India;
  • Borrow monies**;
  • Invest the funds of the Company;
  • Grant loans or give guarantee or provide security in respect of loans;
  • Approve financial statement and the Board’s report;
  • Diversify the business of the Company;
  • Approve amalgamation, merger or reconstruction;
  • Take over a Company or acquire a controlling or substantial stake in another Company;
  • Any other matter which may be prescribed (including making political contributions, appointment or removal of KMP, appointment of internal auditors etc).

**In respect of dealings between a Company and its bankers, the exercise by the Company of the power specified shall mean the arrangement made by the Company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.


Restrictions on Powers of Board

Section 180 of the Act restricts the powers of the Board of Directors of the concerned Company (not being a Private Company), requiring the powers listed thereunder to be exercised only with the consent of the Company by a ‘special resolution’.


Passing of Board Resolution by Circulation – section 175

Resolution by the Board (or by a Committee thereof) of Directors will be deemed to have been duly passed by circulation, when such resolution has been circulated in draft form together with the necessary papers (if any) to all the Directors (or members of the relevant Committee, as the case may be) at their registered addresses (by hand delivery, post or courier, or through such electronic means as may be prescribed), and has been approved by a majority of the said Directors or members, who are entitled to vote on the said resolution.

  • Where not less than 1/3rd of the total number of Directors of the Company for the time being require, that any resolution under circulation be decided at a Board meeting, the concerned ‘chairperson’ is required to put up the relevant resolution to be so decided therein.
  • Resolutions are then required to be noted at a subsequent Board (or relevant Committee, as the case may be) meeting, and made part of the minutes of such meeting.


Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

The Companies Act 2013 (the Act) requires the appointment of Directors by a Company through a General Meeting, unless otherwise expressly provided in the Act (such as ‘First Directors’). Other essentials for such appointment process are as follows (‘Compulsory Retirement of Directors by Rotation’ of Public Company Directors has not been detailed below)

  • Pre-allotment of Director Identification Number (DIN) (via MCA e-Form DIR-3) is mandatory for such appointment
  • Every person proposed to be appointed as a Director has to furnish his/her DIN and a declaration that he/she is not disqualified to become a Director under the Act (see below)
  • A person so appointed is required to give his/her consent to hold the office as Director and file the same with the Registrar of Companies (ROC) in prescribed manner and time
  • In the case of appointment of an ‘Independent’ Director, an ‘explanatory statement’ for such appointment, annexed to the notice for the General Meeting, shall include a statement that in the opinion of the Board, he/she fulfills the conditions specified in the Act for such an appointment

> Read more on the ‘DIN Application’ process via MCA e-portal

> Read FAQs on DIN


‘First’ Director

Where no provision is made in the Articles of Association (Articles) of a newly incorporated Company for the appointment of its first Director(s), the subscribers (individuals) to the Company’s Memorandum of Association (Memorandum) are deemed to be such Directors until the Directors are duly appointed.

In case of ‘One Person’ Company (OPC), an individual being Member shall be deemed to be its first Director until the Director(s) are duly appointed by the Member in accordance with the provisions of the Act.


Principle of Proportional Representation

The Articles of Association (Articles) of a Company may provide for the appointment of not less than 2/3rd of the total number of its Directors in accordance with the ‘Principle of Proportional Representation(by single transferable vote or by a system of cumulative voting or otherwise and such appointments may be made once in every 3 years).

In a Public Company, if the office of any Director appointed at the General Meeting is vacated before the expiry of his/her term in the normal course, the resulting ‘casual vacancy’, in default of and subject to any regulations in the Articles of the concerned Company, may be filled by the Board at its meeting. Provided that any person so appointed shall hold office only up to the date up to which the Director in whose place he/she is appointed would have held office if it had not been vacated.


Additional Director

The Articles of Association (Articles) of a Company may confer on its Board of Directors (the Board) the power to appoint any person (other than a person who fails to get appointed as a Director in a General Meeting) as an ‘Additional Director’ at any time, to hold such office up to the date of the next Annual General Meeting (AGM) or the last date on which the AGM should have been held, whichever is earlier.


Alternate Director

  • The Board where so authorised by the Articles or by a resolution passed in General Meeting, may appoint a person (not being a person holding any ‘Alternate Directorship’ for any other Director in the Company) to act as an ‘Alternate Director’ for a Director during his/her absence for a period of not less than 3 months from India.
  • No person shall be appointed as an Alternate Director for an Independent Director unless such person is qualified to be so appointed as an Independent Director under the relevant provisions of the Companies Act 2013 (the Act) and Rules thereunder.
  • An Alternate Director cannot hold office for a period longer than that permissible to the Director in whose place he/she has been appointed and must vacate the office if and when the Director replaced returns to India.
  • If the term of office of the original Director is determined before such return to India, any provision for the automatic re-appointment of retiring Directors in default of another appointment shall apply to the original, and not to the Alternate director.


Nominee Director

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 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.


Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Section 166 of the Act states that subject to the Act’s provisions, a Director of a Company must act in accordance with the Articles of the concerned Company. On the subject, it further imposes the following duties on Directors —

  • Act in good faith in order to promote the objects of the Company 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.
  • Exercise his/her duties with due and reasonable care, skill and diligence and also exercise independent judgment.
  • Not be involved in a situation in which he/she may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the concerned Company.
  • Not achieve or attempt to achieve any undue gain or advantage either to him/herself or to his/her relatives, partners, or associates and if such Director is found guilty of making any undue gain, he/she shall be liable to pay an amount equal to that gain to the Company.
  • Not assign his/her office and any assignment so made shall be void.

A Director in contravention of the above would be liable to punishment with fine which shall not be less than Rs.1 lakh and which may extend to Rs.5 lacs.


Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Content under review. Update soon.


Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Directors may (subject to some exceptions) be removed from the Board of Directors (the Board) of a Company, before the expiry of the period of his/her office, through an ‘ordinary resolution’ passed by its Members at a Company/Member’s Meeting whilst also following the other prescribed procedures in section 169 of the Companies Act 2013 (the Act).

> Read more on ‘Removal of Directors’

 

Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Under the Act, a person would be ineligible for appointment as a Director of a Company in the following circumstances —

  • Declared unsoundness of mind by a competent court
  • Status of an undischarged insolvent
  • Applied to be adjudicated as an insolvent and same is pending
  • Been 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 and a period of 5 years has not elapsed from the date of expiry of the sentence (conviction for any offence and sentenced in respect thereof to imprisonment for a period of 7 years or more, will not be eligible to be appointed as a director in any Company)
  • Order disqualifying from such appointment has been passed by a court or Tribunal and same is in force
  • Not paid any calls in respect of any shares of the Company held (whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call)
  • Been convicted of the offence dealing with ‘related party transactions’ under section 188 at any time during the last preceding 5 years
  • Not been allotted Director Identification Number (DIN)


Director of Defaulting Company

A person who is/has been a Director of a Company (Defaulting Company), shall be ineligible to be re-appointed in the said Defaulting Company or be appointed as a Director of another Company, for a period of 5 years from the date on which the said defaulting Company has failed to do the following —

  • Not filed financial statements or annual returns for any continuous period of 3 financial years; or
  • 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 pay any Dividend declared, and such failure to pay or redeem continues for 1 year or more.


Articles of Private Company

A ‘Private’ Company may by its Articles provide for any disqualifications for appointment as a Director in addition to those specified above.


Access MinusTax Professionals – Advisory, Compliance and Litigation Support

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

 

Administrative Help

For administrative assistance and general queries, please feel free to contact via —
Telephone: +91 8800 38 1950
Email: contact@minustax.com

Alternatively, please contact for an appointment and visit our representational office in DLF Phase IV, Gurgaon (click for Google Map directions).

Follow us @MinusTax

Need Tax Help?
Need Tax Help?