The new law of Companies Act, 2013 has entrusted tremendous responsibility on Directors of all type of companies. Some of the important provisions related to their appointment, duties and liabilities are as follows:
APPOINTMENT OF DIRECTOR: Section -149
Applicability: Every Company whether Public or Private
Compliance: Every company shall have a minimum of,
¢ 3 Directors in case of Public Companies
¢ 2 Directors in case of Private Companies
¢ 1 Director in case of One Person Company, and
a maximum of 15 Directors on its Board of Directors
Appointment of more than 15 Directors would require approval of shareholders through a special resolution.
APPOINTMENT OF WOMEN DIRECTOR: Section -149 (1)
Applicability: Any Listed Company, or
Unlisted Public Company having paid up share capital of Rs. 100 crore or more, or turnover of Rs. 300 crore or more.
Compliance: Above mentioned companies shall appoint at least one Women Director on the Board.
Provided further that any intermittent vacancy of a Woman Director shall be filled by the Board at the earliest but not later than immediate next board meeting, or three months from the date of such vacancy, whichever is later.
APPOINTMENT OF INDEPENDENT DIRECTOR: Section -149 (1)
Applicability: Public company having paid up share capital of Rs. 10 crore or more
Public company having turnover of Rs. 5 crores or more
Public company having outstanding loan/debentures/deposits more than Rs. 50 crores
Compliance: Above mentioned companies shall be required to have atleast two Independent Directors on the Board. In case of a company, due to composition of audit committee members, a higher number of Independent Directors are required to be appointed, then such higher number of Independent Director will be regarded as minimum limit.
Provided further that any intermittent vacancy of an Independent Director shall be filled by the Board at the earliest but not later than immediate next board meeting or three months from the date of such vacancy whichever is later.
DUTIES OF DIRECTORS:
Applicability: Every Individual who intends to be a Director
Compliance: It is the very first time that the Companies Act, 2013 has specifically mentioned the duties of Directors. In order to induce greater level of transparency and accountability, the following duties have been prescribed for Director:
- To act in good faith and in the best interests of the company, its employees, the shareholders, the community and for the protection of the environment
- Not to involve in a situation that presents a conflict of interest
- To act in accordance with the Articles
- Not to achieve any undue gain or advantage (and to return any equivalent amount to the company if such gain or advantage is indeed made)
- To exercise due and reasonable care, skill and diligence, and exercise independent judgment
- Not to assign or delegate his office
We state below few comparative points for the Director’s position under old and new Act:
| POINTS OF COMPARISON | COMPANIES ACT 2013 | COMPANIES ACT 1956 |
| Duties of Directors | The act specifically prescribes duties of Directors towards the company. | No other duties were prescribed apart from the duty to make disclosures. |
| Disclosure of interest | Disclosure of interest by every Director has been made mandatory at the time of appointment as Director, beginning of every financial year, and every time of any change of interest | Disclosure of interest by every Director was required only on two occasions, at the time of appointment, and beginning of every financial year |
| Loan to Directors | Loan to Directors other than Whole Time Director and Managing Director is prohibited | Prior Approval of central government was required to provide directly or indirectly any loan to any Director of the company, or other Company Firm, Body Corporate in which the Director is interested in the way as stated. |
| Resignation of Director | Directors are required to mandatory forward their resignations, along with detailed reasons for resignation, to the registrar within 30 days of resignation in prescribed manner. | No provision for acceptance of resignation of a Director was required. |
| Disqualifications of Directors | Following additional disqualifications have been introduced in the Act:
· Convicted of an offence while dealing in related party transactions at any time during the last preceding five years. · The person has not obtained Director Identification Number. · Convicted of any offence and sentenced in respect thereof to an imprisonment for a period of 7 years or more, · Any person who is or has been Director of any company including private company, who has not filed any financial statements and annual return for 3 (Three) continuous financial years or has defaulted in payment of debentures. |
Following disqualifications were part of the Act:
· The person is disqualified to be appointed as a Director of company, if he is of unsound mind/ an undercharged insolvent/ an insolvent/ convicted for moral turpitude for imprisonment/ not paid calls till 6 months/ disqualified by an order of court. · The Director of Public Company which has not filed Annual accounts and Annual returns for 3 years or failed to repay the deposits. |
You are requested to kindly follow the above mentioned points carefully and feel free to contact us in case of any doubts / concerns for any other matter related to New Companies Act, 2013 at below mentioned contact details-
Malavika Bhatia | <malavika.bhatia@bluelotusstrategy.com> | M +91 98733 18440
Monika Bhardwaj | <monika.bhardwaj@bluelotusstrategy.com> |M +91 98915 60525
We will do our best to assist you with the compliance’s and removal of doubts / queries. However, please note that since the Act is new, all rules are yet to get promulgated and further MCA website would not be operational from 1st April 2014 till 13th April 2014, as there are lot many areas where operational issues are to be sorted out.
In case of queries that require clarification from Ministry of Corporate Affairs, we will come back to you after seeking necessary clarifications from the Ministry.
