Member - Concept W
Who is a member ?
Section 2(55)
1. Subscriber to the memorandum.
2. Agrees in writing - register
3. Holding shares.
member - shareholder.
Section 2(55) ―member, in relation to a company, means—
(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members;
(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;
(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository;
Who can become member of a company ? W
a. Competent to contract - y
b. Company - y
c. Firm - n
d. trustee - n . Decleration to public trust. Copy of decleration sent within 21 days to company.
e. Society - y
f. non resident - y with Permission of RBI.
g. insolvent - continue.
h. minor - n
Various modes of acquiring membership of a company. W
1. Subscribing to Memorandum of Association.
2. Membership by allotment of shares.
3. Membership by transfer of shares.
4. Membership by transmission of shares.
5. Membership by Acquiescence and Estoppel.
6. Joint membership.
7. Membership by taking qualification shares.
8. Name in the record of depository.
Modes of cessation of membership of a company. W
1. Transfers shares.
2. forfeited.
3. company sells - lien.
4. surrenders.
5. sold - decree.
6. rescinds - misrepresentation.
7. insolvent.
8. Dies.
9. redeemable preference shares are redeemed.
10. Wound up.
Rights and Liabilities of Members W
Liabilities
1. Company with unlimited liability - each member liable in full.
2. Company limited by guarantee - each member is bound to contribute a sum of money agreed and specified.
3. Company limited by shares - liability limited to unpaid amount of shares.
Rights.
1. Statutory Rights.
a. right of priority - increase in capital.
b. notices of meeting, attend and vote.
c. transfer shares.
d. receive copies of annual accounts.
e. inspect - register of members.
f. apply - CG - Calling AGM.
g. apply - Court - Calling EGM
h. participate in appointment of directors and auditors.
i. petition - CG - investigation affairs of company.
j. petition - HC - oppression and mismanagement.
k. petition - HC - winding up.
2. Documentary Rights.
Conferred upon bt MOA and AOA.
3. Proprietary Rights.
a. registered as members.
b. immunity from personal liability.
c. participate in dividend distribution.
d. distribution of assets - liquidation.
4. Remedial Rights.
a. right to information and inspection of company records.
b. representative suit - remedy mismanagement.
Director - Qualification and Disqualification BA
Disqualifications :
1. Not be eligible :
a. unsound mind.
b. undischarged insolvent.
c. applied to be adjudicated as insolvent.
d. convicted - not less than 6 months - 5 years has not elapsed.
- 7 years or more - not eligible to be appointed.
e. order disqualifying - court or tribunal.
f. not paid any calls.
g. related party.
h. Not compiled Section 152(3)
2. No person who is or has been director of a company which -
a. not filed financial statement - three financial years.
b. failed to - repay deposits
- redeem - debentures
- pay dividend declared ---- one year.
3. Private company - articles - disqualifications - not take effect -
a. 30 days - date of conviction / disqualification.
b. appeal - until expiry of 7 days - appeal/petition is disposed.
c. further appeal - until expiry of 7 days - appeal/petition is disposed.
164. Disqualifications for appointment of director.—
(1) A person shall not be eligible for appointment as a director of a company, if —
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has 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 six months and a period of five years has not elapsed from the date of expiry of the sentence: Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;
(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
(h) he has not complied with sub-section (3) of section 152. [DIR]
(2) No person who is or has been a director of a company which—
(a) has not filed financial statements or annual returns for any continuous period of three financial years; or
(b) has 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 one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.
(3) A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1) and (2): Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall not take effect—
(i) for thirty days from the date of conviction or order of disqualification;
(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or
(iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off.
Classification of Directors W
1. Executive Directors.
2. Non Executive Directors.
Directors may broadly be classified into following categories :
a. First Director.
b. Independent Director.
c. Nominee Director.
d. Directors elected by small shareholders.
e. Additional directors.
f. Alternate Directors.
g. Women Directors.
a. First Director
60. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum or a majority of them.
152. Appointment of directors.—
(1) Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed and in case of a One Person Company an individual being member shall be deemed to be its first director until the director or directors are duly appointed by the member in accordance with the provisions of this section.
(2) Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting.
(3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154.
(4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this Act.
(5) A person appointed as a director shall not act as a director unless he gives his consent to hold the office as director and such consent has been filed with the Registrar within thirty days of his appointment in such manner as may be prescribed: Provided that in the case of appointment of an independent director in the general meeting, 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 fulfils the conditions specified in this Act for such an appointment.
(6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company shall—
(i) be persons whose period of office is liable to determination by retirement of directors by rotation; and
(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.
(b) The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting.
(c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable
to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
(d) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto. Explanation.—For the purposes of this sub-section, ―total number of directors‖ shall not include independent directors, whether appointed under this Act or any other law for the time being in force, on the Board of a company.
(7) (a) If the vacancy of the retiring director is not so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at the same time and place.
(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless—
(i) at that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost;
(ii) the retiring director has, by a notice in writing addressed to the company or its Board of directors, expressed his unwillingness to be so re-appointed;
(iii) he is not qualified or is disqualified for appointment;
(iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by virtue of any provisions of this Act; or
(v) section 162 is applicable to the case. Explanation.—For the purposes of this section and section 160, the expression ―retiring director‖ means a director retiring by rotation.
b. Independent Director.
2 (47) ―independent director means an independent director referred to in sub-section (6) of section 149;
135. Corporate Social Responsibility.— (1) 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.
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.
(5) 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 sub-section (4).
(6) An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—
(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(e) who, neither himself nor any of his relatives—
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;
(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or (f) who possesses such other qualifications as may be prescribed.
(7) Every independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence as provided in sub-section (6).
Explanation.—For the purposes of this section, ―nominee director‖ means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.
(8) The company and independent directors shall abide by the provisions specified in Schedule IV.
(9) Notwithstanding anything contained in any other provision of this Act, but subject to the provisions of sections 197 and 198, an independent director shall not be entitled to any stock option and may receive remuneration by way of fee provided under sub-section (5) of section 197, reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.
(10) Subject to the provisions of section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board's report.
(11) Notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms, but such independent director shall be eligible for appointment after the expiration of three years of ceasing to become an independent director: Provided that an independent director shall not, during the said period of three years, be appointed in or be associated with the company in any other capacity, either directly or indirectly. Explanation.—For the purposes of sub-sections (10) and (11), any tenure of an independent director on the date of commencement of this Act shall not be counted as a term under those sub-sections.
(12) Notwithstanding anything contained in this Act,— (i) an independent director; (ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.
(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors by rotation shall not be applicable to appointment of independent directors. 150. Manner of selection of independent directors and maintenance of databank of independent directors.—
(1) Subject to the provisions contained in sub-section (6) of section 149, an independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent directors, maintained by any body, institute or association,
as may by notified by the Central Government, having expertise in creation and maintenance of such data bank and put on their website for the use by the company making the appointment of such directors: Provided that responsibility of exercising due diligence before selecting a person from the data bank referred to above, as an independent director shall lie with the company making such appointment.
(2) The appointment of independent director shall be approved by the company in general meeting as provided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of the general meeting called to consider the said appointment shall indicate the justification for choosing the appointee for appointment as independent director.
(3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as independent director in accordance with such rules as may be prescribed.
(4) The Central Government may prescribe the manner and procedure of selection of independent directors who fulfil the qualifications and requirements specified under section 149.
c. Nominee Director.
149. Explanation.—For the purposes of this section, ―nominee director‖ means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.
161(3) 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.
d. Directors elected by small shareholders.
151. Appointment of director elected by small shareholders.— A listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed. Explanation.—For the purposes of this section ―small shareholders‖ means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.
e. Additional directors.
161. Appointment of additional director, alternate director and nominee director.—
(1) The articles of a company may confer on its Board of Directors 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 who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.
f. Alternate Directors.
161(2) The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, 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 absence for a period of not less than three months from India:
Provided that no person shall be appointed as an alternate director for an independent director unless he is qualified to be appointed as an independent director under the provisions of this Act:
Provided further that an alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed and shall vacate the office if and when the director in whose place he has been appointed returns to India:
Provided also that if the term of office of the original director is determined before he so returns 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.
g. Women Directors.
149(1). Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.
Director Identification Number BA
1. Application for allotment of Director Identification Number.
application - form - fees.
2. Allotment of Director Identification Number
CG - one month.
3. Prohibition to obtain more than one DIN.
4. Director to intimate Director Identification Number
One month - company.
5. Company to inform Director Identification Number to Registrar
- 15 days - Registrar
6. If a company fails to furnish Director Identification Number
fine 25,000/- to 1 lakh.
7. Obligation to indicate Director Identification Number
Section 152 (3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154.
(4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this Act.
153. Application for allotment of Director Identification Number.— Every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Central Government in such form and manner and along with such fees as may be prescribed.
154. Allotment of Director Identification Number.— The Central Government shall, within one month from the receipt of the application under section 153, allot a Director Identification Number to an applicant in such manner as may be prescribed.
155. Prohibition to obtain more than one Director Identification Number.— No individual, who has already been allotted a Director Identification Number under section 154, shall apply for, obtain or possess another Director Identification Number.
156. Director to intimate Director Identification Number.— Every existing director shall, within one month of the receipt of Director Identification Number from the Central Government, intimate his Director Identification Number to the company or all companies wherein he is a director.
157. Company to inform Director Identification Number to Registrar.— (1) Every company shall, within fifteen days of the receipt of intimation under section 156, furnish the Director Identification Number of all its directors to the Registrar or any other officer or authority as may be specified by the Central Government with such fees as may be prescribed or with such additional fees as may be prescribed within the time specified under section 403 and every such intimation shall be furnished in such form and manner as may be prescribed.
102
(2) If a company fails to furnish Director Identification Number under sub-section (1), before the expiry of the period specified under section 403 with additional fee, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.
158. Obligation to indicate Director Identification Number.— Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director.
Legal Position of Directors W
1. Director as Agent of the Company.
2. Director as Trustee of Company.
3. Director as Managing Partners.
4. Director as Employees.
5. Director as organs.
Meetings - Types W & BA
1. Statutory meetings. (dropped)
First meeting
One month - Six months
Statutory report.
2. Annual general meeting.
AGM -------- within 15 months -------------AGM
First AGM Within nine months - closing of first financial year.
Other than first AGM - 6 months - closing of financial year.
Registrar - extend the time
Day - not a national holiday.
Time 9. am to 6 pm
3. Extra Ordinary General Meeting.
Requisition - a. not less than 1/10th - paid up share capital.
b. not less than 1/10th - total voting power.
Signed by the requisitionists - registered office
Board does not, within twenty-one days - not later than forty-five days - requisitonists
Themselves - three months - date of the requisition.
Same manner.
Expenses incurred
4. Board Meeting
all types of companies
first - 30 days of incorporation
four meetings
not more than 120 days gap
participation of directors - in person / video conferencing
seven days’ notice
shorter notice - urgent business
absence of independent directors - final only on ratification thereof by at least one
independent director.
duty to give notice - fails - penalty of twenty-five thousand rupees.
One Person Company, small company and dormant company - one meeting - half of a
calendar year
Who is a member ?
Section 2(55)
1. Subscriber to the memorandum.
2. Agrees in writing - register
3. Holding shares.
member - shareholder.
Section 2(55) ―member, in relation to a company, means—
(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members;
(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;
(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository;
Who can become member of a company ? W
a. Competent to contract - y
b. Company - y
c. Firm - n
d. trustee - n . Decleration to public trust. Copy of decleration sent within 21 days to company.
e. Society - y
f. non resident - y with Permission of RBI.
g. insolvent - continue.
h. minor - n
Various modes of acquiring membership of a company. W
1. Subscribing to Memorandum of Association.
2. Membership by allotment of shares.
3. Membership by transfer of shares.
4. Membership by transmission of shares.
5. Membership by Acquiescence and Estoppel.
6. Joint membership.
7. Membership by taking qualification shares.
8. Name in the record of depository.
Modes of cessation of membership of a company. W
1. Transfers shares.
2. forfeited.
3. company sells - lien.
4. surrenders.
5. sold - decree.
6. rescinds - misrepresentation.
7. insolvent.
8. Dies.
9. redeemable preference shares are redeemed.
10. Wound up.
Rights and Liabilities of Members W
Liabilities
1. Company with unlimited liability - each member liable in full.
2. Company limited by guarantee - each member is bound to contribute a sum of money agreed and specified.
3. Company limited by shares - liability limited to unpaid amount of shares.
Rights.
1. Statutory Rights.
a. right of priority - increase in capital.
b. notices of meeting, attend and vote.
c. transfer shares.
d. receive copies of annual accounts.
e. inspect - register of members.
f. apply - CG - Calling AGM.
g. apply - Court - Calling EGM
h. participate in appointment of directors and auditors.
i. petition - CG - investigation affairs of company.
j. petition - HC - oppression and mismanagement.
k. petition - HC - winding up.
2. Documentary Rights.
Conferred upon bt MOA and AOA.
3. Proprietary Rights.
a. registered as members.
b. immunity from personal liability.
c. participate in dividend distribution.
d. distribution of assets - liquidation.
4. Remedial Rights.
a. right to information and inspection of company records.
b. representative suit - remedy mismanagement.
Director - Qualification and Disqualification BA
Disqualifications :
1. Not be eligible :
a. unsound mind.
b. undischarged insolvent.
c. applied to be adjudicated as insolvent.
d. convicted - not less than 6 months - 5 years has not elapsed.
- 7 years or more - not eligible to be appointed.
e. order disqualifying - court or tribunal.
f. not paid any calls.
g. related party.
h. Not compiled Section 152(3)
2. No person who is or has been director of a company which -
a. not filed financial statement - three financial years.
b. failed to - repay deposits
- redeem - debentures
- pay dividend declared ---- one year.
3. Private company - articles - disqualifications - not take effect -
a. 30 days - date of conviction / disqualification.
b. appeal - until expiry of 7 days - appeal/petition is disposed.
c. further appeal - until expiry of 7 days - appeal/petition is disposed.
164. Disqualifications for appointment of director.—
(1) A person shall not be eligible for appointment as a director of a company, if —
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has 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 six months and a period of five years has not elapsed from the date of expiry of the sentence: Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;
(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
(h) he has not complied with sub-section (3) of section 152. [DIR]
(2) No person who is or has been a director of a company which—
(a) has not filed financial statements or annual returns for any continuous period of three financial years; or
(b) has 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 one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.
(3) A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1) and (2): Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall not take effect—
(i) for thirty days from the date of conviction or order of disqualification;
(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or
(iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off.
Classification of Directors W
1. Executive Directors.
2. Non Executive Directors.
Directors may broadly be classified into following categories :
a. First Director.
b. Independent Director.
c. Nominee Director.
d. Directors elected by small shareholders.
e. Additional directors.
f. Alternate Directors.
g. Women Directors.
a. First Director
60. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum or a majority of them.
152. Appointment of directors.—
(1) Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed and in case of a One Person Company an individual being member shall be deemed to be its first director until the director or directors are duly appointed by the member in accordance with the provisions of this section.
(2) Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting.
(3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154.
(4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this Act.
(5) A person appointed as a director shall not act as a director unless he gives his consent to hold the office as director and such consent has been filed with the Registrar within thirty days of his appointment in such manner as may be prescribed: Provided that in the case of appointment of an independent director in the general meeting, 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 fulfils the conditions specified in this Act for such an appointment.
(6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company shall—
(i) be persons whose period of office is liable to determination by retirement of directors by rotation; and
(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.
(b) The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting.
(c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable
to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
(d) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto. Explanation.—For the purposes of this sub-section, ―total number of directors‖ shall not include independent directors, whether appointed under this Act or any other law for the time being in force, on the Board of a company.
(7) (a) If the vacancy of the retiring director is not so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at the same time and place.
(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless—
(i) at that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost;
(ii) the retiring director has, by a notice in writing addressed to the company or its Board of directors, expressed his unwillingness to be so re-appointed;
(iii) he is not qualified or is disqualified for appointment;
(iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by virtue of any provisions of this Act; or
(v) section 162 is applicable to the case. Explanation.—For the purposes of this section and section 160, the expression ―retiring director‖ means a director retiring by rotation.
b. Independent Director.
2 (47) ―independent director means an independent director referred to in sub-section (6) of section 149;
135. Corporate Social Responsibility.— (1) 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.
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.
(5) 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 sub-section (4).
(6) An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—
(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(e) who, neither himself nor any of his relatives—
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;
(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or (f) who possesses such other qualifications as may be prescribed.
(7) Every independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence as provided in sub-section (6).
Explanation.—For the purposes of this section, ―nominee director‖ means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.
(8) The company and independent directors shall abide by the provisions specified in Schedule IV.
(9) Notwithstanding anything contained in any other provision of this Act, but subject to the provisions of sections 197 and 198, an independent director shall not be entitled to any stock option and may receive remuneration by way of fee provided under sub-section (5) of section 197, reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.
(10) Subject to the provisions of section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board's report.
(11) Notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms, but such independent director shall be eligible for appointment after the expiration of three years of ceasing to become an independent director: Provided that an independent director shall not, during the said period of three years, be appointed in or be associated with the company in any other capacity, either directly or indirectly. Explanation.—For the purposes of sub-sections (10) and (11), any tenure of an independent director on the date of commencement of this Act shall not be counted as a term under those sub-sections.
(12) Notwithstanding anything contained in this Act,— (i) an independent director; (ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.
(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors by rotation shall not be applicable to appointment of independent directors. 150. Manner of selection of independent directors and maintenance of databank of independent directors.—
(1) Subject to the provisions contained in sub-section (6) of section 149, an independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent directors, maintained by any body, institute or association,
as may by notified by the Central Government, having expertise in creation and maintenance of such data bank and put on their website for the use by the company making the appointment of such directors: Provided that responsibility of exercising due diligence before selecting a person from the data bank referred to above, as an independent director shall lie with the company making such appointment.
(2) The appointment of independent director shall be approved by the company in general meeting as provided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of the general meeting called to consider the said appointment shall indicate the justification for choosing the appointee for appointment as independent director.
(3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as independent director in accordance with such rules as may be prescribed.
(4) The Central Government may prescribe the manner and procedure of selection of independent directors who fulfil the qualifications and requirements specified under section 149.
c. Nominee Director.
149. Explanation.—For the purposes of this section, ―nominee director‖ means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.
161(3) 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.
d. Directors elected by small shareholders.
151. Appointment of director elected by small shareholders.— A listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed. Explanation.—For the purposes of this section ―small shareholders‖ means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.
e. Additional directors.
161. Appointment of additional director, alternate director and nominee director.—
(1) The articles of a company may confer on its Board of Directors 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 who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.
f. Alternate Directors.
161(2) The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, 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 absence for a period of not less than three months from India:
Provided that no person shall be appointed as an alternate director for an independent director unless he is qualified to be appointed as an independent director under the provisions of this Act:
Provided further that an alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed and shall vacate the office if and when the director in whose place he has been appointed returns to India:
Provided also that if the term of office of the original director is determined before he so returns 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.
g. Women Directors.
149(1). Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.
Chapter XI – The Companies (Appointment and Qualification of Directors) Rules 2014 Government of India, Ministry of Corporate Affairs, Notification, New Delhi, Dated 31.03.2014
3. Woman director on the Board.- The following class of companies shall appoint at least one woman director-
(i) every listed company;
(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:
Provided that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:
Provided further that any intermittent vacancy of a woman director shall be filled-up 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.
Explanation.- For the purposes of this rule, it is hereby clarified that the paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.
Director Identification Number BA
1. Application for allotment of Director Identification Number.
application - form - fees.
2. Allotment of Director Identification Number
CG - one month.
3. Prohibition to obtain more than one DIN.
4. Director to intimate Director Identification Number
One month - company.
5. Company to inform Director Identification Number to Registrar
- 15 days - Registrar
6. If a company fails to furnish Director Identification Number
fine 25,000/- to 1 lakh.
7. Obligation to indicate Director Identification Number
Section 152 (3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154.
(4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this Act.
153. Application for allotment of Director Identification Number.— Every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Central Government in such form and manner and along with such fees as may be prescribed.
154. Allotment of Director Identification Number.— The Central Government shall, within one month from the receipt of the application under section 153, allot a Director Identification Number to an applicant in such manner as may be prescribed.
155. Prohibition to obtain more than one Director Identification Number.— No individual, who has already been allotted a Director Identification Number under section 154, shall apply for, obtain or possess another Director Identification Number.
156. Director to intimate Director Identification Number.— Every existing director shall, within one month of the receipt of Director Identification Number from the Central Government, intimate his Director Identification Number to the company or all companies wherein he is a director.
157. Company to inform Director Identification Number to Registrar.— (1) Every company shall, within fifteen days of the receipt of intimation under section 156, furnish the Director Identification Number of all its directors to the Registrar or any other officer or authority as may be specified by the Central Government with such fees as may be prescribed or with such additional fees as may be prescribed within the time specified under section 403 and every such intimation shall be furnished in such form and manner as may be prescribed.
102
(2) If a company fails to furnish Director Identification Number under sub-section (1), before the expiry of the period specified under section 403 with additional fee, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.
158. Obligation to indicate Director Identification Number.— Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director.
Legal Position of Directors W
1. Director as Agent of the Company.
2. Director as Trustee of Company.
3. Director as Managing Partners.
4. Director as Employees.
5. Director as organs.
Meetings - Types W & BA
1. Statutory meetings. (dropped)
First meeting
One month - Six months
Statutory report.
2. Annual general meeting.
AGM -------- within 15 months -------------AGM
First AGM Within nine months - closing of first financial year.
Other than first AGM - 6 months - closing of financial year.
Registrar - extend the time
Day - not a national holiday.
Time 9. am to 6 pm
3. Extra Ordinary General Meeting.
Requisition - a. not less than 1/10th - paid up share capital.
b. not less than 1/10th - total voting power.
Signed by the requisitionists - registered office
Board does not, within twenty-one days - not later than forty-five days - requisitonists
Themselves - three months - date of the requisition.
Same manner.
Expenses incurred
4. Board Meeting
all types of companies
first - 30 days of incorporation
four meetings
not more than 120 days gap
participation of directors - in person / video conferencing
seven days’ notice
shorter notice - urgent business
absence of independent directors - final only on ratification thereof by at least one
independent director.
duty to give notice - fails - penalty of twenty-five thousand rupees.
One Person Company, small company and dormant company - one meeting - half of a
calendar year
96. Annual general meeting BA
(1) Every company other than a One Person Company shall in each year hold in
addition to any other meetings, a general meeting as its annual general meeting and shall
specify the meeting as such in the notices calling it, and not more than fifteen months shall
elapse between the date of one annual general meeting of a company and that of the next:
Provided that in case of the first annual general meeting, it shall be held within a period
of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year:
Provided further that if a company holds its first annual general meeting as aforesaid,
it shall not be necessary for the company to hold any annual general meeting in the year of
its incorporation:
Provided also that the Registrar may, for any special reason, extend the time within
which any annual general meeting, other than the first annual general meeting, shall be held,
by a period not exceeding three months.
(2) Every annual general meeting shall be called during business hours, that is, between
9 a.m. and 6 p.m. on any day that is not a National Holiday and shall be held either at the
registered office of the company or at some other place within the city, town or village in
which the registered office of the company is situate:
Provided that the Central Government may exempt any company from the provisions
of this sub-section subject to such conditions as it may impose.
Explanation.—For the purposes of this sub-section, “National Holiday” means and
includes a day declared as National Holiday by the Central Government.
100. Calling of extraordinary general meeting
(1) The Board may, whenever it deems fit, call an extraordinary general meeting of
the company.
(2) The Board shall, at the requisition made by,—
(a) in the case of a company having a share capital, such number of members
who hold, on the date of the receipt of the requisition, not less than one-tenth of such
of the paid-up share capital of the company as on that date carries the right of voting;
(b) in the case of a company not having a share capital, such number of members
who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote,
call an extraordinary general meeting of the company within the period specified in subsection (4).
(3) The requisition made under sub-section (2) shall set out the matters for the
consideration of which the meeting is to be called and shall be signed by the requisitionists
and sent to the registered office of the company.
(4) If the Board does not, within twenty-one days from the date of receipt of a valid
requisition in regard to any matter, proceed to call a meeting for the consideration of that
matter on a day not later than forty-five days from the date of receipt of such requisition, the
meeting may be called and held by the requisitonists themselves within a period of three
months from the date of the requisition.
(5) A meeting under sub-section (4) by the requisitionists shall be called and held in
the same manner in which the meeting is called and held by the Board.
(6) Any reasonable expenses incurred by the requisitionists in calling a meeting under
sub-section (4) shall be reimbursed to the requisitionists by the company and the sums so
paid shall be deducted from any fee or other remuneration under section 197 payable to such
of the directors who were in default in calling the meeting.
173. Meetings of Board
(1) Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board:
Provided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.
(2) The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time:
Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means.
(3) A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means:
Provided that a meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting:
Provided further that in case of absence of independent directors from such a meeting of the Board, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any.
(4) Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
(5) A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:
Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.
173. Meetings of Board
(1) Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board:
Provided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.
(2) The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time:
Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means.
(3) A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means:
Provided that a meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting:
Provided further that in case of absence of independent directors from such a meeting of the Board, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any.
(4) Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
(5) A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:
Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.
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