Sunday, May 11, 2014

Number of Directors and Ceiling on Number of Directorship

Minimum and Maximum Number of directors:
Sec. 149 prescribes the mode of constitution of the board of directors. The purpose of the section is to prevent the company from going into the hands of a single person. The provisions relating to the minimum and maximum number of directors are explained as follows:
1. Minimum number of directors: Every public company shall have minimum of 3 directors and every private company shall have a minimum of 2 directors and every one person company must have 1 director.
a)      When number of directors fall below statutory minimum:
b)      The provisions as to number of directors are mandatory and any business transacted after the number of directors fell below the statutory minimum was held to be invalid
c)       Where the minimum number of directors are three, but only two directors were appointed, an allotment of shares by two directors was held to be invalid, though two directors were sufficient to form a quorum
2. Maximum number of directors: The Companies Act, 2013 has prescribed the maximum number of directors as 15. However, a company may appoint more than 15 directors after passing a special resolution.
Increase or Decrease in number of directors: The company in general meeting can increase or reduce the number of directors. The provisions in this regard are as follows:
1) Increase or decrease in general meeting.
2) Increase with the approval of the central government.

3. Woman Director: As per Sec. 149(1) of the Companies Act, 2013, the following companies shall appoint atleast one woman director:
1) Every listed company.
2) Every other public companies having a paid share capital of Rs. 100 crores or more or turnover of Rs. 300 crores or more.
A period of six months from the date of company’s incorporation has been provided to enable the companies incorporated under Companies Act, 2013 to comply with this requirement. Therefore, the existing companies has to comply the above requirements within one year and new companies incorporated under the new companies act has to comply within 6 months from the date of its incorporation.
Further if there is any intermittent vacancy of a woman director then it shall be filled up by the board of directors within 3 months from the date of such vacancy or not later than immediate next board meeting, whichever is later. This has been a welcome move.
Number of directorships:
1. According to sec. 165 of the Companies Act’ 2013 , no person can act as a director in more than 20 companies (both public and private company).The prohibition extends only to holding of office of a director. Thus, a person holding directorships in 20 companies may hold the office of a manager in other companies. Again, the maximum number of public companies in which a person can be appointed as a director shall not exceed 10.
2. As per sec. 165, directorships in the following companies shall be excluded for the above purpose
a. A private company which is neither a subsidiary nor a holding company of a public company.
b. An unlimited company.
C. An association not carrying on business for profit or which prohibits the payment of dividend.
d. A company in which a director is only an alternate director.


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