Appointment and Qualification of directors along with relevant rules

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In this presentation you can find the provisions regarding appointment of directors and their qualifications as per companies act 2013 and relevant rules of Appointment and qualification of directors rules. Due care has been taken to make presentation simple and attractive. Any suggestions, feedback and queries are openly accepted.

Transcript of Appointment and Qualification of directors along with relevant rules

  • CHAPTER XI APPOINTMENT AND QUALIFICATION OF DIRECTORS Includes relevant rules of Appointment and Qualification of Directors Rule 2014 Prepared and presented By: Dipendra Prasad Poudel Article Trainee (Internal Audit) N.Kochhar & co. for the month of May
  • To have a bird eye view on provision regarding directors To sum up act and rules as far as possible To simplify the provision in such a way that even a layman can understand Presentation Objective
  • SECTION 149: COMPANY TO HAVE BOARD OF DIRECTORS (1)(a) minimum number of directors Public : Minimum three directors Private: Two directors OPC : one director (b) maximum of fifteen directors company can appoint more than 15 directors after passing special resolution. Such class or classes of companies as may be prescribed, shall have one women director
  • Company to appoint at least one female director Rule 3 1) Every public listed company, OR 2) Every other public company having a) Paid up share capital of 100 crore or more ; or b) Turnover of 300 crore or more Explanation : For the purpose of this section it is hereby clarified that the paid up share capital and turnover are as per last date of latest audited financial statement.
  • Section 149 (3 ) Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty two days in the previous calendar year. Section 149 (4) Independent Director I) Listed public company : At least one- third number of directors as independent director. II) And the a Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies. Explanation: For the purpose of this sub- section, any fraction contained in such one-third number shall be rounded off as one.
  • Rule 4 Number of Independent Directors At least two independent directors if any one of below conditions are satisfied Public companies Share capital : 10 crore or more Public companies Turnover: 100 crore or more Public companies Aggregate loans, outstanding loans, debenture and deposits exceeding 50 crore rupee If higher number of independent directors due to composition of its audit committee company shall appoint. Intermittent vacancy: shall be filled by the board at the earliest but not less than immediate board meeting or three months whichever is earlier
  • 149(6) WHO CAN BE INDEPENDENT DIRECTORS Director other than a managing director or a whole-time director or a nominee director. a) Person of integrity and possesses relevant expertise and experience; b) (i) who is or was not promoter of the company or its holding, subsidiary or associate company; (ii) who is not related to its promoter or director in the company, its holding, subsidiary or associate company; c) No pecuniary relationship with the company, its holding, subsidiary or associate company, or to their promoters, or directors, during the two immediately 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- (i) 2 % or more of its gross turnover or total income (ii) fifty lakhs rupees or such higher amount as may be prescribed Whichever is lower of (i) or (ii), 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 key managerial person (KMP) or is or has been employee of the company or its holding, associate or subsidiary ( (ii) Is or has been employee or a proprietor or a partner, in any 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 HAS company; or (B) any legal or consulting firm that has or had any transaction with the company, its HAS company amounting to ten percent or more of the gross turnover of such firm.
  • (iii) Holds together with its relatives two percent or more of the total voting power of the company; or (iv) Is a chief executive or director, by whatever name called, of any non- profit organization that receives (a) 25% or more of its receipt from the company, any of its promoters, directors or of its HAS company or (b) that holds two percent or more voting power of the company ; or (v) who posses such other qualification as may be prescribed. (7) Independent directors participation in meeting. (a) First board meeting in which he participate as the director and thereafter (b)at the first meeting of the board in every financial year or (c) Whenever there is any change in the circumstances which may affect his status as an independent director
  • (10) Independent director shall hold office up to 5 consecutive years on the board of the company, BUT shall be eligible for re-appointment on passing of a special resolution by the company and disclosure of such re-appointment in the boards report . (11) No independent director shall be eligible to hold the office more than two consecutive years BUT Shall be eligible for appointment after the expiration of three years of ceasing to become an Independent director. Provided that, during the three years, he shall not be appointed or associated with the company in any other way either directly or indirectly. (13) Provisions regarding 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) Independent director may be selected from a data bank containing names, addresses and qualification of persons who are willing to act as an independent director. Data Bank can be maintained by any body, institute or association, as may be notified by central government. The responsibility of exercising due diligence before selecting a person from the data bank shall lie with the company making such appointment. (2) Independent director shall be appointed by the company in a general meeting and shall indicate the justification for choosing the appointee for appointment as independent director. (3) The databank shall be maintained in such a rules as prescribed. (4) CG may prescribe the manner and procedure for selection of independent directors
  • RULE 5 : QUALIFICATION OF INDEPENDENT DIRECTORS (APPOINTMENT AND QUALIFICATION OF DIRECTOR RULE) An Independent director shall possess appropriate skills, expertise and knowledge in one or more fields of :- Finance Law Management Sales Marketing Administration Research Corporate governance Technical operations Or other disciplines related to company business.
  • RULE 6: CREATION AND MAINTENANCE OF DATABANK OF PERSON OFFERING TO BECOME INDEPENDENT DIRECTOR (1) Any institute or association which has been authorised by central government shall create and maintain a databank of person willing and eligible to be appointed as independent director AND Such databank shall be published in MCA website or any other websites notified by CG (2) The databank shall include the following information to be eligible and willing to be appointed as independent director. a) DIN b) Personal details, parents name and spouse name (if married) c) Contact details d) Qualification details e) Any legal proceeding initiated or pending against such person f) The list of LLP or Companies where he held/holds the position before along with titles etc.
  • (3) A disclaimer shall be conspicuously displayed on the website hosting databank that a company shall carry own due diligence before appointment of any person as a Independent director. (4) Any person willing to be Independent director shall submit form DIR 1 to agency (institute or body who is managing databank) (5) The agency may charge the reasonable fee from the applicant (6) Any person whose name is hosted in databank, shall intimate to the agency about any changes in his particulars within 15 days. (7) The databank posted in online shall be :- (a) accessible (b) substantially identical with the physical version (c) be searchable in various parameters (d) printed in formats convenient for printing and viewing online (e) contain a link to obtain the software required to view or print the particulars free of charge.
  • 151. APPOINTMENT OF DIRECTOR ELECTED BY SMALL SHARE HOLDER 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 purpose of this section small shareholders means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum of money as may be prescribed.