role of directors under companies act 2013
TRANSCRIPT
ROLE OF DIRECTORS
UNDER
COMPANIES ACT – 2013
Presented by:
Mr. Pavan Kumar Vijay
M: 9810032568
Corporate Professionals
D-28, South Extn., Part – I
New Delhi 110049
Index
Definition
Positions Held by Director
Changing Role and State of Directors
Decision Making
Duties of Director
Power of Director
Significant Provisions Related to Directors
Appointment /Removal & Resignation
“DIRECTOR” means a director appointed to the
Board of a Company. 2(34)
“BOARD OF DIRECTORS” or “BOARD”, in
relation to a company, means the collective body of
the directors of the Company. 2(1)(10)
DEFINITION
POSITIONS HELD BY DIRECTOR
Positions held by director
Managing Director/ Whole time
Director /Manager Officer in Default /Key Managerial Person
“MANAGING DIRECTOR” - Director by virtue of
Articles/Agreement/Shareholders’ Resolution
Entrusted with the Substantial powers of Management
of the Company
Includes a director occupying the position of Managing
Director, by whatever name called
“MANAGER” - 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
Includes a director occupying the position of Manager,
by whatever name called
“WHOLE TIME DIRECTOR” includes a director in the
whole-time employment of the Company
“OFFICER IN DEFAULT” includes a director in the following
instances:
Whole-time director
Key Managerial Personnel (KMP)
In case of no KMP such director as specified by the
Board and who has consented as such
If no Director is so specified all the Directors
Person with whose advice Board of Directors is
accustomed to act, other than a person who gives in a
professional capacity
In respect of contravention, director who is aware of
such contravention
By virtue of receipt of proceedings of the
Board
Participation in such proceeding without
objection
Because of his consent for the same
“key managerial personnel”, in relation to a company,
means—
the Chief Executive Officer or the managing director or
the manager;
the company secretary;
the whole-time director;
the Chief Financial Officer; and
such other officer as may be prescribed;
CHANGING ROLE AND
STATE OF DIRECTORS
Change in Law Concerning Director
At least 1 woman director for prescribed class or classes of
companies
At least 1 director shall be a person who has stayed in India
for atleast 180 days in the previous calendar year.
The maximum limit of directors in the Company has been
increased to 15 from 12. Beyond 15, the number can be
increased by Special Resolution, approval of Central
Government has been dispensed with.
Change in Law Concerning Director
A person cannot become directors in more than 20
companies instead of 15. Out of this 20, he cannot be
director of more than 10 public companies
Listed Companies may have 1 director elected by Small
Shareholder
The amount to be deposited along with notice of nomination
of any person to the office of director has been increased
from Rs 500 to Rs 100000 or such higher amount as may be
prescribed
Alternate director can only be appointed in case director
leaves India for period of not less than 3 months
Subject to Articles, Board can appoint director nominated
by any institution in pursuance of any law or agreement
has been specified in the Law Specifically
Subject to the articles, the Board may appoint any
person, other than a person who fails to get
appointed as a director in a general meeting, as
an additional director
Types of Directorship –
Alternate/Additional/Nominee
Separate Definition of Independent Director under
Companies Act
Listed Public Company to have at least 1/3rd of the
total number of directors as independent directors.
No. of Independent Director for unlisted Company and
its subsidiaries will be prescribed by Central
Government.
INDEPENDENT DIRECTOR
INDEPENDENT DIRECTOR
For appointment of Independent Directors , Board
shall give a declaration for satisfaction of
appointment conditions and criteria.
Limited Liability of Independent Directors – Liability
only for 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
18.
DECISION MAKING OF
DIRECTORS
19.
First Board Meeting should be held within 30 days of the
Incorporation
A notice of not less than seven days in writing is required to
call a board meeting
Notice of Board meeting shall be given to all directors,
whether he is in India or outside India by hand delivery or
by post or by electronic means
BOARD MEETING
Director can participate in the Board meeting through
video conferencing or other audio visual mode as may be
prescribed
At least 4 Board meeting should be held each year, with a
gap of not more than 120 days between two Board meetings
Requirement of Holding the Board Meeting in every
quarter has been discontinued.
BOARD MEETING
In case of One Person Company (OPC), small company and
dormant company at least 1 Board meeting must be held in
each half of a calendar year with a gap of not less than 90 days
between two Board Meetings.
In case of only One Director in OPC, requirement of holding
meeting will not apply.
BOARD MEETING
To issue securities whether in India or outside.
To grant loans or give guarantee or provide security in respect of
loans;
To approve financial statement and the director’s report;
To diversify the business of the company;
To approve amalgamation, merger or reconstruction;
To take over a company or acquire a controlling or substantial
stake in another company
NEW POWERS OF DIRECTORS TO BE EXERCISED
IN BOARD MEETING ONLY
Resolution by circulation shall be consented by majority of
directors present in India instead of requirement of consent
of all directors present in India or by majority of them, as
provided in the Companies Act 1956
RESOLUTION BY CIRCULATION
Nomination and Remuneration Committee -
For listed and other prescribed class of Companies
3 or more non-executive directors out of which not less than
one half shall be independent directors
Stakeholders Relationship Committee –
For company which consists of more than one thousand
shareholders, debenture-holders, deposit-holders and any
other security holders at any time during a financial year
Chairperson who shall be a non-executive director and such
other members as may be decided by the Board
COMMITTEE MEETINGS
Audit Committee
For listed and other prescribed class of Companies
3 or more non-executive directors out of which not less than
one half shall be independent directors
Corporate Social Responsibility Committee
For 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.
3 or more Directors, out of which at least one Director shall be
an Independent Director.
COMMITTEE MEETINGS
25.
DUTIES OF DIRECTORS
A director shall act in accordance with the articles of the
company
A director shall 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 interest of the company, its employees, the shareholders,
the community and for the protection of environment.
A director shall exercise his duties with due and reasonable care,
skill and diligence and shall exercise independent judgment
DUTIES OF DIRECTORS
DUTIES OF DIRECTORS
A director shall not involve in a situation in which he may have a
direct or indirect interest that conflicts, or possibly may conflict,
with the interest of the company
A director shall not achieve or attempt to achieve any undue
gain or advantage either to himself or to his relatives, partners,
or associates
SIGNIFICANT PROVISIONS
RELATED TO DIRECTORS
29.
30.
RESTRICTION ON NON-CASH TRANSACTIONS
INVOLVING DIRECTORS
Any Director of a company or
Director of the Holding Company or
Any person connected with such person
can not acquire assets for the consideration other than cash from
the company & vice versa without the approval of company in
general meeting
RESTRICTIONS FOR DIRECTORS
PROHIBITION ON FORWARD DEALING IN
SECURITIES
No director or KEY Managerial Personnel shall buy in the Company,
or in its holding, subsidiary or associate Company -
A right to call/make for delivery at a specified price and within
a specified time, of a specified number of relevant shares
/debentures
A right, as he may elect, to call for delivery at a specified price
and within a specified time, or to make delivery at a specified
price and within a specified time, of a specified number of
relevant shares/debentures
RESTRICTIONS FOR DIRECTORS
PROHIBITION ON INSIDER TRADING OF
SECURITIES
No person including the director or Key Managerial Personnel shall
enter into the act of insider trading concerning
An act of subscribing, buying, selling, dealing or agreeing to
subscribe, buy, sell or deal in any securities either as principal
or agent if such person is reasonably expected to have access to
any non- public price sensitive information in respect of
securities of company
An act of counseling about, procuring or communicating
directly or indirectly any non- public price sensitive
information to any person
RESTRICTIONS FOR DIRECTORS
No company whether public or private can give any loan
(including loan represented by book debt) or provide any
security or guarantee in connection with a loan to a
Director or any other person in whom he is interested,
except by way of passing a special resolution.
The requirement for permission of Central Government
for giving loan to Director as provided in the Companies
Act 1956 has been dispensed with
The exemption given to loan given, guarantee or security
provided by any holding company to its subsidiary has
been dispensed with
LOAN TO DIRECTOR
Apart from existing, new related party transactions for
which Board approval will be required:
Selling or otherwise disposing of, or buying, property
of any kind
Leasing of property of any kind
Appointment of any agents for purchase or sale of
goods, materials, services or property
RELATED PARTY TRANSACTION
Appointment of any related party to any office or place
of profit in the company or its subsidiary company or
associate company
Contract for underwriting the subscription of securities
or derivatives thereof
Companies with the prescribed Capital require approval
by Special resolution for entering into defined related
party transactions.
RELATED PARTY TRANSACTION
MISREPRESENTATION IN PROSPECTUS
APPOINTMENT &
VACATION OF DIRECTORS
Appointment of Managing Director, Whole Time Director
or Manager to now be approved by special resolution in a
General Meeting compared to the earlier provision
requiring Ordinary Resolution
If appointment is not in accordance with Schedule V of the
Act, then approval of Central Government is also required.
Whole Time Director shall not be appointed for a period of
more than 5 years
Provisions to apply to Private Companies as well
APPOINTMENT OF MD/WTD
The appointment of Independent Director to be approved
by the Company in general meeting
Board may appoint Additional, Alternate & Nominee
Director as the case may be
APPOINTMENT OF OTHER DIRECTORS
DISQUALIFICATION & VACATION
NEW DISQUALIFICATIONS OF DIRECTORS
Person has been convicted for offence dealing with Related
Party Transaction anytime during the previous 5 years
Person has not obtained Director Identification Number
Person has been convicted for any offence and has been
sentenced for an imprisonment extending to 7 years or
more
DISQUALIFICATION & VACATION
VACATION OF OFFICE OF DIRECTOR
Director to vacate his office if he fails to attend all Board
Meetings for a consecutive period of 12 months as opposed to
previous provision prescribing a 3 month period. This even
when the leave of absence has been granted.
If all directors have vacated the office, the promoter shall
appoint minimum number of members
And if that is not possible, the Central Government may
appoint Directors till the Company makes appointment in a
General Meeting
35.
THANK YOU