Section 149 of the Companies Act, 2013 (CA 2013) provides for “Company to have Board of Directors” and this section is effective from 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27-03-2014. Section 149 of CA 2013 corresponds to section 252 (Minimum Number of Directors), section 253 (Only Individuals to be Directors) and section 259 (Increase in Number of Directors to require Government sanction) of the Companies Act, 1956.
Number of Individual Directors in a Company
As per section 149(1) of the CA 2013, every company shall have a Board of Directors (BOD) consisting of individuals as directors. That means only Individuals are eligible for becoming directors in a company.
Further, the provisions of sub-section (1) of section 149 also provides for the minimum and maximum number of directors required in case of different types of companies viz. Public, Private and OPC.
A) Minimum Directors [Section 149(1)(a)]:
A company must have at least the following minimum number of directors
- In case of Public Company: 3 Directors;
- In case of Private company: 2 Directors;
- In case of One Person Company (OPC): 1 Director.
Thus, the concept of only one director in case on OPC has been newly introduced in the Companies Act, 2013.
B) Maximum Director [Section 149(1)(b)]:
A company may appoint a maximum of 15 directors. In accordance with the first proviso of section 149(1) of CA 2013, a company may also appoint more than fifteen directors after passing a special resolution. Thus, the approval of Central Government is not required for increasing the number of directors.
The maximum limit of directors in a company has been increased from 12 to 15 under CA 2013 in compare to old CA 1956. Under the old Companies Act, 1956, the private company was allowed to appoint any number of directors but now, under CA 2013, the maximum limit of directors has been applicable on every company.
Compulsory Appointment of Woman Directors on the Board
In compliance with the second proviso of section 149(1) of the Companies Act, 2013, the prescribed class of companies shall have at least one Woman Director. The Central Government (CG) has now prescribed such class or classes of companies in Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014.
Accordingly, 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 ₹100 crore or more; or
b) turnover of ₹300 crore or more:
Note: 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.
A) Last date to appoint Woman Director:
A company, which has been incorporated under the CA 2013 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.
In other words, such prescribed class of companies must appoint at least 1 Woman Director within 6 months from the date of its incorporation under the Companies Act, 2013.
B) Filling Vacancy of Woman Directors:
According to second proviso to Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014, any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest. However, the filling of such vacancy of Woman Director shall not be later than:
i) Immediate next Board meeting; or
ii) 3 months from the date of such vacancy;
– whichever is later.
In other words, if there is any intermittent vacancy of a woman director then it shall be filled up with another woman director within 3 months from the date of such vacancy or not later than immediate next board meeting, whichever is later.
Requirement for Resident Director in a Company
As per Section 149(3) of the CA 2013, every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
Further, the Ministry of Corporate Affairs (MCA) has issued a clarification on applicability of requirement for resident director in the current calendar/ financial year vide General Circular No. 25/2014 dated 26-06-2014.
Accordingly, the newly incorporated companies between 01-04-2014 to 30-9-2014 should have a resident director either at the incorporation stage itself or within six months of their incorporation.
However, a company incorporated on and after 30th September, 2014 need to have the resident director from the date of incorporation itself.
Independent Directors in a Company
A) Criteria and Qualifications of Independent Director:
According to section 149(6) of CA 2013, an independent director in relation to a company, means a director who fulfills the following criteria:
1) Experienced Person: The Independent Director must be a person of integrity and possesses relevant expertise and experience in the opinion of the Board.
2) Not a Promoter: A person who is or was a promoter of the company or its holding, subsidiary or associate company shall not become Independent Director. Additionally, the Independent Director shall not be related to promoters or directors in the company, its holding, subsidiary or associate company.
3) Relationship: The Person 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;
4) Relative Relationship: 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 2% or more of its gross turnover or total income or ₹50 lakh or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year.