ROLE OF DIRECTORS UNDER COMPANIES ACT – 2013

Presented by:

Mr. Pavan Kumar VijayE: pkvijay@indiacp.comM: 9810032568Corporate ProfessionalsD-28, South Extn., Part – INew 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

DEFINITION: DIRECTOR

“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 /ManagerOfficer 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 BoardParticipation in such proceeding without objectionBecause 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

Changing Role and State of Directors

• Change in law concerning Directors• Additional/ Alternate/ Nominee Director• Independent Director

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

Decision Making of Directors

• Board Meeting• Resolution by Circulation• Committee Meeting

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.

Significant Provisions Related to Directors

• Restrictions for Director• Loan to Director• Related Party Transactions

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