Published on March 6, 2014
Presented by: Mr. Pavan Kumar Vijay E: firstname.lastname@example.org M: 9810032568 Corporate Professionals D-28, South Extn., Part – I New Delhi 110049 ROLE OF DIRECTORS UNDER COMPANIES ACT – 2013
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” 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)
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
Types of Directorship – Alternate/Additional/Nominee 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
INDEPENDENT DIRECTOR 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 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
BOARD MEETING 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 meeting will not apply . holding
NEW POWERS OF DIRECTORS TO BE EXERCISED IN BOARD MEETING ONLY 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
RESOLUTION BY CIRCULATION 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
COMMITTEE MEETINGS 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.
25. DUTIES OF DIRECTORS
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 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
29. SIGNIFICANT PROVISIONS RELATED TO DIRECTORS
RESTRICTIONS FOR DIRECTORS 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
LOAN TO DIRECTOR 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
RELATED PARTY TRANSACTION 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.
MISREPRESENTATION IN PROSPECTUS APPOINTMENT & VACATION OF DIRECTORS
APPOINTMENT OF MD/WTD 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 OTHER DIRECTORS 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
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
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