NUMBER OF DIRECTORSHIPS : SOME INTERESTING CHANGES
By: CS. Balaji, Company Secretary, Chennai
The subject mater of discussion is “Number of Directorships”. In the previous company law i.e. Companies Act 1956, the sections 275, 276 and 278, deal with the provisions relating to number of directorships.
As changes are inevitable, the provisions relating to “Number of Directorships” have also seen its new changed form in The Companies Act 2013 under section 165.
We are now likely to study the new provisions on the subject matter and compare with the erstwhile provisions though it is still in practice.
Hope you will enjoy reading the below mentioned provisions with zeal and interest.
In view of the foregoing provisions of the Companies Act 2013, we need to focus our attention towards the following;
1. We should bring to the notice of our directors of the latest provisions on number of directorships that a person shall not hold office as a director in more than 20 companies. And the maximum directorship in public companies cannot exceed 10.
2. From the disclosure made by the directors on their directorships, it is imperative to understand whether any other company has passed a special resolution specifying the lesser number of directorships for any of our director.
3. If any special resolution passed as per the provisions of Companies Act 2013, specifying lesser number of companies in which a director of the company may act as directors, then we need to consider that limit as the limit specified by this section for the purpose of number of directorship for that particular director.
Friends, hope the above deliberations have given you an understanding of the provisions relating to “number of directorships” as per the Companies Act 2013.
Please do write your suggestions, in case you feel the above could have been presented better, to my ID gbalajiacs@gmail.com
G Balaji
Company Secretary
We are now likely to study the new provisions on the subject matter and compare with the erstwhile provisions though it is still in practice.
Hope you will enjoy reading the below mentioned provisions with zeal and interest.
S No
|
Companies Act 2013
|
Companies Act 1956
|
1
|
A person shall
not hold office as a
director in
more than 20 companies at the
same
time.
|
A person shall
not hold office in more
than
15 companies at the same time.
|
2
|
The maximum
number of public
companies in
which a person can be
appointed as
director shall not exceed 10.
In other
words, out of maximum limit of
20 companies,
a person shall hold office
as a director
in public companies only
upto
10 and not more than that.
|
For reckoning
15 companies for the
purpose of
directorships, the
following are
excluded;
i) private
company;
ii) an
unlimited company;
iii) an
association not carrying on
business for
profit or which prohibits
the payment of
dividend.
In other
words, a person shall hold
office as a
director in public
companies
upto 15.
|
3
|
Members of the
company may by special
resolution
specify lesser number of
companies in
which a director of the
company
may act as directors.
|
No provision
|
4
|
A person
holding directorships more than
the prescribed
limits, shall within a
period of one
year from the notification
of this
section,
i) choose not
more than the specified
limit of those
companies in which he
wishes to
continue to hold office as
director;
ii) resigns
his office as director in the
other
remaining companies;
iii) intimate
the choice made by him to
each of the
companies in which he was
holding the
office of director before such
commencement
and to the Registrar
having
jurisdiction in respect of each
such
company.
|
A person
holding office as director in
more than 15
companies shall within
two months
from the commencement
of Companies
(Amendment) Act
2000,
i) choose not
more than 15
companies, as
companies in which he
wishes to
continue to hold the office
as director;
ii) resigns
his office as director in the
other
companies;
iii) intimate
the choice made by him
to each of the
companies in which he
was holding
the office of director
before such
commencement and to
Registrar
having jurisdiction in
respect of
each such company, and
also
to the Central Government.
|
5
|
Any
resignation made by a director in
order to
comply with the provisions of
this section,
shall become effective
immediately on
the dispatch thereof to
the
company concerned.
|
Any
resignation made by a director in
order to
comply with the provisions of
this section,
shall become effective
immediately on
the dispatch thereof to
the
company concerned.
|
6
|
No person
shall act as a director in more
than the
specified number of companies
i) after
dispatching the resignation of his
office as
director; or
ii) after the
expiry of one year from the
notification
of this section.
|
No person
shall act as a director in
more than 15
companies
i) after the
expiry of two months from
the
commencement of Companies
(Amendment)
Act 2000; or
ii) of any
company after dispatching
the
resignation of his office as
director
thereof.
|
7
|
Punishable
with fine which shall not be
less than
Rs.5000/- but which may extend
to Rs.25,000/-
for every day after the first
during which
the contravention
continues.
|
Punishable
with fine which may
extend to
Rs.50,000/- in respect of
each of those
companies after the first
fifteen.
|
1. We should bring to the notice of our directors of the latest provisions on number of directorships that a person shall not hold office as a director in more than 20 companies. And the maximum directorship in public companies cannot exceed 10.
2. From the disclosure made by the directors on their directorships, it is imperative to understand whether any other company has passed a special resolution specifying the lesser number of directorships for any of our director.
3. If any special resolution passed as per the provisions of Companies Act 2013, specifying lesser number of companies in which a director of the company may act as directors, then we need to consider that limit as the limit specified by this section for the purpose of number of directorship for that particular director.
Friends, hope the above deliberations have given you an understanding of the provisions relating to “number of directorships” as per the Companies Act 2013.
Please do write your suggestions, in case you feel the above could have been presented better, to my ID gbalajiacs@gmail.com
G Balaji
Company Secretary
Good analysis Balaji; as regards restriction by shareholders on number of Directorships, if one Company shareholders put a restriction for 5 companies and another Company puts 10 companies, what will happen? Mostly this provision may not be practically used. It may be useful for students for their exam. That is all
ReplyDeleteThanks for the analysis sir. i endorse mohan sir's views. moreover, directors may not volunteer to give details about the restrictions by shareholders on their directorships while being appointed in another company.
DeleteMy opinion is that, this cannot be enforced unless the Form 32 is revised to include such provisions.
my view is, it is totally against the fundamental rights of indian citizen.
Deleteone can decide for himself about in how many companies he can discharge his duties as director. The companies act can put maximum limit but not by shareholder. this is nothing but appointing every employee with the permission of shareholders.Hope it will be suitably modified or removed
P Thirumalaikumar
Good Work Balaji. My Hearty Wishes. Neat Analysis. Keep writing
ReplyDelete-M.Sundar A.C.S
Sec 165(5) - No such person shall act as director in more than the specified number of companies,—
ReplyDelete(a) after despatching the resignation of his office as director or non-executive director thereof, in pursuance of clause (b) of sub-section (3); or
(b) after the expiry of one year from the commencement of this Act,
whichever is earlier.
If situation of subclause (b) arises - then how to recognise in which Company he will not be treated as Director.?