Lecture Chapter- 1

1 “Appointment and Qualfiication of Directors”

Paper – 4 “ Corporate and other Laws”

Part – I Part – II

Corporate Laws (70%) Economics Laws (30%)

(A) Companies Act, 2013 (B) Securities Laws (10%) (i) FEMA

(ii) PMLA

(a) Directors (30%) (a) SCRA, 1956 (iii) SARFAESI

(b) Other topics (30%) (b) SEBI Act, 1992 (iv) IBC

(c) SEBI (LODR) (v) Arbitration

Regulations, 2015 (vi) FCRA

DIRECTORS

Chapter – XI Chapter – XII Chapter – XIII

Appointment and Qualification Meetings of the Board Appointment and

of Directors and its Powers Remuneration of

Managerial Personnel

Sections 149 to 172 Sections 173 to 193 Sections 196 to 205

Companies (Appointment and Companies (Meetings of Companies (Appointment

Qualification of Directors) the Board and its Power) and Remuneration of

Rules, 2014 Rules, 2014 Managerial Personnel)

Rules, 2014

1.1
 Analysis of definition of term “Officer” under the Companies Act, 2013
Sec. 2(59) - "Officer" includes any

director, manager or key managerial personnel or any person in accordance with whose directions or instructions the Board of
Directors or any one or more of the directors is or are accustomed to act.

Meaning of Meaning of Meaning of Key Managerial Personnel

Director Manager
Appointment and Qualification of Directors

Sec. 2(34): "director" Sec. 2(53): "manager" Sec. 2(51): "key managerial
means a director means an individual personnel", in CEO Sec. "Chief Executive Officer" means an officer of a
appointed to the who, relation to a 2(18) company, who has been designated as such by
Board of a  subject to the company, means— it;
company superintendence, (i) the Chief Executive Managing Sec. "managing director" means a director who, by
control and Officer or the Director 2(54)  virtue of the articles of a company or

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direction of the managing director  an agreement with the company or
Sec. 2(10): "Board of Board of or the manager;  a resolution passed in its general
Directors" or Directors, (ii) the company meeting, or by its Board of Directors,
"Board", in  has the secretary; is entrusted with substantial powers of
relation to a management of (iii) the whole-time management of the affairs of the company
company, means the whole, or director; and
the collective substantially (iv) the Chief Financial includes a director occupying the position of
body of the the whole, of the Officer; managing director, by whatever name called.
directors of the affairs of a (v) such other officer, Manager Sec. Already defined
company. company, not more than one 2(53)
and level below the Company Sec. "company secretary" or "secretary" means a
 includes a directors who is in Secretary 2(24) company secretary as defined in Sec, 2(1) (c) of
director, or whole-time
the Company Secretaries Act, 1980 who is
 any other person employment, appointed by a company to perform the
designated as key
Meaning of Terms used in definition of “ KMP”

occupying the functions of a company secretary under this Act.

position of a managerial
Whole Sec. "whole-time director" includes a director in the
manager, by personnel by the
Time 2(94) whole-time employment of the company.
whatever name Board; and
Director
called, whether (vi) such other officer as
Chief Sec. "Chief Financial Officer" means a person
under a contract may be prescribed.
Financial 2(19) appointed as the Chief Financial Officer of a
of service or not. officer company.
Chapter 1
Chapter 1 Appointment and Qualification of Directors
Chapter – 1 “Appointment and Qualification of Directors”
PARTS

I II III IV

Requirement of Directors Appointment of Disqualification, Other

and different types of Directors Vacation, resignation Provisions

Directors removal, etc.

- Sec. 149 Sec. 151 and 152 Sec. 164 and 167 - Sec. 153-159

- Sec. 150 Sec. 160 and 161 Sec. 165 - Sec. 166

Sec. 162 and 163 Sec. 168 and 169 - Sec. 170-172

(i) Sec. 149: Company to have Board of Directors:

Number of Woman Resident Independent

Directors Directors Directors Directors

Sec. 149(1) 2nd proviso to Sec. 149(3) Sec. 149(4) to

Sec. 149(1) 149(13)

(i) Every Company shall have a BOD Consisting of Individuals.

(ii) Minimum directors: 1 (OPC); 2 (Private Co.); 3 (Public Co.)

(iii) Maximum directors: 15

First Provsio to Sec. 149(1): To appoint >15 directors, SR is required

Note: Limit of Maximum directors and requirements of SR, not applicable over Govt.

companies and Section 8 companies subject to conditions.

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Appointment and Qualification of Directors Chapter 1
Woman Director: 2nd proviso to Sec. 149 (1) and Rule3

Prescribed Companies shall have

atleast one woman director

Companies required Appointment in case Filling of Intermittent

to have woman director of a new company vacancy

(a) Every Listed Company Covered under Intermittent Vacancy

(b) Unlisted Public Companies prescribed criteria shall be filled by Board

PUC or Turnover shall be made within at earliest but not

> 100 Cr 300 > Cr. 6 months of date of lower than

Incorporation - Immediate next

Note: PUC or Turnover as on Board Meeting; or

date of latest audited - 3 Months from date of

Financial statements to vacancy,

be considered. whichever is later.

Example – 1:

PUC Turnover whether women director required

ABC Ltd. Listed 50 Cr. 200 Cr. Yes

A (Pvt.) Ltd. “ 90 Cr. 250 Cr. Yes

X Ltd. Unlisted 40 Cr. 240 Cr. No

Y Ltd. “ 110 Cr. 290 Cr. Yes

Z Ltd. “ 90 Cr. 305 Cr. Yes

M Ltd. “ 110 Cr. 350 Cr. Yes

O (Pvt.) Ltd. “ 105 Cr. 360 Cr. No

P (Pvt.) Ltd. “ 90 Cr. 400 Cr. No

Example - 2: ABC Ltd. Incorporated on 05.09.2020 with Puc of Rs. 150 crores. Within

how much period,Woman director shall be appointed.

Ans.: 6 months from date of incorporation.

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Chapter 1 Appointment and Qualification of Directors
Example - 3: Vacancy Created in office of woman director on 15.08.2020.

3 Months

15.08.2020 15.10.2020 14.11.2020

Date of Vacancy Board Meeting

Last date by which Vacancy

to be filled

Example – 4: Vacancy created in office of woman director on 15.08.2020

3 Months

15.08.2020 14.11.2020 01.12.2020

Date of Vacancy Date of Board Meeting

Last date by which Vacancy

to be filled

Example - 5: ABC Ltd incorporated on 05.08.2020 with PUC of ₹150 Cr. and listed on

Bombay Stock Exchange.

- Compnay has 7 directors – M1 M2 M3 M4 M5 (Mens); and W1 W2 (Women)

- Office of W1 falls vacant due to resignation on 15.10.2020.

- Office of W1 not filled up by the Board in Board meeting held on

18.01.2021.

State wheter Sec. 149 (1) has been contravened?

Ans.: No

3 Months

15.10.2020 14.01.2021 18.01.2021

Date of Board meeting

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Appointment and Qualification of Directors Chapter 1
Resident Director – Section 149 (3):

Existing Companies Newly Incorporated Companies

Every Company shall have This requirement shall apply

proportionately for the financial year

atleast one director in which company is incorporated

who stays in India for > 182 days

during the financial year

Example-1: For financial year 2018-19, period of stay of directors in India of X Ltd. is

as follows:

D1 – 01.04.2018 to 31.10.2018 > 182 days

D2 – 15.06.2019 to 15.08.2019 < 182 days

D3 – 01.01.2020 to 15.01.2020 < 182 days

D4 – 10.10.2019 to 05.01.2020 < 182 days

D5 – 18.06.2019 to 20.07.2020 < 182 days

State whether Section 149 (3) has been complied with.

Example–2: For financial year 2019 – 20, period of stay of directors in India of X Ltd.

is as follows:

D1 – 01.04.2019 to 15.06.2019 < 182 days

D2 – 15.06.2019 to 15.08.2019 < 182 days

D3 – 01.01.2020 to 15.01.2020 < 182 days

D4 – 10.10.2019 to 05.01.2020 < 182 days

D5 – 18.06.2019 to 20.07.2020 < 182 days

State Whether Section 149 (3) has been Contravened. No

(Refer MCA Circular 11/2020 dated 24.03.2020)

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Chapter 1 Appointment and Qualification of Directors
Example–3: A (Pvt.) Ltd. was incorporated on 15.07.2020.

Compute number of days a director must stay in India so as to fulfill the

requirement of Sec. 149 (3).

Ans.: No. of days from 15.07.2020 to 31.03.2021

= 17 + 31 + 30 + 31 + 30 + 31 + 31 + 28 +31

= 260 days

Proporationate days = 182 x 260

365

= 130 days

DO PRACTICE – Questions on Woman director / Resident Director.

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