Yes, Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically: Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years. Section 149(11) providRead more
Yes,
Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically:
Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years.
Section 149(11) provides that “notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms,” which means that even if each term is shorter than five years, the maximum number of consecutive terms an independent director can serve is two.
For example, if an independent director is appointed for a term of three years and then reappointed for a second term of three years, they cannot be immediately reappointed for a third consecutive term without a break. They must wait for a period (typically three years) after ceasing to be an independent director before they can be reappointed.
This provision ensures a regular infusion of fresh perspectives on the board, maintaining the independence and effectiveness of corporate governance.
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that noRead more
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that no one can be appointed as an alternate director for an independent director unless he is qualified to be an independent director.
Additionally, it’s important to note that for listed companies, regulatory amendments effective from October 1, 2018, have restricted the practice—meaning listed entities are not permitted to appoint alternate directors for their independent directors.
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is conRead more
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is considered vacated from the receipt date (or the date stated in the notice) regardless of whether the company subsequently communicates the resignation to the Registrar of Companies.
For instance, if a director submits his resignation via email or physical notice on April 1, and no later date is mentioned, his resignation is effective from April 1. If a later effective date is mentioned in the notice, then his resignation will take effect on that specified date.
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitRead more
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitting fees. In essence:
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that oRead more
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that of a director under the Act, and therefore they must secure a DIN before they can effectively perform their duties on the board.
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means: Section 8 Companies:Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-pRead more
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means:
Section 8 Companies: Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-profit in nature), a directorship in a Section 8 company does count toward the limit of 20 companies.
Foreign Subsidiary Companies: A foreign subsidiary company is incorporated outside India and is governed by the laws of that jurisdiction. Therefore, a directorship in a foreign subsidiary is not covered by the Indian Companies Act and does not count toward the limit of 20 companies.
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means: Effective Date:The director’s office is declared vacant from the date of the board reRead more
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means:
Effective Date: The director’s office is declared vacant from the date of the board resolution or decision, and the effect is limited to future board meetings.
No Retroactive Impact: Actions taken by the director prior to the resolution remain valid. The non-attendance that triggered the resolution does not retrospectively invalidate decisions or the director’s prior acts.
Practical Implication: The director ceases to be a member of the board only from the moment the resolution takes effect. Past participation or decisions made before the resolution are not affected.
Under the Companies Act, 2013, a director’s resignation becomes effective when he tenderes it in writing to the company—even if the company subsequently fails to intimate about the resignation to the Registrar of Companies (ROC). Here’s how it works: Effective Resignation:Once the director submits hRead more
Under the Companies Act, 2013, a director’s resignation becomes effective when he tenderes it in writing to the company—even if the company subsequently fails to intimate about the resignation to the Registrar of Companies (ROC). Here’s how it works:
Effective Resignation: Once the director submits his resignation in writing and follows the prescribed procedure (including filing the appropriate form, such as DIR-11, within the stipulated time), his resignation is deemed effective. This is independent of whether the company subsequently notifies the ROC.
Company’s Obligation: The company is required to intimate the resignation to the ROC (usually through Form DIR-12) as per the procedural requirements. Failure to do so does not invalidate the director’s resignation but creates a discrepancy in the ROC records.
Status in Public Records: Legally, the director ceases to hold office from the effective date of his resignation. However, if the company does not update the ROC records, the director’s name may continue to appear as a director in the public database until the error is rectified. This is a matter of the company’s compliance and does not affect the director’s legal status.
Consequences for the Company: The non-intimation may attract regulatory scrutiny or penalties for the company for not fulfilling its compliance obligations, even though it does not affect the director’s status as having resigned.
Directors participating via video conferencing are required to have their attendance recorded in the attendance register, but they need not physically sign the register at the meeting. Instead, the process can be adapted as follows: Electronic or Digital Signature:Since electronic signatures are legRead more
Directors participating via video conferencing are required to have their attendance recorded in the attendance register, but they need not physically sign the register at the meeting. Instead, the process can be adapted as follows:
Electronic or Digital Signature: Since electronic signatures are legally recognized under the IT Act, directors can affix their digital signatures on an electronic attendance register. This ensures that their participation is authenticated without needing physical presence.
Post-Meeting Physical Signature: Alternatively, the company may circulate the attendance register after the meeting, allowing remote directors to print, sign, and return a scanned copy for record-keeping. This method also serves to authenticate their attendance.
Recording Details in Minutes: Regardless of the method used, the minutes of the meeting should clearly state the names of the directors who participated via video conferencing, along with the time of joining and leaving the meeting.
Compliance with Companies Act and Rules: The Companies Act, 2013 and the Companies (Meetings of Board) Rules, 2014 do not prescribe a specific format for signing the attendance register in the case of video conferencing. The key requirement is that a reliable and verifiable record of attendance is maintained.
Based on the provisions of the Companies Act, 2013 and related rules, there is no statutory restriction that mandates a company to hold any of its board meetings in India. A company may choose to hold all board meetings abroad, provided that all procedural and statutory requirements are strictly folRead more
Based on the provisions of the Companies Act, 2013 and related rules, there is no statutory restriction that mandates a company to hold any of its board meetings in India. A company may choose to hold all board meetings abroad, provided that all procedural and statutory requirements are strictly followed.
Key Points to Consider
Compliance with Notice and Quorum Requirements
Proper Notice & Agenda: The meeting must be convened by giving proper notice and the agenda should be circulated to all directors.
Quorum Requirements: The meeting should satisfy the quorum as laid down in the Articles of Association and the Companies Act.
Recording and Documentation
Minutes of Meetings: Minutes must be recorded and maintained in the company’s statutory records, regardless of where the meeting is held.
Accessibility of Records: The records should be readily available for inspection and regulatory scrutiny in India.
Technological and Logistical Arrangements
Participation of Directors: All directors, including those based in India, must have the means to effectively participate in the meeting—this might involve ensuring reliable communication facilities.
Video Conferencing: The Companies Act, 2013 and subsequent rules recognize meetings held via video conferencing and other electronic means, which also applies when meetings are held abroad.
Regulatory and Reporting Considerations
Foreign Location Documentation: While there is no legal prohibition, the company should document the reasons and logistics for holding meetings abroad, in case any regulatory issues arise regarding governance practices or reporting.
Relevant Legal Framework
Companies Act, 2013: The Act does not prescribe any mandatory location for board meetings. The validity of the meeting depends on the compliance with notice, quorum, and documentation requirements.
Companies (Meetings of Board) Rules, 2014: These rules outline the manner in which meetings can be conducted (including through video conferencing or other electronic means) but do not impose restrictions on the geographical location.
Whether an independent director may continue to be an ID for maximum two terms, even if each such term is less than 5 years.
Yes, Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically: Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years. Section 149(11) providRead more
Yes,
Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically:
Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years.
Section 149(11) provides that “notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms,” which means that even if each term is shorter than five years, the maximum number of consecutive terms an independent director can serve is two.
For example, if an independent director is appointed for a term of three years and then reappointed for a second term of three years, they cannot be immediately reappointed for a third consecutive term without a break. They must wait for a period (typically three years) after ceasing to be an independent director before they can be reappointed.
This provision ensures a regular infusion of fresh perspectives on the board, maintaining the independence and effectiveness of corporate governance.
See lessCan an alternate director be appointed for an independent director?
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that noRead more
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that no one can be appointed as an alternate director for an independent director unless he is qualified to be an independent director.
Additionally, it’s important to note that for listed companies, regulatory amendments effective from October 1, 2018, have restricted the practice—meaning listed entities are not permitted to appoint alternate directors for their independent directors.
See lessWhen does the resignation of a director become effective?
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is conRead more
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is considered vacated from the receipt date (or the date stated in the notice) regardless of whether the company subsequently communicates the resignation to the Registrar of Companies.
For instance, if a director submits his resignation via email or physical notice on April 1, and no later date is mentioned, his resignation is effective from April 1. If a later effective date is mentioned in the notice, then his resignation will take effect on that specified date.
See lessIs sitting fees payable to a director who participates through video conferencing ?
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitRead more
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitting fees. In essence:
See lessDoes an alternate director need to obtain a Director Identification Number under Section 153 of the Companies Act, 2013 ?
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that oRead more
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that of a director under the Act, and therefore they must secure a DIN before they can effectively perform their duties on the board.
See lessFor directorship,Whether section 8 companies and foreign subsidiary companies are covered in the limit of 20 companies?
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means: Section 8 Companies:Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-pRead more
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means:
-
-
See lessSection 8 Companies:
Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-profit in nature), a directorship in a Section 8 company does count toward the limit of 20 companies.
Foreign Subsidiary Companies:
A foreign subsidiary company is incorporated outside India and is governed by the laws of that jurisdiction. Therefore, a directorship in a foreign subsidiary is not covered by the Indian Companies Act and does not count toward the limit of 20 companies.
Whether vacation of office of director on account of not attending board meetings under Section 167(1)(b) has prospective or retrospective effect?
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means: Effective Date:The director’s office is declared vacant from the date of the board reRead more
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means:
-
-
-
See lessEffective Date:
The director’s office is declared vacant from the date of the board resolution or decision, and the effect is limited to future board meetings.
No Retroactive Impact:
Actions taken by the director prior to the resolution remain valid. The non-attendance that triggered the resolution does not retrospectively invalidate decisions or the director’s prior acts.
Practical Implication:
The director ceases to be a member of the board only from the moment the resolution takes effect. Past participation or decisions made before the resolution are not affected.
A director resigns by giving notice in writing to the company. He forwards a copy of resignation in Form DIR-11 to ROC within time. What would be the status of director if the company fails to intimate about the resignation to the Registrar?
Under the Companies Act, 2013, a director’s resignation becomes effective when he tenderes it in writing to the company—even if the company subsequently fails to intimate about the resignation to the Registrar of Companies (ROC). Here’s how it works: Effective Resignation:Once the director submits hRead more
Under the Companies Act, 2013, a director’s resignation becomes effective when he tenderes it in writing to the company—even if the company subsequently fails to intimate about the resignation to the Registrar of Companies (ROC). Here’s how it works:
-
-
-
-
See lessEffective Resignation:
Once the director submits his resignation in writing and follows the prescribed procedure (including filing the appropriate form, such as DIR-11, within the stipulated time), his resignation is deemed effective. This is independent of whether the company subsequently notifies the ROC.
Company’s Obligation:
The company is required to intimate the resignation to the ROC (usually through Form DIR-12) as per the procedural requirements. Failure to do so does not invalidate the director’s resignation but creates a discrepancy in the ROC records.
Status in Public Records:
Legally, the director ceases to hold office from the effective date of his resignation. However, if the company does not update the ROC records, the director’s name may continue to appear as a director in the public database until the error is rectified. This is a matter of the company’s compliance and does not affect the director’s legal status.
Consequences for the Company:
The non-intimation may attract regulatory scrutiny or penalties for the company for not fulfilling its compliance obligations, even though it does not affect the director’s status as having resigned.
How do directors participating in a meeting by video conferencing sign the attendance register?
Directors participating via video conferencing are required to have their attendance recorded in the attendance register, but they need not physically sign the register at the meeting. Instead, the process can be adapted as follows: Electronic or Digital Signature:Since electronic signatures are legRead more
Directors participating via video conferencing are required to have their attendance recorded in the attendance register, but they need not physically sign the register at the meeting. Instead, the process can be adapted as follows:
-
-
-
-
See lessElectronic or Digital Signature:
Since electronic signatures are legally recognized under the IT Act, directors can affix their digital signatures on an electronic attendance register. This ensures that their participation is authenticated without needing physical presence.
Post-Meeting Physical Signature:
Alternatively, the company may circulate the attendance register after the meeting, allowing remote directors to print, sign, and return a scanned copy for record-keeping. This method also serves to authenticate their attendance.
Recording Details in Minutes:
Regardless of the method used, the minutes of the meeting should clearly state the names of the directors who participated via video conferencing, along with the time of joining and leaving the meeting.
Compliance with Companies Act and Rules:
The Companies Act, 2013 and the Companies (Meetings of Board) Rules, 2014 do not prescribe a specific format for signing the attendance register in the case of video conferencing. The key requirement is that a reliable and verifiable record of attendance is maintained.
Is there any restriction on a company for holding all Board Meetings abroad during the year?
Based on the provisions of the Companies Act, 2013 and related rules, there is no statutory restriction that mandates a company to hold any of its board meetings in India. A company may choose to hold all board meetings abroad, provided that all procedural and statutory requirements are strictly folRead more
Based on the provisions of the Companies Act, 2013 and related rules, there is no statutory restriction that mandates a company to hold any of its board meetings in India. A company may choose to hold all board meetings abroad, provided that all procedural and statutory requirements are strictly followed.
Key Points to Consider
Compliance with Notice and Quorum Requirements
Proper Notice & Agenda: The meeting must be convened by giving proper notice and the agenda should be circulated to all directors.
Quorum Requirements: The meeting should satisfy the quorum as laid down in the Articles of Association and the Companies Act.
Recording and Documentation
Minutes of Meetings: Minutes must be recorded and maintained in the company’s statutory records, regardless of where the meeting is held.
Accessibility of Records: The records should be readily available for inspection and regulatory scrutiny in India.
Technological and Logistical Arrangements
Participation of Directors: All directors, including those based in India, must have the means to effectively participate in the meeting—this might involve ensuring reliable communication facilities.
Video Conferencing: The Companies Act, 2013 and subsequent rules recognize meetings held via video conferencing and other electronic means, which also applies when meetings are held abroad.
Regulatory and Reporting Considerations
Foreign Location Documentation: While there is no legal prohibition, the company should document the reasons and logistics for holding meetings abroad, in case any regulatory issues arise regarding governance practices or reporting.
Relevant Legal Framework
-
-
See lessCompanies Act, 2013: The Act does not prescribe any mandatory location for board meetings. The validity of the meeting depends on the compliance with notice, quorum, and documentation requirements.
Companies (Meetings of Board) Rules, 2014: These rules outline the manner in which meetings can be conducted (including through video conferencing or other electronic means) but do not impose restrictions on the geographical location.