Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Thursday, April 17, 2014

Directors under Companies Act 2013

Woman Director
The following class of companies shall appoint at least one woman director-
(i) Every listed company;
(ii) Every other public company having -
      (a) Paid–up share capital of Rs. 100 crore or more; or
      (b) Turnover of Rs. 300 crore or more.
For the purposes of this rule the paid up share capital or turnover as on the last date of latest audited financial statements shall be taken into account.

Independent Director
The following class of companies shall have at least 2 directors as independent directors -
(i) Public companies having paid up share capital of Rs. 10 crore or more; or
(ii) Public companies having turnover of Rs. 100 crore or more; or
(iii) Public Companies having  outstanding loans, debentures and deposits(in aggregate) exceeding rs. 50 crores.

Higher number of independent directors shall be applicable to a company in case such company is required to appoint such higher number of independent directors due to composition of its audit committee.

Qualification: An independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business.

Databank of Persons offering to become Independent Directors:
Any body, institute or association (hereinafter to be referred as “the agency”) authorised by the Central Government shall create and maintain a data bank of persons willing and eligible to be appointed as independent director and such data bank shall be placed on the website of the MCA or on any other website as may be approved by the Central Government.

Any person who desires to get his name included in the data bank of independent directors shall make an application to “the agency” in Form DIR-1.

Any person who has applied for inclusion of his name in the data bank of independent directors or whose name appears in the data bank, shall intimate to the agency about any changes in his particulars within fifteen days of such change.

Note: Any irregular vacancy of an independent director or Woman Director shall be filled-up by the Board at the earliest but not later than
(a)immediate next Board meeting or
(b)three months from the date of such vacancy; 
whichever is later.

Small Shareholders' Director
(1) A listed company, may upon notice of not less than 1000 small shareholders or 1/10 of the total number of such shareholders, whichever is lower, have a small shareholders’ director elected by the small shareholders.
(2)   The small shareholders shall leave a notice of their intention to propose a person as a candidate for the post of small shareholders’ director with the company at least 14 days before the meeting under their signatures.
(3) The notice shall be accompanied by a statement signed by the person proposed for the post of small shareholders’ director stating his DIN, qualification and consent to act as a director of the company.
(4)  Such director shall be considered as an independent director subject to , his eligibility u/s 149(6) and his giving a declaration of his independence in accordance with section 149(7) of the Act.

(5) The appointment of small shareholders’ director shall be subject to the provisions of section 152 except that-

§  such director shall not be liable to retire by rotation;
§ such director’s tenure as small shareholders’ director shall not exceed a period of three consecutive years; and
§  on the expiry of the tenure, such director shall not be eligible for re-appointment.
(6) A person shall not be appointed as small shareholders’ director if he is not eligible for appointment in terms of section 164.
(7) A person appointed as small shareholders’ director shall vacate the office if -
§  the director incurs any of the disqualifications specified in section 164;
§  the office of the director becomes vacant in pursuance of section 167;
§  the director ceases to meet the criteria of independence as provided u/s 149(6).
(8) No person shall hold the position of small shareholders’ director in more than two companies at the same time in case the second company is in a business which is competing or is in conflict with the business of the first company.

(9) A small shareholders’ director shall not, for a period of 3 years from the date on which he ceases to hold office as a small shareholders’ director in a company, be appointed in or be associated with such company in any other capacity, either directly or indirectly.

Consent to act as Director
Every person who has been appointed as a director shall on or before the appointment furnish to the company a consent in writing to act in Form DIR-2.
Provided that the company shall file such consent with the Registrar in Form DIR-12 within 30 days of the appointment of a director along with the required fee.

Application for Allotment of DIN
(1) Every individual, who is to be appointed as director of a company shall make an application to the Central Government electronically in Form DIR-3, for the allotment of a DIN along with required fees.
 (2) (a) The applicant shall download Form DIR-3 from the portal on the MCA website, fill in and sign the form using Digital Signature Certificate and after attaching copies of the following documents, scan and file the entire set of documents electronically-
§ photograph;
§ proof of identity;
§   proof of residence;
§  verification by the applicant for applying for allotment of DIN in      Form DIR-4; and
§   specimen signature duly verified.
(b) Form DIR-3 shall be verified digitally by -
§ a chartered accountant or a company secretary or a cost accountant(all in practice); or
§ a company secretary in full time employment of the company or by the managing director or director of the company in which the applicant is to be appointed as director.

Allotment of DIN
(1) The provisional DIN generated by the system automatically after submission of the Form DIR-3 shall not be utilized till the DIN is confirmed by the Central Government.
(2)      After generation of the provisional DIN, the Central Government shall process the applications received for allotment of DIN and decide on the approval or rejection thereof and communicate the same to the applicant along with the DIN allotted in case of approval within a period of one month from the receipt of such application.
(3)       If the Central Government finds such application to be defective or incomplete in any respect it shall give intimation of the same to the applicant directing him to rectify the same by resubmitting the application within a period of fifteen days of giving such intimation.
Provided that the Central Government shall -
§ reject the application and direct the applicant to file fresh application with complete and correct information;
§ treat and label such application as invalid in the electronic record in case the defects are not removed within the given time
(4)      In case of rejection or invalidation of application, the provisional DIN so allotted by the system shall get lapsed automatically and the fee so paid with the application shall neither be refunded nor adjusted with any other application.

Cancellation of DIN
The Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may  cancel or deactivate the DIN in case –
   (a) the DIN is found to be duplicated in respect of the same person provided   the data related to both the DIN shall be merged with the validly retained number;
   (b) the DIN was obtained in a wrongful manner or by fraudulent means;    *Provided that an opportunity of being heard shall be given to the concerned   individual before cancellation or deactivation of DIN.  
   (c) of the death of the concerned individual;
   (d) the concerned individual has been declared of unsound mind by a competent Court;
   (e) the concerned individual has been adjudicated an insolvent:
   (f) an application made in Form DIR-5 by the DIN holder to surrender his DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority
        * Provided that before deactivation of any DIN in such case, the Central Government shall verify e-records.

Explanation:- For the purposes of point(b) above -
(i) the term “wrongful manner” means if the DIN is obtained on the basis of documents which are legally invalid or incomplete  or on suppression of material information or on the basis of wrong certification or by making misleading or false information or by misrepresentation;
(ii) the term “fraudulent means” means if the DIN is obtained with intent to deceive any other person or any authority including the Central Government. 

Changes in Particulars of DIN
(1) In case of any change in particulars of an individual who has been allotted a DIN shall intimate to the Central Government in Form DIR-6 about any such change  within a period of thirty days of such change(s) in the following manner, namely;-
(i) the applicant shall download Form DIR-6 from the portal and fill in the relevant changes, attach copy of the proof of the changed particulars and verification in the Form DIR-7 all of which shall be scanned and submitted electronically;
(ii) the form shall be digitally signed by a chartered accountant or a company secretary or a cost accountant (all in practice);
     (iii) the applicant shall submit the Form DIR-6;

(2) The Central Government after verification of such changed particulars from the enclosed proofs shall incorporate the said changes and inform the applicant confirming the effect of such change in the electronic database maintained by the Ministry.
(3)The DIN cell of the Ministry shall also intimate the change(s) in the particulars of the director submitted to it in Form DIR-6 to the concerned Registrar(s) under whose jurisdiction the registered office of the company(s) in which such individual is a director is situated.
(4)The concerned individual shall also intimate the change(s) in his particulars   to the company(s) in which he is a director within fifteen days of such change.

Notice of Candidature of a Person for Directorship
The company shall inform its members at least seven days before the general meeting about the candidature of a person for directorship or the intention of a member to propose such person as a candidate for that office-
(1) by serving individual notices through electronic mode to such members who have provided their email addresses and in writing to all other members; and
(2) by placing notice of such candidature or intention on the website of the company, if any:
Provided that it shall not be necessary for the company to serve individual notices in case the company advertises and circulates such candidature or intention, not less than seven days before the meeting at least once in a vernacular newspaper in the principal vernacular language of the district where registered office of the company is situated and at least once in English language in an English newspaper in such district.

Disqualification of Directors u/s 164(2)
 (1) Every director shall inform to the company in Form DIR-8 about his disqualification u/s 164(2) (if any) before he is appointed or re-appointed.
(2) Whenever a company fails to file the financial statements or fails to repay any deposit, interest, dividend, or fails to redeem its debentures, as specified u/s 164(2), the company shall immediately file Form DIR-9 to the Registrar furnishing therein the names and addresses of all the directors of the company during the relevant financial years and the Registrar shall immediately register the document and place it in the document file for public inspection.
(3) When a company fails to file the Form DIR-9 within a period of thirty days of the failure that would attract the disqualification u/s 164(2), officers of the company specified in clause (60) of section 2 of the Act shall be the officers in default.
 (4) Any application for removal of disqualification of directors shall be made in Form DIR-10

Notice of Resignation of Director
The company shall intimate the Registrar in Form DIR-12 within thirty days from the date of receipt of notice of resignation from a director and post the information on its website, if any. 
Where a director resigns from his office, he shall within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with required fee.

Register of Directors and Key Managerial Personnel
(1) Every company shall keep at its registered office a register of its directors and key managerial personnel containing the following particulars, namely:-
(a) DIN (optional for key managerial personnel);
(b) present name and surname in full;
(c) any former name or surname in full;
(d) father’s name, mother’s name and spouse’s name (if married) and surnames in full;
(e) date of birth;
(f) residential address (present as well as permanent);
(g) nationality (including the nationality of origin, if different);
(h) occupation;
(i) date of the board resolution in which the appointment was made;
(j) date of appointment and reappointment in the company;
(k) date of cessation of office and reasons therefor;
(l) office of director or key managerial personnel held or relinquished in any other body corporate;
(m) membership number of the Institute of Company Secretaries of India in case of Company Secretary, if applicable; and
(n) Permanent Account Number (mandatory for key managerial personnel if not having DIN);
(2) In addition to the above details the company shall also include in the aforesaid Register the details of securities held by them in the company, its holding company, subsidiaries, subsidiaries of the company’s holding company and associate companies relating to-
(a) the number, description and nominal value of securities;
(b) the date of acquisition and the price or other consideration paid;
(c) date of disposal and price and other consideration received;

-Contributed by Ms. Azfar Khan (Article Assistant)

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