• Posted on: 18 April 2016
  • By: admin

Companies Act 2013 Easy understanding

 

Director

Section 2 (34) of companies Act , 2013 prescribed that ‘’Directors’’ means a directors appointed to the Board of a company. A director is a person appointed to perfrm the duties and function of director of a company in accordance with provision of companies act 2013.

 

Minimum/Maximum Number of Directors

 

Directors

 

Members

 

Quorum

Public

                3

Minimum  7 and maximum 

                   5

Private

                2

Minimum 2 and maximum 200

                   2

 

Number of Directorships

As per section 165 of the Companies Act, 2013 maximum number of directorships, including any alternate directorship a person can hold is 20. The number of directorships in public companies and private companies that are either holding or subsidiary company shall be limited to 10. Further the members of a company may restrict abovementioned limit by passing a special resolution.

 

Residence of Director in india 

Section 148 (3) of the Companies Act, 2013 has provided for residence of director in India as a compulsory i.e. every company shall have at least one directors who has stayed  in India for a total period of not less 182 days in the previous calendar year.

 

Women Director

Every listed company and every other public company having paid up share capital of Rs. 100 crores or more or turnover of Rs. 300 crores or more as on the last date of latest audited financial statements, shall also appoint at least one women director under Section 149 (1) of the companies Act, 2013.

 

Independent Directors

Section 2 (47) of the Companies  Act, 2013 prescribed that “Independent director’’ means as independent director referred to in sub section (5) of section  149 of the Act. In fact reference should have been made to sub section (6) of 149 as it specified the qualifications of independent directors with clarity.

An independent directors means a director other than a managing directors or a whole- time director or a nominee director who does not have any materials or pecuniary with the company / directors. Section 149(6) of the Act prescribes the criteria for independent directors whichy are as follows.

(a)  Who in the opinion of the Board, is a person of integrity and possesses relevant industrial expertise and experience;

(b) Such individual shall not be a promoter or related to promoter of the company or its holding, subsidiary or associate company:;

(c) Such individuals must not have any materials or pecuniary relationship during the two immediately preceding financial years or during the current financial year with the company or its promoters/ directors/ holding /subsidiary/ associate company.

(d) The relatives of such person should not have had any pecuniary relationship with the company or its holding, subsidiaries, amounting to 2% or more of its gross turnover or total income or Rs. 50 lacs or such higher amount as may be prescribed, whichever is less, during the two immediately preceding financial years or im the current financial year;

(e) He must not either directly or any of his relatives :

(i) hold or held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any three financial years immediately preceding the financial year in which he is proposed to be appointed, of –

(A)  a firm of auditors or company secretaries in practice or cost auditors of the company or its holding , subsidiary or associate company; or  

(B) any legal or a consulting firm that has or had any transaction with the company, its holding , subsidiary or associate company amounting to ten per cent. Or more of the gross turnover of such firm;

(iii) holds together with his relatives two per cent or more of total voting power of the company; or

(iv) is a chief Executive or director, by whatever name called, of any non-profit organisation that receives 25% or more of its receipts from the company any of its promoters, directors or its holding, subsidiary or is not eligible for office of independent directors; or

(f) who possesses such other qualifications as prescribed in Rule 5 of the Companies (Appointment and        

Qualification of Directors) Rules, 2014 as 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 operation or other disciplines related to the company’s business.

Every listed public company shall have at least one-third of the total number of directors as independent directors (fraction is to be rounded off to one). Central Government has prescribed that public companies with paid up share capital of Rs. 10 crore or more; or turnover of Rs. 100 crore or more; or in aggregate, outstanding loans/ borrowings/debentures/deposits/exceeding Rs. 50 crores or more as on the last date of latest audited financial statements mentioned below shall also have at least 2 directors as independent direction.

Future if there is any intermittent vacancy of an independent directors then it shall be filled up by the board of directors within 3 months from the date of such vacancy or not later than immediate next board meeting, whichever is later.

 

Directors elected by small shareholders

According to section 151 of the Companies Act, 2013 every listed company may have one director elected by such small shareholders. For the purpose of this section, ‘’small shareholders’’ means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.

 

Appointment of Directors

First Directors the first directors of most the companies are named in the  articles. If they are not so named in the articles a company, they subscribers to the memorandum who are individuals shall be deemed to be the first direction of company until the duly appointed.

 

In the case of one Person Company, an individuals shall be deemed to be the first director until the director(s) are duly appointed by the member in accordance with the provision of section 152 of the Companies Act, 2013.   

General provisions relating to appointment of directors    

1. Expect as provisions in the Act, every directors shall be appointed by the company  in general meeting.

2. Directors identification Number is compulsory for appointment give his consent to hold the office of director.

3. Every person proposed to be appointed as a directors shall furnish his directors identification Number and a declaration that he is not disqualified to become a director to become a director under the Act.

4. A person appointed as a director shall on or before the appointment give his consent to hold the office of directors.

5. Articles of the company may provide the provision relating to retirement of the all directors. 


Retirement by Rotation

If there is no provision in the article, then not less than two-third of the total number of directors of a public company shall persons whose period of office is liable to retirement by rotation and eligible to be reappointed at Annual General Meeting. At the annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then the number nearest to one-third, shall retire from office. The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment.   

At the annual general meeting at which a directors retires as aforesaid, the company may fill up vacancy by appointing the retiring directors is not so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or it that day is national holiday, till the next succeeding day which is not a holiday, at the same time and place.

If at the adjourned meeting also, the vacancy of the retiring directors is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring directors shall be deemed to have been re-appointed at the adjourned meeting , unless -                                           

(i)  a resolution for the re-appointment of such directors has been put to the meeting and lost;

(ii) the retiring director has expressed his unwillingness to be so re-appointed;

(iii) he is not qualified or is disqualified fpr appointment;

(iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by virtue of any provisions of this Act; or

(v) appointment of directors to be vote individually is applicable to the case.

 

 

Meeting of the Board

 

Section 173 of the Companies Act, 2013 deals with meeting of the Board and it provides that the first Board meeting should be held within thirty days of the incorporation. There shall be minimum of four Board meeting every year and not more one hundred and twenty days gap between two consecutive Board meetings.

 

In case of One Person Company (OPC), Small Company and Dormant Company, at least one board meeting should be conducted in each half of the calendar year and gap between two meetings should not be less than ninety days. Directors may participate in the meeting either in person or through video conferencing or other audio visual means.

 

Notice of Board Meeting

 

Not less than seven daysnotice in writing shall be given to every directors at the registered address as available with the company. The notice can be given by hand delivery or by post or by electronic means.

 

In case the Board meeting is called at shorter notice, at least one independent director shall be present at the meeting. If he is not present, then decision of the meeting shall be circulated to all directors and it shall be final only after ratification of decision by at least one independent Directors.

 

Quorum for Board Meeting 

One third of total strength or two directors, whichever is higher, shall be the quorum for the meeting.                                                

If due to resignations or removal of director(s), the number of directors of the company is reduced below the quorum as fixed by the Articles of association of the company, then the continuing Directors may act for the purpose of increasing the number of Directors to that quorum or for summoning a general meeting of the company.

 

If at any time the number of interested directors exceeds or is equal to two-third of the total strength of the Board of Directors, the number of directors who are not interested and present at the meeting, being not less than two shall be the quorum during such time.

 

The meeting shall be adjourned due to want of quorum, unless the articles provide shall be held to the same day at same time and same place in the next week or if the day is National Holiday, the next working day at the same time and place.

 

Key Managerial Personnel

The companies Act, 2013 has introduced new term Key Management Personnel .

The key management personnel are responsible for not just laying down the strategies as well as implementation. Chapter  XIII of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial personnel) Rules, 2014 deal with the legal and procedural aspect of appointment of key Managerial Personnel ) Rules, 2014 deal with the legal and procedural aspects of appointment of Key Managerial Personnel including Managing Directors, whole-time Director or Manger, managerial remuneration, secretarial audit etc.

The Companies Act, 2013 has for first time recognized the concept of key managerial personnel. As per section 2(51)of the Companies Act, 2013 ‘’key Managerial Personnel ‘’

in relation to a company, means­

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer; and

(v) such other as may be prescribed.


Managing Director

 

Section 2(54) of the companies Act, 2013, defines ‘managing director’. It stipulates that a ‘’managing director’’ means a director who, by virtue of the  articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial power of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.

 

Whole Time Director

The explanation to section 2(94) of the Companies Act, 2013 defines ‘’whole-time director’’ as director in the whole-time employment of the company.      

 

Manager

section 2(53) of the Companies Act, 2013 defines ‘"manger" as 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, and includes a director or any other person occupying the position of manager , by whatever name called, whether under a contract of service or not.

 

Chief Executive officer

Section 2(18) of the Companies Act< 2013 defined "Chief Executive Officer’’ means an officer of a company , who has been designed as such by it.

 

Chief Financial Officer

Section 2(19) of the Companies Act, 2013 defined ‘’Chief Financial Officer” mans a person appointed as Chief Financial Officer of a Company.

 

Company Secretary

Section 2(24) of the Companies Act,2013 defines ‘’company secretary” or  ‘’Secretary “ mans a company secretary as defined in clause of sub section (1) of section 2 of the company secretaries Act, 1980 who is appointed by a company to perform the function of a company secretary under this Act;

 

Appointment of key Managerial Personnel

Section 203 of the Companies Act, 2013 read with Rule 8 of the Companies (Appointed and Remuneration of Managing Personnel) Rules 2014 mandates the appointment of Key Managerial Personnel and makes it obligatory for a listed company and every other public company having a paid up share capital of rupee ten crores or more, to appoint following whole-time key managerial personnel:

(i) managing director, or Chief Executive Officer or manger and in their absence, a whole-time director,

(ii) company secretary ; and

(iii) Chief Financial Officer:

 

Every whole-time key managerial personnel of company shall be appointed by means of a resolution of the Board containing the term and condition of the appointment including the remuneration. An individual shall not be appointed or reappointed as the chairperson of the company, as well as the managing director or Chief Executive Officer of the company at the same time unless the articles of such a company provide otherwise; or the company does not carry multiple businesses. However, such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officer for each such business as may be notified the Central Government are exempted from the above.

 

A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel.

 

A company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the director present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all directors then in India.

 

If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by Board at meeting of the Board within a period of six months from the date of such vacancy.

 

 

Meetings of Shareholders 

Annual General Meeting

Annual genral meeting (AGM) is an important annual event where members get an opportunity to discuss the activities of the company. Section 96 of  the Companies Act, 2013 provides that every company, other than a One Person Company is required to hold an annual general meeting every year.

 

Following are the key provisions regarding the holding of an annual general meeting.

Holding of annual general meeting

1.  Annual general meeting should be held once every year.

2. First annual general meeting of the company should be held within 9 months from the closing of the first financial year. It shall not be necessary for the company to hold any annual general meeting in the year of its incorporation.

3. Subsequent annual general meeting of the company should be held within 6 months from the closing of the financial year.

4. The gap between two annual general meeting should not exceed 15 months.

Extension of validity period of AGM.

 

In case it is not possible for company to hold an annual meeting within the prescribed time, the registrer may, for any special reason, extend the time within which any annual general meeting shall be held. Such extension can be for a period not exceeding 3 months . No such extension of time can granted by the registrar for holding of the first annual general  meeting .

Time and place for holding an annual general meeting.

 

An annual general meeting can be called during business hours on any day that is not National Holiday. It should be held either at the registered office of the company is situate. The Central Government is empowered to exempt any company from these provision , subject to such condition as It may impose.

 

Sub-section (2) of section 102 of the Companies Act, 2013 provides that all other businesses transacted at an Annual General Meeting except the following are special business.


(i)                 the consideration of financial statements and the reports of the Board of Directors ans auditors;


(ii)               the declaration of any dividend;


(iii)              the appointment of , directors in place of those retiring.


(iv)             

the appointment of, and the fixing of the remuneration of, the auditors.

 

Extra Ordinary General  meeting

 

All general meeting other than annual general meeting are called extraordinary general meeting.

Extraordinary general meeting shall called by:

   -  By Board The Board may, whenever it deems fit, call an extraordinary general meeting of the company.

   -The Board on requisition of shareholders

  The Board must call an extraordinary general meeting on receipt of the requisition fromn the following number of members:

          (a)    In the case of a company having a share capital; members who hold on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting; 

         (b)   In the case of company not having a share capital: members who hold, on the date of receipt of the requisition, not less than one-tenth of total voting power of all the members having on the said date a right to vote.

          The requisition should set out the matters to be considered at the proposed meeting and the same should be signed by the requisitionists and sent to the registered office of the company. The Board must, within 21 days from the date of receipt of a valid requisition, prceed to call a meeting on a day not later than 45 days from the date of receipt of such requisition.

               - By requisitionists

If the Board does not within 21 days  from the date receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not  later than  45 days from the date of receipt of such requisition, the meeting may be called held by the requisitionists themselves. The meetig should be held within a period of 3 months from the date of the requisition. Reasonable expenses incurre by the requisitionists in calling such a meeting shall be reimbursed by the company to the requisitionists. The company in turn recover such expenses from any fee or other remuneration under section 197 payable to such of the directors who were in default in calling the meeting.in case the quorum isnot present within half –an-hour from the time appointed for holding a meeting called by requisitionists the meeting shall stand canceelled.

- By Tribunal

Section 98 of the Companies Act 2013 provides that if for any reason it is impracticable to all a meeting of a company or to hold or conduct the meeting of the company, the Tribunal may, either suo motu or n the application of any director or member of the company who would be entitled to vote at the meeting. Order a meeting of the company to be called, held and conducted in such manner as the Tribunal thinks fit; and Give such ancillary or consequential directions as the Tribunal thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting the operation of the provisions of this Act or articles of the company. Such directions may includes a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting . Meeting held pursuant to such order shall be deemed to be a meeting of the company duly called, held and conducted.

 

Notice of meeting 

A general meeting of a company may be called by giving not less than 21 clear days’ notice either in writing or through electronic mode. Notice through electronic mode shall be given in such manner as may be prescribed.

 

Short notice

A general meeting may be called after giving a shorter notice also if consent is given in writing or by electronic mode by not less than 95% of the members entitled to vote such meeting.

 

Place of meeting

The notice should state the place where the general meeting is scheduled to be held. In case of an annual general meeting, the place of the meeting has to be either the registered office of the company is situated. No such restriction applies to an extraordinary general meeting.

 

Day of meeting

The day and date o the meeting should be clearly stated in the notice. In case of an annual general meeting , the day should be one that is not a National Holiday. An extraordinary general meeting can however be held on any day.

 

Time of meeting

Exact time holding the meeting should b given in the notice. An annual general meeting can be called during business hours only. There is no need to follow such timing in case of an extraordinary general meeting.

 

Proxy 

Every notice calling a meeting of a company which has a share capital, or the articles of which provides foe voting by proxy at the meeting, should carry with reasonable prominence, a statement that a member entitled to attend and vote is entitled to  appoint a proxy, or, where that allowed, one or one more proxies, to attend and vote anstead of himself, and that proxy need not be a member.