Company Law VI: Directorship

S. 2(34), Companies Act, 2013: A director appointed to the Board of a company - person appointed to perform the duties and functions of director of a company in accordance with provisions of the Companies Act, 2013.

S. 2(10): Board of Directors: Collective body of the directors of the company.

S. 149(1): A minimum of 1 director in case of a One Person Company, 2 in case of a private company, and a maximum of 15 directors. More directors may be appointed after a special resolution in General Meeting. There should be at least one female director appointed.

S. 165: Maximum number of directorships (including alternate directorships) held by a single person is 20. In addition, the number of directorships in public or private companies that are either holding or subsidiary companies of a public company shall be limited to 10. This limit may further reduced through a special resolution.

S. 149(3): Residence of a director in India is compulsory. 

S. 2(47): Independent director as under S. 149(5) - A director other than a managing or whole-time or nominee director who does not have any material or pecuniary relationship with the company/ directors. Criteria for independent directors prescribed under S. 149(6).

Every listed public company must have at least 1/3 of its total number of direcors as independent directors. Intermittent vacancies should be filled by the Board of Directors within 3 months from the date of such vacancy, or no later than the next board meeting (whichever is later).

S. 151: Every listed company may have a director elected by small shareholders (i.e. those holding shares of nominal value of Rs. 20,000/- or less or other prescribed sum).

First director:

First directors are usually named in the articles of association. If unnamed, then individuals who are subscribers to the memorandum shall be deemed first directors until appointment of directors. In case of OPC, an individual that is a member will be deemed first director until director is appointed under S. 152.

Duties of Directors covered under S. 166:

• Act in accordance with the articles
• Act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, shareholders, community and for the protection of the environment.
• Exercise duties with due and reasonable care, skill and diligence and to exercise independent judgment. 
• Avoid direct or indirect conflicts of interest.
• Avoid attempting to achieve undue gain or advantage through his position. 
• Not assign his office. 

Powers of the board are dealt with under S. 179:

For very small or very large companies, typically, the BOD will have power vested in it to do all such acts and things for which the company is authorised. However, in most other cases, the powers of the company may be divided between the BOD and the General Meeting. In such cases, the powers of the BOD extend to whatever powers are not vested in the GM.

Board Meetings:

The BOD generally oversees the management of the company, and ensures that the interest of non controlling shareholders is protected. S. 173 deals with board meetings and requires the first to be within 30 days of the date of incorporation. In addition, there should be a minimum of 4 meetings per year, and not more than 120 days between consecutive meetings. For OPCs, small companies and dormant companies, at least 1 Board meeting should be conducted in each half of the calender year, and the gap between two meetings shouldn't be more than 90 days. 

Notice of board meetings is required in writing 7 days in advance to the registered address of every director. 

Requisite quorum shall be one third of the total strength, or two directors, whichever is higher. If total number of directors falls below the quorum (as fixed by the AOA), the continuing directors may act to increase the number to fulfill quorum, or to summon a general meeting.