valid as on 25/03/2019

Section 149. Company to have Board of Directors

Regulation 17 of LODR

 Every shall have a  consisting of individuals as   and shall have—

(a) a minimum number of three directors in the case of a , two directors in the case of a , and one director in the case of a ; and

 a maximum of fifteen directors:

that a company may appoint more than fifteen directors after passing a special resolution:

 that such class or classes of companies as , shall have at least one woman director.

(2) Every company existing on or before the date of commencement of this Act shall within one year from such commencement comply with the requirements of the provisions of sub-section (1).

(3) Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous

 that this sub-section shall apply to a Specified IFSC public company in respect of  other than the first financial year from the date of its incorporation.

 that this sub-section shall apply to the Specified IFSC private company in respect of financial years other than the first financial year from the date of its incorporation.

Every listed public company shall have at least one-third of the total number of directors as  and the Central Government may , the minimum number of independent directors in case of any class or classes of public companies.

Explanation.—For the purposes of this sub-section, any fraction contained in such one-third number shall be rounded off as one.

Every company existing on or before the date of commencement of this Act shall, within one year from such commencement or from the date of of the rules in this regard as may be applicable, comply with the requirements of the provisions of sub-section (4).

An independent director in relation to a company, means a director other than a   or a or a nominee director,—

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

(b) (i) who is or was not a of the company or its , or subsidiaries associate company

(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;

 who has or had no   with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;

none of whose relatives—

(i) is holding any security of or interest in the company, its holding, subsidiary or  during the two immediately preceding financial years or during the current financial year:

Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed;

(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current ;

(iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or

(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);

(d) none of whose has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;

(e) who, neither himself nor any of his relatives—

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

in case of a relative who is an employee, the restriction under this clause shall not apply for his employment during preceding three financial years.

(ii) is or has been an employee or proprietor or a partner, in any of the 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 the of the company; or

(iv) is a Chief Executive or director, by whatever name called, of any non-profit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or

(f) who possesses such other qualifications

Every independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence as provided in sub-section (6).

Explanation.—For the purposes of this section, “nominee director” means a director nominated by any  in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.

The company and independent directors shall abide by the provisions specified in Schedule IV.

Notwithstanding anything contained in any other provision of this Act, but subject to the provisions of sections 197 and 198, an independent director shall not be entitled to any stock option and may receive by way of fee provided under sub-section (5) of section 197, reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the .

Subject to the provisions of section 152, an independent director shall hold office for a term up to on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board’s report.

Notwithstanding anything contained in sub-section (10), no independent director shall hold office , but such independent director shall be eligible for appointment after the expiration of three years of ceasing to become an independent director:

Provided that an independent director shall not, during the said period of three years, be appointed in or be associated with the company in any other capacity, either directly or indirectly.

Explanation.—For the purposes of sub-sections (10) and (11), any tenure of an independent director on the date of commencement of this Act shall not be counted as a term under those sub-sections.

(12) Notwithstanding anything contained in this Act,—

an independent director;

(ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.

The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors by rotation shall not be applicable to appointment of independent directors.

1. Section 149(1) shall not apply to section 8 companies vide notification no. G.S.R. 466(E) dated 5th June, 2015.(Substituted vide below mentioned notification)

2. Section 149(1) is applicable to section 8 companies except clause (b) and first proviso, vide exemption notification to section 8 companies dated 13th June, 2017.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(20) Company means a company incorporated under this Act or under any previous company law
2(10) Board of Directors, in relation to a company, means the collective body of the directors of the company
2(34) Director means a director appointed to the Board of a company
2(71) Public company means a company which—

(a) is not a private company; and

(b) has a minimum paid-up share capital, as may be prescribed:

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles

2(68) Private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles, —

(i) restricts the right to transfer its shares;

(ii) except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that—

(A) persons who are in the employment of the company; and

(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company

2(62) One Person Company means a company which has only one person as a member
1. 149(1)(b) is not applicable to a Government Company – vide notification no. G.S.R. 463(E) dated 5th June, 2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

2. 149(1)(b) is not applicable to section 8 companies- vide exemption notification to section 8 companies dated 13th June, 2017.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

First Proviso shall not apply to section 8 and Government companies vide notification no. G.S.R. 466(E) and G.S.R. 463(E) respectively dated 5th June, 2015 and exemption notification to section 8 companies dated 13th June, 2017.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies and companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

This proviso is not applicable for specified IFSC Public Companies vide Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017. To view the notification Click Here
Refer rule 3 of the Companies (Appointment and Qualification of Directors) rules,2014. To view the rule,Click Here
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018.Effective from 07-05-2018
To view commencement notification,Click Here
To view the notification of Companies Amendment Act,2017 Click Here
 For stay in India in calendar year 2014, and appointment on or after 01 October 2014 of a resident director, refer Circular 25/2014 dated 26 June 2014.To view the clarification,Click Here
Inserted vide Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017. To view the notification Click Here
2(42) Financial year, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause

Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

Inserted vide Exemption Notification to specified IFSC Private Companies, GSR 09 (E) dated 04.01.2017. To view the notification Click Here
Section 149(4) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(47) Independent director means an independent director referred to in sub-section (5) of section 149
Refer rule 4 of the Companies (Appointment and Qualification of Directors) rules,2014. To view the rule,Click Here
Section 149(5) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(58) Notification means a notification published in the Official Gazette and the expression “notify” shall be construed accordingly
Section 149(6)shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(54) 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 powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.

Explanation.—For the purposes of this clause, the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within the substantial powers of management.

2(94) Whole-time director includes a director in the whole-time employment of the company
For a Government Company, in.section 149(6)(a) – for the word “Board”, the words “Ministry or Department of the Central Government which is administratively in charge of the company, or, as the case may be, the State Government” shall be substituted – vide notification no. G.S.R. 463(E) dated 5th June,2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(69) Promoter means a person—

(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity

2(46) Holding Company, in relation to one or more other companies, means a company of which such companies are subsidiary companies.

Explanation.- For the purposes of this clause, the expression “company” includes any body corporate;

2(87) Subsidiary Company or Subsidiary, in relation to any other company (that is to say the holding company), means a company in which the holding company—

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers  as may be prescribed.

Explanation.—For the purposes of this clause,—

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c) the expression “company” includes any body corporate;

(d) “layer” in relation to a holding company means its subsidiary or subsidiaries.

 shall not apply to government companies vide notification no. G.S.R. 463(E) dated 5th June, 2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

Refer General Circular 14/2014. To view the clarification,Click Here
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018. Effective from 07-05-2018
To view commencement notification,Click Here
To view the notification of Companies Amendment Act,2017 Click Here
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018.Effective from 07-05-2018
To view commencement notification,Click Here
To view the notification of Companies Amendment Act,2017 Click Here
2(6) Associate Company, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
Explanation.—For the purpose of this clause—
(a) the expression “significant influence” means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement;
(b) the expression “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement;
2(41) Financial Year, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause

Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

2(77) Relative, with reference to any person, means any one who is related to another, if—

(i) they are members of a Hindu Undivided Family;

(ii) they are husband and wife; or

(iii) one person is related to the other in such manner as may be prescribed

2(91) Turnover means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year
2(51) 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;

(v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and

(vi) such other officer as may be prescribed;

Inserted vide Companies (Amendment) Act, 2017 dated 03.01.2018. Effective from 07-05-2018
To view commencement notification,Click Here
To view the notification of Companies Amendment Act,2017 Click Here
 2(89) Total voting power, in relation to any matter, means the total number of votes which may be cast in regard to that matter on a poll at a meeting of a company if all the members thereof or their proxies having a right to vote on that matter are present at the meeting and cast their votes
Refer rule 5 of the Companies (Appointment and Qualification of Directors) rules,2014. To view the rule,Click Here
Section 149(7)shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(39) Financial Institution includes a scheduled bank, and any other financial institution defined or notified under the Reserve Bank of India Act, 1934 (2 of 1934)
Section 149(8) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

Section 149(9) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

2(78) Remuneration means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961)
2(55) Member in relation to a company, means—

(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members;

(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;

(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository

Section 149(10)shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

Refer General Circular 14/2014. To view the clarification,Click Here
Section 149(11) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

Refer General Circular 14/2014. To view the clarification,Click Here
Section 149(12) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

Section 149(13) shall not apply to section 8 companies and specified IFSC Public Companies vide notification no. G.S.R. 466(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification,Click Here

11.1.3-Companies (Appointment and Qualification of Directors) Rules,2014

3.Woman director on the Board.—

The following class of companies shall appoint at least one woman director-

  • every listed company;
  • every other public company having –
  • paid–up share capital of one hundred crore rupees or more; or
  • turnover of three hundred crore rupees or more:

Provided that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:

Provided further that any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is Set

Explanation.For the purposes of this rule, it is hereby clarified that the paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.


11.1.4-Companies (Appointment and Qualification of Directors) Rules,2014

4. Number of Independent directors.—

The following class or classes of companies shall have at least two directors as independent directors

(i) the Public Companies having paid up share capital of ten crore rupees or more; or

(ii)the Public Companies having turnover of one hundred crore rupees or more; or

(iii)the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees.

Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it:

Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later:

Provided also that where a company ceases to fulfil any of three conditions laid down in sub-rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Explanation. For the purposes of this rule, it is here by clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account:

Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.

The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-

(a) a

(b) a wholly owned subsidiary; and

(c) a dormant company as defined under section 455 of the Act

This sub-rule is numbered vide Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 dated 05.06.2017 . To view the notification,Click Here
Inserted  vide Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 dated 05.06.2017 . To view the notification,Click Here
The term joint venture is clarified vide circular no. 9/2017 dated 5th September 2017. To view the circular,Click Here

11.1.5-Companies (Appointment and Qualification of Directors) Rules,2014

5. Qualifications of independent director.—

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.

 None of the relatives of an independent director, for the purposes of sub-clauses (ii) and (iii) of clause (d) of sub-section (6) of section 149,-

(i) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors; or

(ii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for an amount of fifty lakhs rupees, at any time during the two immediately preceding financial years or during the current financial year.

Numbered vide Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018 dated 07.05.2018 . To view the notification,Click Here
Inserted vide Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018 dated 07.05.2018 . To view the notification,Click Here

Amendment in Schedule IV of the Companies Act 2013 [GSR 584(E)] dated 05/07/2017


Commencement Notification dated 07/05/2018


Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 dated 05/07/2017


Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018 dated 07/05/2018


Enforcement Notification S.O. 902(E) dated 26/03/2014


Exemption to Govt Companies G.S.R. 463(E) dated 05/06/2015


Exemption to Specified IFSC Private company [GSR 09(E)] dated 04/01/2017


Exemption to Specified IFSC Public company [GSR 08(E)] dated 04/01/2017


Exemptions to Government Companies [Amendment to GSR 463(E)] dated 13/06/2017


Exemptions to Section 8 Companies [Amendment to GSR 466(E)] dated 13/06/2017


Exemptions to Section 8 companies [GSR 466 (E)] dated 05/06/2015


The Companies (Amendment) Act, 2017 (Effective from 03.01.2018)


General Circular 09/2017


General Circular 14/2014


General Circular 25/2014


Schedule IV

[See section 149(8)]

CODE FOR INDEPENDENT DIRECTORS

The Code is a guide to professional conduct for independent directors. Adherence to these standards by independent directors and fulfilment of their responsibilities in a professional and faithful manner will promote confidence of the investment community, particularly minority shareholders, regulators and companies in the institution of independent directors.

I.  Guidelines of professional conduct:

An independent director shall:

(1) uphold ethical standards of integrity and probity;

(2) act objectively and constructively while exercising his duties;

(3) exercise his responsibilities in a bona fide manner in the interest of the company;

(4) devote sufficient time and attention to his professional obligations for informed and balanced decision making;

(5) not allow any extraneous considerations that will vitiate his exercise of objective independent judgment in the paramount interest of the company as a whole, while concurring in or dissenting from the collective judgment of the Board in its decision making;

(6) not abuse his position to the detriment of the company or its shareholders or for the purpose of gaining direct or indirect personal advantage or advantage for any associated person;

(7) refrain from any action that would lead to loss of his independence;

(8) where circumstances arise which make an independent director lose his independence, the independent director must immediately inform the Board accordingly;

(9) assist the company in implementing the best corporate governance practices.

II. Role and functions:

The independent directors shall:

(1) help in bringing an independent judgment to bear on the Board’s deliberations especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct;

bring an objective view in the evaluation of the performance of board and management;

(3) scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;

(4) satisfy themselves on the integrity of financial information and that financial controls and the systems of risk management are robust and defensible;

(5) safeguard the interests of all stakeholders, particularly the minority shareholders;

(6) balance the conflicting interest of the stakeholders;

determine appropriate levels of remuneration of executive directors, key managerial personnel and senior management and have a prime role in appointing and where necessary recommend removal of executive directors, key managerial personnel and senior management;

(8) moderate and arbitrate in the interest of the company as a whole, in situations of conflict between management and shareholder’s interest.

III. Duties :

The independent directors shall—

(1) undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company;

(2) seek appropriate clarification or amplification of information and, where necessary, take and follow appropriate professional advice and opinion of outside experts at the expense of the company;

(3) strive to attend all meetings of the Board of Directors and of the Board committees of which he is a member;

(4) participate constructively and actively in the committees of the Board in which they are chairpersons or members;

(5) strive to attend the general meetings of the company;

(6) where they have concerns about the running of the company or a proposed action, ensure that these are addressed by the Board and, to the extent that they are not resolved, insist that their concerns are recorded in the minutes of the Board meeting;

(7) keep themselves well informed about the company and the external environment in which it operates;

(8) not to unfairly obstruct the functioning of an otherwise proper Board or committee of the Board;

(9) pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure themselves that the same are in the interest of the company;

(10) ascertain and ensure that the company has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use;

(11) report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy;

(12) acting within his authority , assist in protecting the legitimate interests of the company, shareholders and its employees;

(13) not disclose confidential information, including commercial secrets, technologies, advertising and sales promotion plans, unpublished price sensitive information, unless such disclosure is expressly approved by the Board or required by law.

(1) Appointment process of independent directors shall be independent of the company management; while selecting independent directors the Board shall ensure that there is appropriate balance of skills, experience and knowledge in the Board so as to enable the Board to discharge its functions and duties effectively.

(2) The appointment of independent director(s) of the company shall be approved at the meeting of the shareholders.

(3) The explanatory statement attached to the notice of the meeting for approving the appointment of independent director shall include a statement that in the opinion of the Board, the independent director proposed to be appointed fulfils the conditions specified in the Act and the rules made thereunder and that the proposed director is independent of the management.

(4) The appointment of independent directors shall be formalised through a letter of appointment, which shall set out :

(a) the term of appointment;

(b) the expectation of the Board from the appointed director; the Board-level committee(s) in which the director is expected to serve and its tasks;

(c) the fiduciary duties that come with such an appointment along with accompanying liabilities;

(d) provision for Directors and Officers (D and O) insurance, if any;

(e) the Code of Business Ethics that the company expects its directors and employees to follow;

(f) the list of actions that a director should not do while functioning as such in the company; and

(g) the remuneration, mentioning periodic fees, reimbursement of expenses for participation in the Boards and other meetings and profit related commission, if any.

(5) The terms and conditions of appointment of independent directors shall be open for inspection at the registered office of the company by any member during normal business hours.

(6) The terms and conditions of appointment of independent directors shall also be posted on the company’s website.

The re-appointment of independent director shall be on the basis of report of performance evaluation.

VI. Resignation or removal:

(1) The resignation or removal of an independent director shall be in the same manner as is provided in sections 168 and 169 of the Act.

(2) An independent director who resigns or is removed from the Board of the company shall be replaced by a new independent director within a period of not more than one hundred and eighty days  from the date of such resignation or removal, as the case may be.

(3) Where the company fulfils the requirement of independent directors in its Board even without filling the vacancy created by such resignation or removal, as the case may be, the requirement of replacement by a new independent director shall not apply.

VII. Separate meetings:

(1) The independent directors of the company shall hold at least one meeting in a year , without the attendance of non-independent directors and members of management;

(2) All the independent directors of the company shall strive to be present at such meeting;

(3) The meeting shall:

review the performance of non-independent directors and the Board as a whole;

review the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;

(c) assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

(1) The performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.

(2) On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the independent director.

The provisions of sub-paragraph (2) and (7) of paragraph II, paragraph IV, paragraph V, clauses (a) and (b) of sub-paragraph (3) of paragraph VII and paragraph VIII shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in these paragraphs are specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies.

Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Substituted vide Amendment Notification, GSR 584(E) dated 05.07.2017. To view the notification,Click Here
Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Substituted vide Amendment Notification, GSR 584(E) dated 05.07.2017. To view the notification,Click Here
Substituted vide Amendment Notification, GSR 584(E) dated 05.07.2017. To view the notification,Click Here
Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Shall not apply in the case of a Government company as defined under clause(45) of section 2 of the Companies Act,2013 (18 of 2013), if the requirements in respect of matters specified in this paragraphs is specified by the concerned Ministries or Departments of the Central Govemment or as the case may be, the State Governments and such requirements are complied with by the Government companies, vide Amendment Notification GSR 584(E) dated 05.07.2017 . To view the notification,Click Here
Inserted vide Amendment Notification, GSR 584(E) dated 05.07.2017. To view the notification,Click Here

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