1. By C. S. Kelkar Partner C. S. Kelkar & Associates, Company Secretaries Master Class on Company Law

2. Points covered in the Presentation Part I Roles, responsibilities and powers of Directors  Directors: Types, tenure, rotation, appointment, composition  Duties, liabilities and accountability  Independent directors: appointment, databank, code of conduct(schedule IV), rotation, immunity  Board Committees: types, compositions, terms of reference

3. Part II Meetings of Board  Board meetings: participation by video conferencing, secretarial standards, records  Board meetings and other relaxations for small companies and OPCs

4. Board of directors Woman Director Nominee Director Independent Director Resident Director Alternate Director Additional Director

5. Independent Director-Sec 149 Applicable to Public Co. 5 Independent Director Rs. 10 crores or more paid up capital Rs 100 Crores or more turnover Rs 50 Crores or more outstanding boroowings Listed Company

6. Resident Director Sec 149(3) Mandatory for ALL Companies Every company must have a Director who has stayed in India for a total period of 182 days or more in previous calendar year. Existing Companies, not fulfilling this condition, to appoint Resident Director at earliest. MCA has clarified that period to be taken into consideration will be calendar year 14. Hence, on proportionate basis, number of days Director should be resident in India shall exceed 136 days.

7. Woman director – Public Co. Only (Sec. 149) Women Director Listed Company Public Company having turnover of Rs 300 Crores or more Public company having capital of Rs. 100 Crores or more

8. Additional Directors Sec. 161 The Board of Directors can appoint any person as additional director by passing a resolution. A person who fails to get appointed as a director in a general meeting cannot be appointed as an additional Director by the Board of Directors.

9. Alternate Director Sec. 161 The Board of Directors may appoint an alternate for a director during his absence from India for a period of not less than three months An alternate director vacates office when the original director returns to India A person shall not be appointed as alternate director for more than one person in a company

10. Nominee Director Sec. 161 the Board may appoint any person as a director nominated by any institution. Such appointed nominee director shall not be treated as an independent director. The institution instead of appointing director on the board can appoint observer on the board. Companies law has not defined the role and liabilities of observer.

11. Pointers for CS Types of DirectorPrivate Company Public CompanyListed Company Woman DirectorNo1.Paid up share capital of one hundred crore or more 2.Turnover of Three hundred crore or more Yes Independent Director No1.Paid up share capital of Ten crore Rupees or more or 2.Turnover of one hundred crore rupees or more or 3.Aggregate outstanding loan, Debenture Deposits exceeding Fifty crore Yes Resident DirectorYes

12. Tenure Managing Director/Whole Time Director or Manager can be appointed for a term of five years at a time. Sec 196(2) Additional Director appointed by Board of Directors shall be appointed till the conclusion of next AGM. The appointment of Additional Director should be approved by members in general meeting. Sec 162

13. Rotation of Directors Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company shall— a)be persons whose period of office is liable to determination by retirement of directors by rotation; and b)save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

14. Rotation of Directors At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed and at every subsequent annual general meeting, one- third of the directors for the time being as are liable to retire by rotation. The directors to retire by rotation at every annual general meeting shall be those who have been longest in office.

15. Pointers for CS Private CompanyPublic Company Articles of AssociationApplicableArticles can provide for provisions for retirement by rotation. These provisions shall prevail over the Companies Act, 2013. Section 152(6)(a) of Companies Act, 2013 Not applicable two-thirds of the total number of directors shall be liable to retire by rotation. one-third of the directors out of the Directors to retire by rotation shall retire at every AGM.

16. Appointment of the directors (Sec. 152) Applicable to both Private and Public Companies: – Declaration by the Appointee that he/she is not disqualified mandatory [Sec 152(4)] – Consent to act as director to be filed with the Company – Company to file the consent with ROC.

17. Number of Directorships Sec. 165 Companies Act, 1956Companies Act, 2013 Total directorship of Director should not exceed 15. Total directorships of Director should not exceed 20. Directorship in public company should not exceed 10.

18. Composition of Board of Director Private Company Private Limited Company (minimum2 Directors) Resident Director (compulsory) Category Executive/non executive Resident or non resident director Category Executive/non executive

19. Composition of Board of Director Public limited Public Limited Company (minimum 3 Directors) Resident Director (compulsory) Category Executive/non executive Independent Director (at least 2) If applicable Category Non Executive Woman Director if applicable Category Executive/non executive/indepen dent Director

20. Composition of Board of Director Listed Company Listed Company (minimum 3 Directors) Resident Director (compulsory) Category - Executive/non executive 1/3 rd Independent Director (mandatory) Category Non executive Women Director (Compulsory) Category - Executive/ non executive/ independent Director

21. Duties/responsibilities of directors For the first time, duties of directors have been specified in the Act. A director shall: (i) Act in accordance with the company’s Articles (ii) Act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company (iii) Exercise his duties with due and reasonable care, skill & diligence.

22. Duties/responsibilities of directors A director shall not: (i) Involve in a situation where he may have direct or indirect interest (ii) Achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives (iii) Shall not assign his office

23. Liabilities of Director Companies Act, 2013 cast a criminal liability and civil liability on “officer who is in default” which includes Executive Director and KMP. Definition of Officer in default is as follows: “officer who is in default”, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:— (i) whole-time director; (ii) key managerial personnel;

24. (iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified; iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;

25. (v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity; (vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance; (vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;

26. Independent Director (Sec. 149) Who can be independent directorWho can’t be Independent Director Possesses relevant expertise and experience Who is Managing Director, Nominee Director, Whole time Director of the Company Who is or was not a promoter of the company Who is related to promoters or directors in the company its holding, subsidiary or associate company

27. None of whose relative has pecuniary relation with the Company, its holding, subsidiary or associate company or their promoters or directors, amounting to two percent or more of its gross turnover or total income or 50 lakh whichever is lower during the two immediately preceding financial years Who has pecuniary relationship with the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year

28. Independent Director (Sec. 149) Who can be independent directorWho can’t be Independent Director Who, neither himself nor any of his relatives holds position of KMP neither himself nor any of his relatives who is or has been an employee or proprietor or a partner of Audit firm, Legal firm, in any of the three financial years immediately preceding the financial year Who possess such other qualification as may be prescribed neither himself nor any of his relatives w ho holds together with his relatives two per cent. or more of the total voting power of the company

29. Independent Director (Sec. 149) Who can be independent directorWho can’t be Independent Director neither himself nor any of his relatives who is or has been an employee of the Company or its holding, subsidiary or associate company, in any of the three financial years immediately preceding the financial year of his appointment.

30. Appointment The appointment of independent director shall be approved by the company in general meeting. an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company. no independent director shall hold office for more than two consecutive terms, but such independent director shall be eligible for appointment after the expiration of three years of ceasing.

31. Appointment No remuneration other than sitting fees, commission on profit and reimbursement of expenses shall be payable. Alternate Director of the independent director should also be an independent Director.

32. Databank Independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent Director maintained by any body, institute or association. It is optional to appoint independent director from databank.

33. Code of Conduct (Schedule IV) uphold ethical standards of integrity and probity act objectively and constructively while exercising his duties exercise his responsibilities in a bona fide manner in the interest of the company devote sufficient time and attention to his professional obligations for informed and balanced decision making

34. Code of Conduct (Schedule IV) 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. 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;

35. Code of Conduct (Schedule IV) refrain from any action that would lead to loss of his independence; where circumstances arise which make an independent director lose his independence, the independent director must immediately inform the Board accordingly ; assist the company in implementing the best corporate governance practices.

36. Rotation Independent Director is not liable to retire by rotation

37. Immunity An independent director shall be held liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge or connivance or for failure to exercise due diligence in such acts {Section149(12)}

38. Committees of the Board Particulars Corporate Social Responsibility Committee Audit Committee Nomination & Remuneration Committee Listed Company  Net worth of Rs 500 Crores or more OR  Turnover of Rs 1000 Crores or more OR  Net profit of Rs 5 Crores or more Mandatorily Required

39. Committees of the Board Particulars Corporate Social Responsibility Committee Audit Committee Nomination & Remuneration Committee Public Limited Companies  Net worth of Rs 500 Crores or more OR  Turnover of Rs 1000 Crores or more OR  Net profit of Rs 5 Crores or more  Paid-up Capital of Rs 10 Crores or more OR  Outstanding loans/ deposits /debentures, of Rs50Crores or more OR  Turnover of Rs. 100 Crores or more  Paid-up Capital of Rs. 10 Crores or more OR  Outstanding loans/ deposits /debentures, of Rs50 Crores or more OR  Turnover of Rs. 100 Crores or more

40. Committees of the Board Particulars Corporate Social Responsibility Committee Audit Committee Nomination & Remuneration Committee Private Limited Companies  Net worth of Rs 500 Crores or more OR  Turnover of Rs 1000 Crores or more OR  Net profit of Rs 5 Crores or more Not Required

41. Composition of CSR Committee Consisting of three or more directors out of which one shall be an independent director. Unlisted public company and a private company which are not required to appoint independent Directors, can constitute CRS committee without independent Director. Board’s Report must contain specified details in respect to CSR like composition of CSR committee, CSR policy, expenditure made on CSR etc.

42. Composition of Audit Committee Minimum three directors with majority of independent directors Audit Committee members and Chairman of Audit Committee shall have ability to read and understand financial statements

43. Composition of Nomination & Remuneration Committee Three or more non-executive directors with majority of independent directors Chairperson of the company can act as committee member but not as the Chairman of the nomination and remuneration committee

44. Pointers for CS Whether it is mandatory for Private Company to appoint an independent directors as member of CSR Committee?  As per Companies (Corporate Social Responsibility Policy) Rule, 2014 no requirement to appoint Independent Director for Private company who have CSR committee.

45. Meetings

46. Minimum 4 meetings in a year. Maximum gap between two meetings – 120 days. Minimum Notice of 7 days for a meeting. No shorter notice permitted unless independent director is present, if any [Sec 173] Small Companies – At least One meeting in each half of calendar year. Minimum gap between two meetings – 90 days [Sec 173] Board Meeting (Sec. 173) and the Companies (meetings of Board and its Powers) Rule 2014.

47. Board Meeting BM Notice may be given by hand delivery/electronic means. Meetings through Video Conferencing permitted. But proper recording of video conferencing to be kept. Minimum quorum shall be one third of its total strength or two directors, whichever is higher

48. Participation by video conferencing The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means. Procedure as per Companies (Meetings of Board and its Powers) Rules, 2014.

49. Matter not to be dealt with at meeting through video conferencing the approval of the annual financial statements; the approval of the Board’s report; the approval of the prospectus; the Audit Committee Meetings for consideration of accounts; and the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover

50. Pointers for CS Whether presence of directors through Video conference shall be considered for quorum? -If the procedure of video conferencing is duly complied by the Company, then the presence of Director can be considered for quorum. What if the Directors attend the meeting through video conference, however the procedure is not complied with? - Directors presence will not be considered for quorum and also he would not be entitled to vote on any matter of Board meeting.

51. Matters to be asked before, during and after the meeting Before meeting Notice of the meeting should be sent to all the directors 7 days prior to the date of Board meeting. Quorum is present for the meeting. Or else the meeting will be adjourned for want of quorum. During meeting Appointment of chairman to conduct the meeting. Minutes of the previous meeting should be approved and signed by Chairman interested director in any contract shall not vote for approval contract. After meeting Minutes of the meeting should be forwarded to all directors within 30 days for their review. If any resolution which require reporting to ROC, are passed, then such compliance should be completed.

52. Secretarial Standard on Board Meetings (SS-1) The Secretarial Standards issued by ICSI are recommendatory in nature. Notice in writing of every Meeting should be given to every Director by hand or by post or by facsimile or by e-mail or by any other electronic mode. Unless the Articles prescribe a longer notice period, Notice should be given at least fifteen days before the date of the Meeting.

53. Secretarial Standard on Board Meeting (SS-1) The Board should meet at least once in every three months, with a maximum interval of 120 days between any two Meetings such that at least four Meetings are held in each year. Every company should have a Chairman who would be the Chairman for Meetings of the Board. Leave of absence should be granted to a Director only when a request for such leave has been communicated to the Secretary or to the Board or to the Chairman

54. The presence of all the members of any Committee constituted by the Board is necessary to form the Quorum for Meetings of such Committee unless otherwise stipulated by the Board while constituting the Committee. Quarterly or half-yearly financial results should be approved at a Meeting of the Board or its Committee and should not be approved by means of a Resolution passed by circulation.

55. Within fifteen days from the date of the Meeting of the Board or Committee or of an adjourned Meeting, the draft Minutes thereof should be circulated to all the members of the Board or the Committee, as the case may be, for their comments. Minutes should not be pasted or attached to the Minutes Book. Minutes, if maintained in loose-leaf form, should be bound at intervals coinciding with the financial year of the company.

56. ParticularsOne Person CompanySmall Company Holding of Board meetingNot applicable when there is only one director on its Board of Directors. Applicable At least one board meeting of the board of director has been conducted in each half calendar year and gap between two meeting is not less than ninety days Applicable if there are more than one Directors Applicable Quorum of Board meetingIn case of One Director- Not applicable In case of more than one Director- 1/3 of its total strength or 2 directors whichever is higher 1/3 of its total strength or 2 directors whichever is higher Relaxations for OPCs and Small companies

57. Holding of Annual General meeting Not applicableApplicable Financial statement not to include cash flow statement Applicable Signing of financial statements By only one Directorby the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director and the Chief Executive Officer, if he is a director in the company, the Chief Financial Officer and the company secretary of the company, wherever they are appointed.

58. Signing of Annual ReturnBy Company Secretary or where there is not Company Secretary by the Director of the Company. Due date of filing for Financial Statements with Registrar. 180 days.30 days Holding of Annual General meeting Not applicableApplicable.

59. Pointers for CS What are the liabilities of Company Secretary in Employment if there is non compliance of the above mentioned matters? -Companies Act, 2013 cast a criminal liability and civil liability on “officer who is in default” which includes Company Secretary in Employment. What are the liabilities of Company Secretary in Practice?

60. Liabilities of PCS ParticularsDefaultPenalty Annual return Certifies the annual return otherwise than in conformity with Section 92 or the rules made there under Fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees Secretarial audit report Certification of Secretarial Audit Report Not less than one lakh rupees but which may extend to five lakh rupees Fraud or False Statement, return Certificate If found to be guilty of fraud or made false statement Imprisonment not less than six months but may extend to ten years and also liable to fine not less than amount involved in the fraud, but which may extend to three times the amount involved in fraud

61. Any Queries….

62. Thank you!!! Contact Details CS C. S. Kelkar Cell: +91-98225 02145 Email: csk@kelkarcs.comcsk@kelkarcs.com Website: www.kelkarcs.comwww.kelkarcs.com