1. DIRECTORS AND BOARD MEETINGS
RAMESH VENKAT
April 27, 2014

2. APPOINTMENT OF DIRECTORS……1
Companies act, 2013
Maximum number of Directors in a public Company increased from 12 to 15
Limit of 15 Directors applies to private companies also; previously no limit for private companies
Increase beyond 15 Directors by passing Special Resolution; no Central Government appoval

3. APPOINTMENT OF DIRECTORS……2
Companies act, 2013
Maximum number of Directorships of an individual limited to 20 companies
Of which not more than 10 can be public companies or private companies that are holding or subsidiary company of a public company
Previous limit was 15 companies, but excluding private companies and Alternate Directorships
New provision for specified companies to have atleast one Woman Director
Every listed Company and all public companies with a paid up capital of Rs. 100 crores or more or turnover of Rs. 300 crores or more, to have atleast one Woman Director

4. APPOINTMENT OF DIRECTORS……3
Companies act, 2013
Specific provision for Nominee Directors – subject to the Articles, the Board empowered to appoint Nominee Directors; previously no specific provision except for Government nominees
Alternate Director appointment only if a Director leaves India for more than 3 months; previously if Director absent from the state in which Board meetings held for more than 3 months
Additional Director to hold office till next AGM or the last date for the AGM as per law
New provision prohibiting a person who fails to get appointed as Director in a general meeting, from being appointed Additional Director

5. APPOINTMENT OF DIRECTORS……4
Companies act, 2013
Listed companies may have one Director elected by small shareholders; previously public companies with share capital exceeding Rs. 5 crores or 1000 or more small shareholders
Appointment of such Director upon notice from atleast 1000 small shareholders or 1/10 of the total number of small shareholders or suo motu
Small shareholders’ Director could be considered as an Independent Director also
Small shareholders’ Director not liable to retire by rotation; tenure of upto 3 consecutive years; not eligible for reappointment
No person to be small shareholders’ Director in more than 2 companies simultaneously; or in competing companies

6. INDEPENDENT DIRECTORS……….1
Companies act, 2013
Independent Director defined comprehensively
In the opinion of the Board, a person of integrity and possesses relevant expertise and experience
Not a promoter or related to promoters or directors of the Company
No pecuniary relationship of the Director and relatives with company*, promoters or directors in 2 preceding financial years
Director or relatives not to be or have been key managerial person or employee of company * in 3 preceding financial years
Director or relatives not to be a employee, partner etc. of auditors, Company Secretary, Cost auditors or specified legal or consulting firms of the Company * in 3 preceding financial years
Director and / or relatives to not hold 2% or more of the voting power of the Company
Not the CEO or Director of any non-profit organisation that receives more than 25% of its receipts from the Company *, promoters, directors, or holds 2% or more voting power

7. INDEPENDENT DIRECTORS……….2
Companies act, 2013
Listed public companies to have atleast 1/3 of total number of Directors as Independent Directors
Minimum of 2 Independent Directors in public companies with paid up capital of Rs. 10 crores or more; or turnover of Rs. 100 crores or more; or outstanding loans, debentures and deposits exceeding Rs. 50 crores
Independent Directors not entitled to stock options; remuneration by way of sitting fees for Board and Committee meetings and profit related commission as approved by members

8. INDEPENDENT DIRECTORS……….3
Companies act, 2013
Term of 5 years; no more than 2 consecutive terms; cooling period of 3 years thereafter
May be selected from a data bank of directors; Central Government may authorise any appropriate agency to create and maintain such data bank
Data bank to list names, qualification, experience and expertise, legal proceedings, other directorships or partnerships
Appointment of Independent Director to be approved by Company in a general meeting; Explanatory statement to include justification for appointment

9. INDEPENDENT DIRECTORS……….4
Companies act, 2013
Inability of Independent and Non-executive directors restricted to acts of omission or commission
Occurred with his knowledge
Attributable through Board processes
With his consent or connivance
Where not acted diligently

10. CODE FOR INDEPENDENT DIRECTORS
Companies act, 2013
Specified in Schedule IV to the Act and includes the following
Guidelines of professional conduct; Role and Functions
Duties listed out comprehensively
Manner of appointment and reappointment, including performance evaluation
Independent Directors to hold atleast 1 meeting each year without other Directors and management for
Review performance of the Chairperson
Assess quality, quantity, timeliness of information flow to Board

11. DISQUALIFICATION OF DIRECTORS
Companies act, 2013
New disqualifications added in Sec. 164
Any person convicted of any offence and sentenced to imprisonment for 7 years or more permanently debarred from Directorship
Convicted of any offence dealing with related party transactions during the preceding 5 years
Not obtained Directors Identification Number
Not filed financial statements or Annual return for 3 consecutive years or defaulted in payment of debentures – also for private companies

12. DUTIES OF DIRECTOR
Companies act, 2013
Specifically spelt out in Sec. 166 and includes the following
Act in accordance with the articles
Act in good faith to promote company’s objects for benefit of members, company, employees, shareholders, community and protection of environment
Exercise duties with due and reasonable care, skill, diligence and independent judgement
Avoid conflicts with interest of the Company
Shall not achieve any undue gain or advantage for self, relatives, partners, associates
Not assign his office

13. RESIGNATION OF DIRECTORS
Companies act, 2013
Specific provisions on resignation in Sec. 168
Notice in writing to the Company and Board
Forward the notice with reasons to the Registrar of Companies within 30 days

14. VACATION OF OFFICE OF DIRECTOR
Companies act, 2013
Fails to attend all Board meetings for 12 months even if leave of absence granted; previously absence from 3 consecutive meetings or all meetings in 3 months without leave of absence
Convicted of any offence and sentenced to imprisonment for not less than 6 months even if appeal pending
Disqualified by an order of a Court or Tribunal under the Companies Act or any other Act
Ceases to hold office pursuant to which appointed as Director in Company of holding, subsidiary or associate Company
Any company where he is a director has not filed financial statements or Annual returns for 3 years or not paid interest or principal on debentures for 1 year or more; no such provision previously

15. REMUNERATION OF DIRECTORS
Companies act, 2014
Independent
Executive
Any Others
Salary
Profit based Commissions
Stock Options
Sitting fees
Maximum sitting fees for Board or Committee meetings
increased to Rs. 1 lakhs

16. MEETINGS OF THE BOARD OF DIRECTORS
Companies act, 2013
Atleast 4 meetings a year for public and private companies with a 90 day gap but 1 meeting in each half of the year for one Person company, small company and dormant company
Gap between two meetings to not exceed 120 days (previously one meeting every 3 months) for public and private companies
Minimum 7 days notice; shorter notice acceptable if atleast 1 independent director present; notices and draft resolutions by electronic means permitted
If independent directors absent from above meeting; ratification required from atleast 1 independent director
Resolutions passed by circulation to be noted in a subsequent Board meeting and incorporated in the minutes

17. MEETINGS OF THE BOARD OF DIRECTORS......2
Companies act, 2013
Participation of a director by audio visual means or by video conferencing will count for quorum
Rules prescribe detailed procedure for conduct of meetings by video conferencing or other audio visual means
Responsibility of the Chairperson and the Company Secretary to ensure
Security and identification procedures
Record proceedings and prepare minutes
Storage and safe keeping of electronic media
Restricting participation in the proceedings to Directors and other persons required by the Board
Restricting access to the data of proceedings
Some key business not to be dealt with through video conferencing or audio-visual means including
Approval of financial statements
Approval of Board report

18. MEETINGS OF THE BOARD OF DIRECTORS......3
Companies act, 2013
All companies to observe secretarial standards with respect to General meetings and Board meetings
Secretarial standards to be specified by the ICSI and approved by the Central Government
Rules provide for maintenance and inspection of documents in electronic form including minutes, etc. for every listed company and companies with not less than 1000 shareholders
Existing companies to convert data to electronic form within 120 days of notification of Sec. 120
Managing Director, Company Secretary or any other Director or Officer as decided by the Board responsible for maintenance and security of electronic records

19. AUDIT COMMITTEE
Companies act, 2013
Mandatory for all listed companies; and other public companies with a paid up capital of Rs. 10 crores or turnover of Rs crores or borrowings of Rs. 50 crores or more
Minimum 3 Directors with independent directors in majority
Majority of members and Chairperson to have ability to read and understand financial statements
Role and function of the Audit Committee spelt out in detail including
Appointment of auditors and their performance review
Approval of related party transactions
Scrutiny of inter corporate loans and investments
Evaluation of internal controls and risk management

20. NOMINATION AND REMUNERATION COMMITTEE
Companies act, 2013
Mandatory for all listed companies; and other public companies with a paid up capital of Rs. 10 crores or turnover of Rs crores or borrowings of Rs. 50 crores or more
Not less than 3 non-executive directors of which not less than ½ shall be independent directors
Chairperson (executive or non-executive) of the company can be a member but not the Chairman of the Committee
Responsible for identifying Directors and senior management positions, performance evaluation, criteria and policy for remuneration

21. STAKEHOLDERS RELATIONSHIP COMMITTEE
Companies act, 2013
Required for every company with more than 1000 shareholders, debenture holders, deposit holders or any other security holders at any time during the financial year
Chairperson of the committee to be a non-executive director, other members as decided by the Board
Responsible for considering and resolving grievances of security holders

22. VIGIL MECHANISM
Companies act, 2013
To be set up by all listed companies and companies which accept public deposits or with bank/ FI borrowings exceeding Rs. 50 crores
Mechanism for directors and employees to report genuine concerns
Mechanism to provide for adequate safeguards against victimisation of persons using it
To provide for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases

23. RESTRICTIONS ON BOARD’S POWERS
Companies act, 2013
Powers exercisable by the Board with approval of general meeting applicable to all companies (previously only public companies)
Special resolution required in the general meeting in above case (previously ordinary resolution)
Certain powers exercisable only by a resolution at a Board meeting (per Act and additionally per Rules)
To grant loans, guarantees or provide security
To approve financial statements and Board’s report
To diversify company’s business
To approve mergers or reconstruction
To takeover a company or acquire a substantial stake
To make political contributions
To appoint or remove key managerial persons
To appoint internal and secretarial auditors
To buy or sell investments greater than 5% of capital + free reserves
To invite or renew public deposits

24. SPECIAL RESTRICTIONS ON DIRECTORS – LOANS TO DIRECTORS
Companies act, 2013
No loan, security or guarantee for a loan to a Director or interested person (previously possible with Central Government approval)
Person in whom Director is interested include relatives, partners, related firm, related private company, any company where 25% of voting power controlled, etc.
Loans to Managing or Whole Time Directors permitted with shareholder approval if such loan is a condition of service for all employees; or by a special resolution of shareholders
Loan by a holding company to a wholly owned subsidiary exempted

25. SPECIAL RESTRICTIONS ON DIRECTORS – RELATED PARTY TRANSACTIONS
Companies act, 2013
Related party transactions require approval by the Board and in some cases an ordinary or special resolution of the company
Definition of Related Party greatly expanded
Related Party also includes any “”Shadow Director” ie. any person on whose advice, direction or instructions a director is accustomed to act
Scope of Related Party transactions also expanded significantly, including
Sale and purchase of goods
Sale and purchase of property
Leasing of property
Appointment of agents for purchase or sale of goods or property
Appointment to a office or place of project
Underwriting subscription of securities or derivatives
Rules prescribe monetary limits for the above

26. SPECIAL RESTRICTIONS ON DIRECTORS – OTHERS
Companies act, 2013
Directors cannot acquire assets from or sell assets to the company for consideration other than cash without approval of company in a general meeting
Prohibition on forward dealings in securities of the company
Provisions for prohibiting insider trading in the securities of the company