[Notification Date: 26.03.2014; Effective from: 01.04.2014]
Sub-sections (4), (5), (6), (7), (8), (9), (10), (11) shall not apply to Section 8 company- Notification F. No. 1 /2/2014-CL.I dated 05.06.2015.
Sub- sections (4) to (11), clause (i) of subsection (12) and sub-section (13) of section 149 shall not apply to the unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 -Notification G.S.R. 08(E) dated 04.01.2017]
Section 149- Company to have Board of directors. [Corresponds to Section 252, 253, 259 of the Companies Act, 1956]; [Relevant Rule:3 to 5 of The Companies (Appointment and Qualification of Directors) Rules, 2014]
(1) Every company shall have a Board of Directors consisting of individuals as directors and shall have—
(a) a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and
(b) a maximum of fifteen directors:
Section 149 (1) shall not apply to Section 8 company- Notification F. No. 1 /2/2014-CL.I dated 05.06.2015
Section 149(1)(b) shall not apply to a Government company - Notification F No 1/2/2014-CL.V dated 05.06.2015
Provided that a company may appoint more than fifteen directors after passing a special resolution:
Proviso shall not apply to Section 8 company- Notification F. No. 1 /2/2014-CL.I dated 05.06.2015
Proviso shall not apply to a Government company - Notification F No 1/2/2014-CL.V dated 05.06.2015
Provided further that such class or classes of companies as may be prescribed - [Rule 3], shall have at least one woman director.
[second proviso to sub-section(1) shall not apply to the unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 -Notification G.S.R. 08(E) dated 04.01.2017]
(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 calendar year.
Provided that this sub-section shall apply to a Specified IFSC public company in respect of financial years other than the first financial year from the date of its incorporation. [ proviso inserted vide Notification G.S.R. 08(E) dated 04.01.2017]
(4) Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe - [Rule 4] 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.
(5) 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 notification of the rules in this regard as may be applicable, comply with the requirements of the provisions of sub-section (4).
(6) An independent director, in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—
(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
For a Government Company, the word "Board", shall be substituted for 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" - Notification F No 1/2/2014-CL.V dated 05.06.2015.
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship 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;
Clause (c) shall not apply to a Government company-Notification F No 1/2/2014-CL.V dated 05.06.2015.
(d) none of whose relatives 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 turnover 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 key managerial personnel 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;
(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 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 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 as may be prescribed - [Rule 5].
(7) 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 financial institution 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.
(8) The company and independent directors shall abide by the provisions specified in Schedule IV.
(9) 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 remuneration 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 members.
(10) Subject to the provisions of section 152, 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 re-appointment on passing of a special resolution by the company and disclosure of such appointment in the Board's report.
(11) Notwithstanding anything contained in sub-section (10), 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 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, -
(i) an independent director;
clause (i) of subsection (12) shall not apply to Section 8 company-Notification F.No.1 /2/2014-CL.I dated 05.06.2015
clause (i) of subsection (12) shall not apply to the specified unlisted public company- Notification G.S.R. 08(E) dated 04.01.2017]
(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.
(13) 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.
Sub-section (13) shall not apply to section 8 company- Notification F.No.1 /2/2014-CL.I dated 05.06.2015
Subsection (13) shall not apply to the specified unlisted public company- Notification G.S.R. 08(E) dated 04.01.2017]
