Directors

Appointment of Independent Director on the Board of a listed company requires a special resolution to be passed under Regulation 25(2A) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. In this case, the votes cast in favour of the resolution is only 60,000 votes as against the requirement of at least 75,000 votes to pass a special resolution. Hence, the special resolution is not passed. However, with effect from 14th November, 2022, proviso to Regulation 25(2A) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 states that where the special resolution to appoint an independent director fails to get 3/4th majority of members present and voting, if-

a.The votes cast in favour of the resolution exceed the votes cast against the resolution and

b.The votes cast by the public shareholders in favour of the resolution is more than the votes cast against the resolution the independent director is deemed to be appointed.

In this case, the votes cast in favour of the resolution by public shareholders is only 10,000 votes whereas the votes cast against the appointment by public shareholders is 30,000 votes. Hence, the requisite condition fails.

Hence, the decision of the Chairman to declare that Shubudhi is appointed as Independent Director is not correct. The independent director has not been appointed as per the provisions of the aforesaid regulations.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 5(e) (Syllabus 2017).

According to section 115 r/w Rule 23 of the Companies (Management and Administration) Rules, 2014 and with Section 169(2) of the Companies Act, 2013, the special notice with the intention of removal of director of the company or to appoint somebody in place of a director so removed, is required to be sent by the members to the company not earlier than 3 months but at least 14 days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting.

A special notice required to be given to the company shall be signed, either individually or collectively by such number of members holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than ₹5 lakh has been paid up on the date of the notice.

In the instant case, since the two shareholders are jointly holding shares amounting to ₹5,50,000 and have sent a special notice 20 days before the date of Annual General Meeting intimating their intention to remove a director and appointing another person as director in place of director so removed is in compliance with the provisions under Rule 23 of the Companies (Management and Administration) Rules, 2014.

The company shall immediately after receipt of the notice, give its members notice of the resolution at least seven days before the meeting, exclusive of the day of dispatch of notice and day of the meeting, in the same manner as it gives notice of any general meetings. Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated and such notice shall also be posted on the website, if any, of the Company. The notice shall be published at least seven days before the meeting, exclusive of the day of publication of the notice and day of the meeting.

Hence, the company is required to act on such notice and follow the other procedures w.r.t. removal of Director as prescribed under Section 169 of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 4(c) (Syllabus 2017).

Kind of Meeting: General Meeting

Type of Resolution: Special Resolution

“RESOLVED THAT pursuant to the provisions of section 149, section 150 and section 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 (the Act), as amended from time to time and the Companies (Appointment and Qualifications of Directors) Rules, 2014, (the Rules) including any statutory modification(s) or re-enactments thereof for the time being in force, read with the applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations), the Articles of Association of the company and the recommendation of the Nomination and Remuneration Committee of the Board and the Board of Directors, Sachin (DIN:01234567), who was appointed as an Independent Director and who holds the office of Independent Director up-to the conclusion of this annual general meeting and who has submitted a declaration that he meets the criteria for independence as provided in Section149(6) the Act and applicable Rules of the Listing Regulations and in respect of whom the company has received a notice in writing from a member proposing his candidature for the office of the director pursuant to Section 160 of the Act and being eligible and willing, be and is hereby reappointed as an Independent Director of the company not liable to retire by rotation and to hold office for a second term of five consecutive years on the Board of directors of the company w.e.f._____ to hold office up to ___________.

RESOLVED FURTHER THAT the Board of directors of the company be and is hereby authorised to do all acts, deeds and things including filings and take steps as may deemed necessary, proper or expedient to give effect to this Resolution and matters incidental thereto.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6(b) (Syllabus 2022).

(a)According to Sec 149(6) of Companies Act, 2013 read with Regulation 25(2A) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), an independent director of a listed company shall be appointed by passing a special resolution in the general meeting.

According to Regulation 16(1)(b) of LODR the independent director shall not be less than 21 years of age.

Hence, the appointment of Sudarshan Chakraborty, aged 20 is invalid on both counts.

(b)Section 161(3) of the Companies Act, 2013, provides that subject to the articles of a company, the Board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.

However, there is an exception to this sub section in case of specified IFSC public company and specified IFSC private company. Companies, which secure financial assistance from financial institutions, banks, major shareholders, debenture holders, etc. usually confer on their lenders, power to appoint and terminate the appointments of their nominees on their Boards. Such power is conferred by incorporating appropriate provisions in the financial assistance agreements.

These institutions/banks etc. also insist on borrowing companies to alter their articles of association so as to empower them to appoint and terminate the services of their nominee directors on the Board of the company as and when they like. These directors are known as nominee directors. They are not liable to retire by rotation and hold office at the pleasure of their nominating agencies. They cannot be removed by the company.

Procedure to appoint a nominee director is same as appointment as additional director by the Board or appointment of director other than retiring director by the company in general meeting. Depending upon the term and condition of agreement with the appointing bank/institution/ Government, the company may choose any of these two methods.

Thus, in view of above, Karna Kumar Baag, a nominee director appointed by BICCI Bank Ltd. Cannot be removed by Reliable Capacitors limited, a listed Company, by passing an ordinary resolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5A(i) (Syllabus 2017).

Section 149(10) of the Companies Act, 2013 prescribes that 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 reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board’s report.

Section 149(11) states that 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.

General Circular No. 14/2014 issued by MCA dated 9th June, 2014 clarifies that though an independent director is to be appointed for a term up to 5 years, there is no bar on appointment for a term of less than 5 years. However, such appointment for less than 5 years is to be counted as one term and at the end of two such consecutive terms, the director should demit his office, even if the total number of years of his appointment in such two consecutive terms is less than 10 years. In such a case, at the end of the 2 consecutive terms, he cannot be reappointed again as independent director and the cooling period of 3 years shall start.

In view of the above, Jupiter Ltd. cannot reappoint Ashok as independent director of the company at the end of second consecutive term.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5A(v) (Syllabus 2017).

Section 149(6) of the Companies Act, 2013 provides that Independent Director, in relation to a company, means a director other than a managing director or a whole time director or a nominee director who has or had no pecuniary relationship other than remuneration as such director or having transaction not exceeding ten per cent. of his total income or such amount as may be prescribed, 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.

This provision inter alia requires that an ‘ID’ should have no ‘pecuniary relationship’ with the company concerned or its holding/subsidiary/associate company and certain other categories specified therein during the current and last two preceding financial years. Clarifications have been sought whether a transaction entered into by an ‘ID’ with the company concerned at par with any member of the general public and at the same price as is payable/paid by such member of Public would attract the bar of ‘pecuniary relationship’ under section 149(6)(c). The matter was examined and it was clarified by MCA vide its circular no. 14/2014 dated 9th June, 2014 that in view of the provisions of section 188 which take away transactions in the ordinary course of business at arm's length price from the purview of related party transactions, an ‘ID’ will not be said to have ‘pecuniary relationship, under section 149(6)(c) in such cases.

Therefore, staying of Susmita at the hotel in Ooty of Prapti Hotels Ltd. and making transactions with the company 6 months prior to her proposed appointment in the board as Independent Director cannot be termed as pecuniary relationship as those were at par with members of general public.

So, the Vice President (Commercial) should be advised that Susmita can be appointed as Independent Director in the Company from 1st January, 2022.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5(b) (Syllabus 2017).

•With effect from 1" January 2022 an independent director can be appointed on the board of a listed company only by a special resolution passed by the members at a general meeting as per Regulation 25(2A) read with Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements), 2015 (LODR). Hence, approval of special resolution by the members in the general meeting is mandatory.

•However, as the Board Meeting and the Annual General Meeting (AGM) of the company has just concluded and as the chairman is unwilling to call an Extra Ordinary General meeting or the Board meeting in the near future, an alternative approach to solving the problem is appointing Paritosh as an additional director under section 161(1) of the Act by passing a board resolution by circulation under section 175 of the Act.

•According to Para 6.5 of Secretarial Standards 1 issued by ICSI, passing a resolution by circulation shall be considered valid as if it had been passed at a duly convened meeting of the Board of Directors.

•The maximum tenure of an independent director shall be for a period of five years as per Section 149(10) of the Companies Act, 2013. Hence, the suggestion of the chairman to appoint Paritosh for a period of seven years is not valid.

•The additional director shall hold office up to the date of next annual general meeting. In the next AGM, Paritosh can be appointed as an independent director for a further period of four years by passing a special resolution by the members.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5(e) (Syllabus 2017).

Provisions relating to Independent Directors are covered under section 149 of the Companies Act, 2013. However, listed companies are also required to follow relevant SEBI (LODR) Regulations.

As per Regulation 24(1) of the SEBI (LODR) Regulations, 2015 at least one independent director on the Board of Directors of the listed company shall be a director on the Board of Directors of an unlisted material subsidiary, whether incorporated in India or not.

Explanation - For the purposes of this provision, notwithstanding anything to the contrary contained in Regulation 16, the term 'material subsidiary' shall mean a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the listed company and its subsidiaries in the immediately preceding accounting year.

Further, spouse of an independent director cannot be appointed as an independent director. Section 149(6)(b)(ii) provides that an independent director in relation to a company means one who is not related to promoters or directors in the company, its holding, subsidiary or associate company.

Wife cannot take up a role of an independent director if spouse is already appointed as an independent director in subsidiary of the qualified company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 4(b) (Syllabus 2017).

The re-appointment of independent director shall be on the basis of report of performance evaluation. (Schedule IV - Code for Independent Directors).

Section 149(11) provides that the Independent Director shall be eligible for re-appointment on passing of special resolution. He shall not hold office for more than 2 consecutive terms, but such independent director shall be eligible for appointment after the expiration of 3 years (cooling period) of ceasing to become an independent director.

However, he shall not, during the said period of 3 years, be appointed in or be associated with the company in any other capacity, either directly or indirectly.

Accordingly, based on the above provision, correct answer is as under:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 5A(i) (Syllabus 2017).

Nominee Director

A nominee director is an individual nominated by an institution, including banks and financial institutions, on the board of companies where such institutions have some “interest. The “interest" can either be in form of financial assistance such as loans or investment into shares. Such strategic investment may have a direct bearing on the profitability of a nominator and therefore appointment of nominee director becomes essential to facilitate monitoring of operations and business of the investee company. The main purpose of appointment of such persons is to safeguard the interest of the nominator, without conflicting with his/her fiduciary duty as a director. Such director plays several roles and responsibilities, including adequate disclosure of interest, reporting to the nominator and protection of the interest of company in its entirety. In case of holding the position in specialized entities, the person must act in accordance with the operations of such entities, guided by industry specific statutory requirements in addition to the general roles and responsibilities.

As per explanation to Section 149(7) of the Companies Act, 2013-“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.

Under the Companies Act, 2013, the appointment of a nominee director is made in accordance with section 161(3), which provides that: “Subject to the articles of a company, the Board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company." The main objective of appointment of a nominee director is to ensure that Borrower Company complies with all legal requirements under various laws. In other words, nominee directors are watchdogs of the financial institutions to safeguard their investments.

Conventionally, a nominee director is nominated” by a nominator. The nominator has all the rights with respect to appointment, removal, resignation or cessation and the terms and conditions of appointment form part of a long term agreement or a shareholders' agreement entered into with the investee company. Since a nominee director is generally appointed by the nominator at its own terms, his office is liable for retirement by rotation, unless otherwise provided in the shareholder's agreement

A nominee director is not merely a thread to protect the interests of nominator, but / he/she is also capable of giving meaningful insights towards better corporate governance practices and functioning of the company. His/ her specialized knowledge in the field of finance and banking is a utility for the investee company, which can be deployed in taking critical policy and business decisions, benefitting the company as a whole.

Independent Director

Section 149, 150 of Companies Act, 2013 and Schedule IV read with Rule 4, 5 & 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 deals with Independent Directors. Independent Director is viewed as a solution to various corporate governance problems.

Every listed public company shall have at least one-third of the total number of directors as independent directors. Any fraction contained in such one third numbers shall be rounded off as one.

According to Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 the classes of companies are required to have at least two directors as independent directors, viz. the Public Companies having paid up share capital of ten crore rupees or more; or the Public Companies having turnover of one hundred crore rupees or more; or the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees.

Section 149(6) of the Act, 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; is a person of integrity and possesses relevant expertise and experience; who is or was not a promoter of the company or its holding, subsidiary or associate company; who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent. of his total income or such amount as may be prescribed, 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 shall be holding security or interest in the company for preceding two financial years; or indebted to the company or has any other pecuniary transaction or relationship with the company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions.

An independent director is required to 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.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2(d) (Old syllabus).

The first directors of most of the companies are named in their Articles of Association. Regulation 60 of Table F provides that the number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum or a majority of them.

Further, Section 152(1) of the Companies Act, 2013 provides that, where no provision is made in the Articles of Association of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed.

Accordingly, in the given case, advice given by the advisor regarding first director is not correct.

Section 149(3) of the Companies Act, 2013 provides that every company shall have at least one director who has stayed in India for a total period of not less than 182 days during the financial year. However, in case of a newly incorporated company the requirement under this sub-section shall apply proportionately at the end of the financial year in which it is incorporated.

Hence, Dim Dim Ltd. which has been incorporated on December 31, 2019 can appoint a director who has just stayed for 120 days in India during the financial year, 2019-20.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5(c) (Syllabus 2017).

Section 149(8) read with Schedule IV of the Companies Act, 2013 provides for the separate meeting of the Independent Director within the ambit of the code for the Independent Directors:

(1)The independent directors of the company shall hold at least one meeting in a financial 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:

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

(b)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.

Hence, holding of such separate meeting of Independent Directors is valid within the applicable provisions of the Companies Act, 2013 and Non- Independent Directors cannot challenge this.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 6(c) (Old syllabus).

Terms & Conditions for Small Shareholders’ Director

Rule 7 of the Companies (Appointment and Qualification of Directors) Rules, 2014 laid down the following terms and conditions for appointment of small shareholders director, which are as under:

Election of small shareholders director:

A listed company, may upon notice of not less than:

(a)One thousand small shareholders; or

(b)one-tenth of the total number of such shareholders,

whichever is lower; have a small shareholder director elected by the small shareholders.

A Small Shareholders Director may be elected voluntarily by any listed company. Thus, a listed company, may on its own, act to appoint a Small Shareholder’s Director. In such a case, no notice from small shareholder(s) is required.

Notice of intention to propose a candidate:

The small shareholders intending to propose a person as a candidate for the post of small shareholder director shall leave a signed notice of their intention with the company at least 14 days before the meeting under their signatures specifying their details and proposed director’s details. The details include name, address, shares held and folio number etc. If the proposer does not hold any shares in the company, the details of shares held, and folio number need not be specified in the notice.

Statement by the proposed small shareholders director:

The notice shall be accompanied by a statement signed by the proposed director for the post of small shareholder director stating:

(a)his Director Identification Number.

(b)that he is not disqualified to become a director under the Act; and

(c)his consent to act as a director of the company Tenure of office and no retirement by rotation:

The tenure of small shareholders’ director shall not exceed a period of 3 consecutive years, and he shall not be liable to retire by rotation. Further he shall not be eligible for re-appointment after the expiry of his tenure.

Grounds of vacation of office:

A Small shareholders’ director shall vacate the office if -

(a)he incurs any of the disqualifications specified in section 164.

(b)the office of the director becomes vacant in pursuance of section 167.

(c)he ceases to meet the criteria of independence as provided section 149 (6).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5A(ii) (Syllabus 2017).

Terms & Conditions for Small Shareholders’ Director

Section 151 read with Rule 7 of the Companies (Appointment and Qualification of Directors) Rules, 2014 laid down the following terms and conditions for appointment of Small Shareholders Director

(SSD), which include inter alia the following:

Election of small shareholders director:

A listed company, may upon notice of not less than:

(a)One thousand small shareholders; or

(b)one-tenth of the total number of such shareholders,

whichever is lower; have a small shareholder director elected by the small shareholder.

1/10th of the small shareholders (SS) would come to 2000. However, the notice has been given by more than 1000 small shareholders. Hence, they are entitled to make such requisition.

Whether mandatory:

A listed company may upon notice appoint Small Shareholder Director (SSD). A Small Shareholders’ Director may be elected voluntarily by any listed company. Thus, a listed company may on its own, act to appoint a Small Shareholder’s Director. In such a case, no notice from small shareholder(s) is required. The word used is “may” in Section 151 read with Rule 7 of the Companies (Appointment and Qualification of Directors) Rules, 2014. Hence, it is not mandatory for the company to appoint SSD, even if the notice is received from the eligible SS.

Tenure of office and no retirement by rotation:

The tenure of small shareholder director shall not exceed a period of 3 consecutive years and he shall not be liable to retire by rotation. Further he shall not be eligible for re-appointment after the expiry of his tenure.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(d) (Syllabus 2022).

(a)According to Section 151 of the Companies Act, 2013 read with rule 7(1) of the Companies (Appointment and qualifications of Directors) Rules, 2014, a listed company may have one director elected by such small shareholders in such manner and on such terms and conditions as may be prescribed. A listed company, may upon notice of not less than:

1.One thousand small shareholders; or

2.One-tenth of the total number of such shareholders, whichever is lower; have a small shareholders director elected by the small shareholder.

A ‘Small Shareholder’s Director’ may be elected voluntarily by any listed company. Thus, a listed company, may, on its own, act to appoint a Small Shareholder’s Director. In such a case, no notice from small shareholder(s) is required. The Act has used the expression “may” and not “shall.” Hence, it is not mandatory for a listed company to appoint small shareholders’ director.

(b)As per rule 7(5) of the of the Companies (Appointment and qualifications of Directors) Rules, 2014, the tenure of small shareholders’ director shall not exceed a period of 3 consecutive years and he shall not be liable to retire by rotation. Further he shall not be eligible for re-appointment after the expiry of his tenure.

(c)As per rule 7(8) of the of the Companies (Appointment and qualifications of Directors) Rules, 2014, a person shall not hold the office of small shareholders’ director in more than two companies. If second company is in competitive business or is in conflict with business of the first company, he shall not be appointed in second company.

(d)As per rule 7(4) of the of the Companies (Appointment and qualifications of Directors) Rules, 2014, Small shareholders’ director shall be considered as an independent director, if-

a.he is eligible for appointment as an independent director as per sub-section

(6)of section 149; and

b.he gives a declaration of his independence as per sub-section (7) of section 149.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 6A(ii) (Syllabus 2022).

As per Explanation to Section 151 of the Companies Act, 2013, “small shareholder” means one holding shares of nominal value of not more than Rs. 20,000 or such other sum as may be prescribed. Thus, in deciding whether a shareholder is a small shareholder or not, the nominal value of the share is relevant. It does not matter how much is the paid-up value or market value of the shares.

In view of the above, Karan has to reckon the situation with reference to the nominal value of the shares held by him which is Rs. 25,000 and not paid-up value of 12,500 or market value of Rs.10,000. Hence, he is not a small shareholder.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3(a) (Old syllabus).

As per Section 151 read with Rule 7 of the Companies(Appointment and Qualifications of Directors) Rules, 2014, the tenure of small shareholders' director shall not exceed a period of 3 consecutive years and on the expiry of the tenure, such director shall not be eligible for re-appointment. Further, such director shall not be liable to retire by rotation.

A small shareholders' director is included in the total limit of directorship of 20 companies as prescribed under section 165 (1) of the Companies Act, 2013.

Based on the above provisions, answers to the questions are as under:

(i)No, Shankar as small shareholder director cannot be re-appointed as on March 31, 2021.

(ii)No, Shankar is not liable to retire by rotation as on March 31, 2019.

(iii)Yes, Shankar's directorship will be counted in the over-all limit provided under Section 165 (1) of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5(e) (Syllabus 2017).

Appointment of Small Shareholder Directors’

According to Rule 7(1) of the Companies (Appointment and Qualification of Directors) Rules, 2014, a listed company, may upon notice of not less than (a) One thousand small shareholders; or (b) one tenth of the total number of such shareholders, whichever is lower; have a small shareholder's director elected by the small shareholder. A 'Small Shareholders' Director' may be elected voluntarily by any listed company. Thus, a listed company, may, on its own, act to appoint a Small Shareholders' Director. In such a case, no notice from small shareholder(s) is required.

Appointment of Independent Director

According to Section 149(4) of Companies Act, 2013 every listed public company shall have at least one-third of the total number of directors as independent directors. Further as per Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014, 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:

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.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 2(d) (Old syllabus).

Pursuant to section 152(7)(a) of the Companies Act, 2013 which provides that if at the annual general meeting at which a director retires and the vacancy is not so filled up and the meeting has not expressly resolved not to fill the vacancy the meeting shall stand adjourned to next day same day next week at the same time and place or if that day is national holiday till next succeeding day which is not a national holiday at the same time and place.

Section 152(7)(b) further provides that if at the adjourned meeting also the place of retiring directors is not filled up and the meeting also not expressly resolved not to fill the vacancy the retiring director shall be deemed to have been reappointed at the adjourned meeting unless at the adjourned meeting or previous meeting a resolution of reappointment of such directors was put and lost or he has given a notice in writing addressed to the company and board of directors expressing his desire not to be re-elected or disqualified.

Therefore, in the given case, applying the above provisions, the answer is as follows-

The retiring directors shall be deemed to have been reappointed in the first case. In second case, where resolution for reappointment of retiring directors were lost they shall not be deemed to have been reappointed.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 5(a) (Syllabus 2022).

Section 152(6) of the Companies Act, 2013-states that unless it is provided by the articles of the company, 2/3rd directors are liable to retire by rotation and 1/3rd are liable to retire at every general meeting after the meeting at which first directors are appointed.

Directors who are liable to retire by rotation are known as rotational directors. Any fraction while calculating 2/3rd shall be rounded off to the one. Alternatively, it can be said that only 1/3rd of the total number of directors can be non- rotational directors. Here, total directors mean directors appointed by the company. 1/3rd of rotational directors shall retire at every General Meeting. The directors who have been longest in office since their last appointment are liable to retire by rotation at every Annual General Meeting. Small Shareholders' Director and Independent Directors are non-rotational directors.

Applying above provisions, Ashish (Independent Director), Gagandeep (Independent Director) and Anil (Small Shareholders' Director) are non-rotational directors.

Remaining six directors are liable to retire by rotation. 1/3rd of rotational directors are liable to retire at the forthcoming Annual General Meeting (i.e. 1/3rd of 6 = 2).

Therefore, any two directors from Rakesh, Shyam, Mehul, Jigisha, Komal and Kavita will retire by rotation.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 5(a) (Syllabus 2017).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 2(d) (Old syllabus).

As per rule 38 of the Companies (Incorporation Rules), 2014, the application for allotment of Director Identification Number upto three Directors, reservation of a name, incorporation of company and appointment of Directors of the proposed for One Person Company, private company, public company and a company falling under section 8 of the Act. Shall be filed in SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus:INC-32) with the Registrar, within whose jurisdiction the registered office of the company is proposed to be situated. Any person (not having approved DIN) proposed to become a first director in a new company shall have to make an application through web form SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus: INC-32) for allotment of DIN.

For the purposes of filing SPICe Form, the particulars of maximum of three directors shall be allowed to be filled in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32), and allotment of Director Identification Number of maximum of three proposed directors shall be permitted in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) in case of proposed directors not having approved Director Identification Number.

The applicant is required to attach the proof of Identity, address, specimen signature duly verified. etc. along with the application. DIN would be allocated to User only after approval of the form. [Section 153 read with rule 9 of the Companies (Appointment and Qualification of Directors) Rules, 2014].

Once the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus: INC-32) is processed and found complete, company would be registered and CIN would be allocated. Also DINs gets issued to the proposed Directors who do not have a valid DIN.

Thus, with this facility Anil, Sunil and Sunita may obtain DIN simultaneously with the process of incorporation of the company and can assume the office of directorship immediately on incorporation of the company and meet the requirement of having minimum number of directors.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 4A(c) (Syllabus 2022).

Section 155 of the Companies Act, 2013 read with rule 11(1)(f) of the Companies (Appointment and Qualification) Rules, 2014, provides that no individual, who has already been allotted a DIN under Section 154, shall apply for, obtain or possess another DIN. Thus, Bithin has violated Section 155 and has to surrender additional DIN possessed by him.

He has to file e form DIR-5 to surrender the extra DIN obtained by him explaining that the extra DIN was obtained by mistake and without any mala fide intentions with a declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(e) (Syllabus 2022).

As per section 155 of the Companies Act, 2013, no individual who has already been allotted a DIN under section 154 shall apply for, obtain or possess another DIN.

As per Rule 11 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 the Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received alongwith fee as specified in the Companies (Registration Offices and Fees) Rules, 2014 from any person, cancel or deactivate the DIN in case the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number.

On an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such DIN: Provided that before deactivation of any DIN in such case, the Central Government shall verify e-records with the validly retained number.

In this case, Jyoti may make an application in form DIR-5 to surrender his first DIN with declaration as stated in above provisions.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5A(iii) (Syllabus 2017).

As per section 160 of the Companies Act, 2013, a person who is not a retiring director shall be eligible for appointment to the office of a director at any general meeting, if he, or some member intending to propose him as a director, has, not less than fourteen days before the meeting, left at the registered office of the company, a notice in writing under his hand signifying his candidature as a director or as the case may be, the intention of such member to propose him as a candidate for that office. Such notice must come along with the deposit of one lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or, as the case may be, to the member, if the person proposed gets elected as a director or gets more than twenty five percent of total valid votes cast either on show of hands or on poll on such resolution.

In the given case, Mr. X. has deposited a sum of Rs. 1 lakh with the company, but he failed to get appointed as a director. However, Mr. X secured 39% of total valid votes i.e. condition of securing more than 25% of total valid votes cast, has been satisfied. Hence the decision of the company not to refund Rs. 1 Lakh to Mr. X is not valid.

As per the proviso to section 160(1) of the Companies Act, 2013, the requirements of deposit of amount shall not apply in case of appointment of an independent director or a director recommended by the Nomination and Remuneration Committee, if any, constituted under sub-section (1) of section 178 or a director recommended by the Board of Directors of the company, in the case of a company not required to constitute Nomination and Remuneration Committee.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(b) (Syllabus 2017).

In case Mr. Anil not a retiring director in the company is desirous of standing for directorship of the Pritam Ltd., in pursuance of section160 of the Companies Act, 2013 the following procedure needs to be followed:

1.The proposed director or some member intending to propose him as a director, has, not less than fourteen days before the general meeting, left at the registered office of the company, a notice in writing under his hand signifying his candidature as a director or, as the case may be, the intention of such member to propose him as a candidate for that office, along with the deposit of one lakh rupees which shall be refunded to such person or, as the case may be, to the member, if the person proposed gets elected as a director or gets more than twenty-five per cent. of total valid votes cast either on show of hands or on poll on such resolution.

2.The company shall, at least seven days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office-

a.by serving individual notices, on the members through electronic mode to such members who have provided their email addresses to the company for communication purposes, and in writing to all other members; and

b.by placing notice of such candidature or intention on the website of the company, if any; or

c.Publishing the same in vernacular newspaper seven days before the meeting

3.The candidate may obtain Director Identification Number (DIN) and give his consent in DIR-2.

4.If the candidate is elected the company shall file DIR-12.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 4(a) (Syllabus 2017).

According to section 161(4) of the Companies Act, 2013, if office of any director appointed by the company in general meeting is vacated before his term expires in the normal course, the resulting casual vacancy may, in default of and subject to, any regulations in the Articles of the company, be filled by the Board of directors at a meeting of the board which shall be subsequently approved by the members in the immediate next general meeting.

Provided that any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated.

In the given case, casual vacancy caused due to death of Arup (who was appointed by the company in AGM held on 28/09/2023 for a period of three years) is filled by the Board of directors by appointing Prabhat for a period of three years. However, appointment of Prabhat for a period of three years is in contravention of above stated provisions.

As the appointment of Prabhat ought to be approved by members in the immediate next general meeting. However, the appointment was not even proposed or approved in the AGM held on 19/08/2025.

Hence appointment of Prabhat contravenes provisions of the Companies Act, 2013. Therefore, the opinion of President (Corporate Affairs) is correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(a) (Syllabus 2022).

(i)Chairman’s decision whether justifiable:

The given case is regarding appointment of an alternate director in the company.

Section 161(2) of the Act empowers the Board, if so authorized by its Articles or by a resolution passed by the company in general meeting, to appoint a person, not being a person holding any alternate directorship for any other director in the company or holding directorship in the same company, to act as an alternate director for a director during his absence for a period of not less than three months from India.

The Act does not empower the original director to appoint an alternate director. In view of this, the appointment of Khushbu made by Ansari and not by the Board as an alternate director is invalid. The Chairman’s decision to disallow Khushbu from participating in the board meeting is, therefore, justified.

(ii)Specimen Board Resolution:

SPECIMEN COPY OF THE RESOLUTION PASSED AT THE FIRST MEETING OF THE BOARD OF DIRECTORS OF …… LTD., HELD ON (DAY), (DATE)__________ AT (PLACE) __________AT (TIME) TO__________(TIME).

“RESOLVED THAT pursuant to the provisions of Section 161(2) of the Companies Act, 2013 and Articles of Association of the company, Ms Khushbo (DIN: ________), who has signified her consent to act as a director, be and is hereby appointed as an Alternate Director to Mr. Ansari (DIN: ) of the Company to hold office with effect from the date of this board meeting but not beyond the period for which Mr. Ansari is entitled to hold office or when Mr. Ansari returns to India.

RESOLVED FURTHER THAT Mr. ---- (Director) or the Company Secretary of the Company be and is hereby authorized to do all acts, deeds, matters, and things as may be deemed necessary and to sign and execute all necessary documents, applications, and returns for the purpose of giving effect to the aforesaid resolution along with filing of necessary e-form(s) with the Registrar of Companies.”

For and on behalf of JB LTD.

Name:

Designation:

Date:

Place:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6(a) (Syllabus 2022).

Section 161(2) of the Companies Act, 2013(Act), empowers the Board, if so, authorized by its articles or by a resolution passed by the company in general meeting, to appoint a person, not being a person holding any alternate directorship for any other director in the company or holding directorship in the same company, to act as an alternate director for a director during his absence for a period of not less than three months from India. Section 161 (2) of the Act applies to all companies, whether public or private.

Conditions for appointment of an alternate director:

(a)The Board of Directors of a company must be authorised by its articles or by a resolution passed by the company in general meeting for appointment of the alternate director.

(b)The person in whose place the Alternate Director is being appointed should be absent for a period of not less than 3 months from India.

(c)The person to be appointed as the Alternate Director shall be the person other than the person holding any alternate directorship for any other Director in the company or holding directorship in the same company.

(d)If it is proposed to appoint an Alternate Director to an Independent Director, it must be ensured that he is qualified to be appointed as an independent director under the provisions of this Act

Power to appoint:

The Board may appoint an alternate director only if it is authorized by the articles or by an ordinary resolution passed at a general meeting. The right to appoint an alternate director vest in the Board. The original director has no right to appoint an alternate director. The members have no right to appoint an alternate director, the members can only empower the Board to appoint alternate director as and when board thinks fit.

Method of appointment:

There is no condition that an alternate director shall be appointed only by passing a resolution at a Board meeting. Therefore, an alternate director can be appointed by passing a resolution by circulation.

Term of office of an alternate director:

(a)An alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed. If the original director ceases to be a director by reason of death or vacation of office under section 167 the alternate director shall immediately cease to hold his office

(b)The alternate director shall vacate his office when the original director in whose place he has been appointed returns to India.

In light of the above provisions, Akshay cannot appoint Raghav as an alternate director and his appointment is invalid. The board can appoint an alternate director and hence the appointment of Madhuri is valid assuming that the articles of the company authorise the Board for such appointment. Madhuri will vacate the office in accordance with the provisions of the Act, as explained above.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(a) (Syllabus 2017).

Validity of appointment and tenure of Additional Director:

Provision:

Section 161(1) of the Companies Act. 2013, provides that the articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.

Analysis and Answer:

In case of default in holding annual general meeting, the additional director shall vacate his office on the last day on which the annual general meeting ought to be held. A person who fails to get appointed as a director in a general meeting cannot be appointed as Additional Director. Section 161(1) of the Companies Act, 2013 applies to all companies, whether public or private.

Joe was previously proposed to be appointed as a regular director in the Annual General Meeting

(AGM) by completing the required formalities. However, the motion to appoint him a director failed and he could not, therefore, be appointed as proposed. Hence, the Board of Directors can’t appoint him as an additional director. His appointment is invalid ab initio and the question of tenure in his case does not arise as he has not occupied his office of director at any point of time.

Jogesh is validly appointed as an additional director by the Board in term of the power conferred by the Articles. Since, the company has obtained from the Registrar an extension of time for holding the AGM till 31st December, 2024 the company is not in default in not-holding the AGM on 30th September, 2024. The applicable due date of AGM in this case is 31st December, 2024 on which date the company has held the AGM. Hence, Joseph shall vacate his office at the commencement of the AGM held on 31st December, 2024, if not appointed as a regular director at that meeting.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(a) (Syllabus 2022).

Section 161(1) of the Companies Act, 2013, provides that the Articles of Association of a company may confer on its Board of directors the power to appoint any person, other than a person who fails to get appointed as a director in a General Meeting, as an additional director at any time.

Person who is appointed as an additional director shall hold office up to the date of the next Annual General Meeting or the last date on which the Annual General Meeting should have been held, whichever is earlier. In case of default in holding Annual General Meeting, the additional director shall vacate his office on the last day on which the Annual General Meeting ought to be held.

Further, as per section 96, the company is required to hold an Annual General Meeting (other than First AGM) within a period of 6 months of closure of the relevant financial year. As per section 2(41), "financial year" in relation to any company means period ending on 31st March every year.

In the given case, since the Annual General Meeting was adjourned to and held on 30th September, 2021, Mohan can continue up to 30th September, 2021.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 5A(i) (Syllabus 2017).

(i)Section 161(2) of the Companies Act 2013 empowers the Board, if so authorized by its articles or by a resolution passed by the company in general meeting, to appoint a director (termed as ‘alternate director) to act in the absence of a original director during his absence for a period of not less than three months from India. Since as D is absent only for two and half months. Alternate director in place of D cannot be appointed.

(ii)Section 161(2) of the Companies Act, 2013 states that in the conditions for appointment of an Alternate Director, the person to be appointed as the Alternate Director shall be the person other than the person holding any alternate directorship for any other Director in the company or holding directorship in the same company.Therefore since F is acting as an alternate director for another director i.e. “G”, he cannot be appointed again as alternate director for E in the same company.

(iii)There is no specific provision in the Act which provides that the appointment of an Alternate Director shall be made at the meeting of the Board. In the absence of any such prohibition, an alternate director can be appointed by passing a resolution by circulation. Therefore in the given illustration, if permitted the alternate Director can be appointed by circular resolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 4(a) (Syllabus 2017).

Section 161(4) of the Companies Act, 2013 states that if the office of any director appointed by the company in general meeting is vacated before his term of office expires in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filled by the Board of directors at a meeting of the Board which shall be subsequently approved by members in the immediate next general meeting.

Provided that any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated.

Section 161 does not authorize the Board to appoint an additional director to fill the casual vacancy

•If appointment of X is made as an additional director, then, such appointment cannot amount to filling a casual vacancy.

•If X is appointed to fill a casual vacancy, then he shall not be an additional director.

It is thus clear that the appointment of X as an additional director to fill the casual vacancy is not valid. However, X can be treated as additional director and his office as additional director will be valid upto the date of ensuing AGM. In this regard, the text of the resolution dealing with casual vacancy will be void but will be valid to the extent of additional director.

Further X has been appointed to fill the casual vacancy by passing a circular resolution. Since the appointment of a director filling a casual vacancy requires passing of resolution in a board meeting, the appointment of X is in contravention of section 161, and is therefore, invalid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 5A(ii) (Syllabus 2017).

According to Section 162 of the Companies Act 2013, at a general meeting of a company, a motion for the appointment of two or more persons as directors of the company by a single resolution shall not be moved unless a proposal to move such a motion has first been agreed to at the meeting without any vote being cast against it.

Hence, Star Ltd. cannot appoint Ram and Shyam as directors of the company by passing a single resolution in the general meeting unless a proposal to move such a motion has first been agreed to at the meeting without any vote being cast against it.

Pursuant to the Exemption Notification dated 05/06/2015, provisions of Section 162 of the Companies Act, 2013 are not applicable on a private company which has not committed a default in filing its financial statements under Section 137 of the Companies Act, 2013 or annual return under Section 92 of the Companies Act, 2013 with the Registrar of Companies. Hence a private company may appoint more than one director by passing a single resolution, if it has not defaulted under Section 137 or Section 92 of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 2A(ii) (Old syllabus).

Section 164(2) of the Companies Act, 2013 provides that no person who is or has been a director of a company which-

a)Has not filed financial statements or annual returns for any continuous period of 3 financial years; or

b)Has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continuous for one year or more,

shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

Further, in case of Government Companies, section 164(2) shall not apply vide Notification No. GSR 463(E) dated 05-06-2015.

In the given case ABC Ltd., is a Government Company, so the above said section 164(2) is not applicable to ABC Ltd. In such company, directors are not disqualified for the appointment or reappointment as a director in the same company or any other company. So, Bhupesh who is a director in the Government Company is eligible to be appointed as a director in TNC Ltd.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 5(a) (Syllabus 2017).

Section 164(2) of the Companies Act, 2013 provides that where a person has been a director of a company which has not filed financial statements for a continuous period of three financial years, he shall not eligible to be appointed as a director in any other company for a period of 5 years from the date on which the Company has failed to do so. Thus, Takur cannot be appointed as a director of any other company for a period of 5 years from 2018, owing to the failure of Turf Ltd to file the financial statements. Even if the lapse is rectified by the Turf Ltd subsequently, the disqualification of Takur remains for five years.

Proviso to Section 164 (1)(d) of the Companies Act,2013 provides that where a person has been convicted of an offence for a period of 7 years or more, he shall not be eligible to be appointed as a director in any company.

Proviso to the Section 164(3) states that the disqualification referred above shall continue to apply even if an appeal or petition has been filed against the order of conviction.

In the given case, the Umesh was convicted for an offence for a period of 8 years, Therefore, Umesh cannot be appointed as a director of Race Ltd. even the decision on appeal is pending.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 4(d) (Old syllabus).

a.According to Section 2(71) of the Companies Act, 2013, a subsidiary of a public company is deemed to be a public company even when it continues as a private company in its Articles. A director can hold a maximum of 10 directorships in public companies as per Section 165(1) of the Act and as per its Explanation I — For reckoning the limit of public companies in which a person can be appointed as director, Directorship in private companies that are either holding or subsidiary company of a public company shall be included. Sudipto is already holding directorship in 10 public companies including one private company which is deemed to be a public company. Hence, Sudipto cannot be appointed as director in Pragati CNC Machines Limited. His appointment is invalid.

b.According to Section 167(1)(b) of the Act, the office of director is vacated when he absents himself from all the meetings of the Board of Directors (BOD) held during the period of 12 months with or without seeking leave of absence from the company. Hence, despite his medical condition, the position of directorship of Debanand in Albatross Refrigeration Limited has become vacant and he cannot continue to be a director of the company.

c.Ratan cannot take refuge in the fact that he has not received the final call Notice from the company due to loss in postal transit. A director of a company has collective responsibility for all the decisions of the Board of Directors. Call Notice is sent with the approval of the Board. All the decisions of BOD are circulated to all the Directors whether they attended the meeting of BOD or not. Hence, Ratan cannot take refuge under the non-receipt of call Notice. He stands disqualified from holding directorship in Amaranth Seeds Limited under section 164(1)(f) of the Act ,as he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 5A(v) (Syllabus 2017).

According to Section 165 of the Companies Act, 2013, no person shall hold office as a director, including any alternate directorship, in more than 20 companies at the same time. Whereas the maximum number of public companies in which a person can be appointed as a director shall not exceed 10.

For reckoning the limit of public companies in which a person can be appointed as director, directorship in private companies that are either holding or subsidiary company of a public company shall be included.

Further, for reckoning the limit of directorships of 20 companies, the directorship in a dormant company and section 8 companies shall not be included.

The members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

(i)In the present case, holding of directorship of Rohan as on 30th September, 2020 is valid as he is holding directorship in 10 public companies and in 11 private companies out of which one company is dormant company and one company is registered under section 8 of the Companies Act, 2013. So, maximum directorship he is holding is in 20 companies.

(ii)Upon MNP Pvt. Ltd. becoming subsidiary of ABC Ltd. (a public company) directorship in MNP Pvt. Ltd. shall also be included within the limit of 10 public companies.

Accordingly, if Rohan acts as director in more than 10 public companies, then same will be in contravention of Section 165 of the Companies Act, 2013.

(iii)According to section 165(2) of the Companies Act, 2013 subject to the provisions of Section 165 (1), the members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors. So, the proposal of Company Secretary is tenable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 4(a) (Syllabus 2017).

According to Section 165(1) of the Companies Act, 2013, no person, can hold office as a director, including any alternate directorship, in more than twenty companies at the same time. For reckoning the limit of directorships in twenty companies, the directorship in a dormant company is excluded.

Further, out of the above twenty companies, the maximum number of Public Companies in which a person can be appointed as a director cannot be more than ten. For reckoning the limit of ten Public Companies, directorship in Private Companies that are either holding or subsidiary company of a Public Company shall also need to be included.

In the given case, Amit is holding a directorship in:

Company 9 directorship. Hence, total number of directorships he is already holding is 17 (since, directorship in Section 8 Company is excluded, from reckoning the limit of directorship of 20 companies).

Thus, Amit can take up directorship in 2 more Public Companies and 1 more Private Company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5A(v) (Syllabus 2017).

Section 166 (6) of the Companies Act 2013 prohibits assignment of office of director to any other person. Any assignment of office made by a director shall be void. Authorizing any person to sign a document as a director amounts to assignment of office of director.

Hence, in the instant case Rajeev cannot assign his office of directorship in Rajsur Pvt. Ltd. to his son Ranbeer by a general power of attorney to sign documents on his behalf as director of the company. Contracts signed by Ranbeer on behalf of the company are void and not binding upon the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5(a) (Syllabus 2017).

Section 167(1) of the Companies Act, 2013 provides for the cases where the office of a director shall become vacant. Section 167(1)(b) states that the office of a director shall be vacated if he absents himself from all the meetings of the Board of directors held during a period of twelve months with or without seeking leave of absence of the Board.

Examining the given case, Thunder, the director absented from all the four meetings of the board held from July to December 2023 by seeking leave of absence in first three and not seeking leave of absence in the last one. It is not that he did not attend all the meetings for a period of twelve months. Thus, his office does not become vacant and he can continue to be a director in the Board.

Disqualification of directors is dealt with under section 164 of the Companies Act, 2013 and is different from vacation of office of directors under section 167. Section 167(1)(a) provides that the office of a director shall become vacant in case he incurs any of the disqualifications specified in section 164, which does not include non-attendance of board meetings as a reason for disqualification.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(b) (Syllabus 2017).

No, it is not allowed, for a Public Limited Company under the provisions of Section 167 of the Companies Act, 2013, to amend its Article of Association to include additional grounds for vacation of office of Directors over and above what is specifically prescribed under Sec 167(1) of the Companies Act, 2013.

However, if Beauty Ltd had been a Private Limited Company then as provided under Sec 167(4) of the Companies Act, 2013, it may, by its Articles, provide any other ground for the vacation of the office of a director in addition to provisions mentioned in section 167(1) of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 3(c) (Old syllabus).

i)A director of a company may resign from office under section 168 of Companies Act, 2013 (Act) read with Rule (15) of Companies (Appointment and Qualifications of Directors) Rules, 2014 (Rules), by giving a Notice along with reasons for resignation to the company.

The Board of Directors (BOD) shall, on receipt of such Notice of resignation from a director, shall take note of the same.

ii)The company shall, within 30 days from the date of receipt of notice of resignation from a director, intimate the Registrar of Companies (ROC) in Form DIR-12 and may also post the information on its website as per Rule (15).

The BOD shall also mention the fact of such resignation of director in the Report of the Board of Directors under section 134 of the Act laid in the immediately following Annual General Meeting of the company.

iii)The director may, within 30 days from the date of resignation, forward to the ROC a copy of his letter of resignation along with reasons for resignation in Form DIR-11 along with the requisite registration fees as provided under Companies (Registration Offices and fees) Rules, 2014.

iv)The resignation shall be effective from the date on which the notice of resignation was received by the company or the date specified by the director in the Notice of resignation, whichever is later.

In this case, the director has filed a criminal complaint stating that the resignation letter was not signed by him, not genuine and also that his signature was forged.

v)However, as decided by NCLAT in a case Harish Jain v Haveli Restaurant and Resorts Limited dated 26/02/2020, (Company Appeal (AT) No. 390 of 2018) when a director alleges that his signature on the resignation letter was forged, it is for the director to prove that the resignation letter was a forged document. In other words, onus of proof falls on the complainant.

Thus, besides initiating measures to obtain anticipatory bail for all the KMPs of the company, the company secretary Rohit Biswas and the company can also contest the case on merits in the appropriate legal forum.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(b) (Syllabus 2017).

According to Section 168(2) of the Companies Act, 2013, the resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later. Thus, in the given case, the resignation of Kailash shall take effect from December 15, 2019.

Section 168(1) read with Rule 15 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 stipulates that the company shall within thirty days from the date of receipt of notice of resignation from a director, intimate to the Registrar of Companies in Form DIR- 12 along with specified fees and post the information on its website, if any. Thus, in this case the company will have to file form DIR-12 by January 14, 2020.

According to Rule 16 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 the resigning director may also forward to the Registrar of Companies, a copy of his resignation along with reasons for the resignation in form DIR-11 along with specified fees within a period of thirty days from the date of resignation.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5A(iii) (Syllabus 2017).

Removal of a non-rotational managing director is possible, since section 169 of the Companies Act, 2013 empowers the members to remove any director, whether he is rotational or non- rotational director, or managing director, whole time director or a non-executive director.

Procedure/Steps to be taken by Mr. Sunil

Mr. Sunil shall have to give a special notice to the company in accordance with the provisions of Section 115 of the Companies Act, 2013. In the special notice. Mr. Sunil shall propose a resolution for removal of the managing director. The special notice must be - (i) given to the company not earlier than 3 months before the date of the general meeting but at least 14 days before the general meeting (excluding the day on which such notice is given and the day of the general meeting); (ii) signed by member(s) holding not less than 1 % of total voting power or member(s) holding shares on which an aggregate sum of not less than five lakh rupees has been paid up on the date of the notice..

Procedure/Steps to be taken by the company

(a)On receipt of notice by the company: The Company shall immediately after the receipt of the notice, give its members notice of the resolution at least seven days before the meeting, exclusive of the day of dispatch of notice and day of the meeting, in the same manner as it gives notice of any general meetings.

(b)Publication of notice: Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated. Such notice shall also be posted on the website, if any, of the Company. Such notice shall be published at least seven days before the meeting, exclusive of the day of publication of the notice and day of the meeting.

(c)On receipt of special notice, the company shall send a copy to the managing director concerned.

(d)The concerned Managing director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.

(e)Managing Director concerned if make representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so,–

(a)in any notice of the resolution given to members of the company, state the fact of the representation having been made; and

(b)send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company), and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company’s default, the concerned director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting.

(f)The general meeting shall be held.

(g)The managing director shall have a right to be heard at the meeting. The right to make an oral representation is in addition to written representation.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6A(iv) (Syllabus 2022).

i)The vacancy resulting from removal of director under section 169 of the Act may be filled up by appointing another director at the same general meeting where Lazybones was removed from directorship by appointing any other person as a director. However, a special Notice for the proposed appointment of another person in the vacancy caused by removal of Lazybones needs to be given under section 169(2) of the Act.

ii)As per Section 169(5) of the Act, the vacancy caused by removal of Lazybones may be filled as a casual vacancy in accordance with provisions of Section 161(4) of the Act. As per Section 161(4) of the Act, in case of public company if the office of director appointed by the company is vacated before the expiry of his term of office in normal course, the resulting casual vacancy may be filled up by the Board of Directors at a meeting of the Board, which shall subsequently be approved by the members in the immediate next general meeting.

iii)In the given case, another person can be appointed in the place of the director removed from office by the Board. However, subject to the provisions of the Articles of Association of the company, the director appointed in the casual vacancy will hold office only up to the date which the director in whose place he was appointed would have held office if it had not been vacated.

iv)The company is required to file Form DIR-12 within 30 days of appointment of another person in the casual vacancy along with the fees provided under Companies (Registration Offices and Fees) Rules, 2014.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5A(iv) (Syllabus 2017).

According to Section 169 of the Companies Act, 2013 a company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard. The provision relating to removal shall not apply where the company has availed itself of the option to appoint not less than two – thirds of the total number of directors according to the principle of proportional representation.

The company has to follow the prescribed procedure in section 169 of the Companies Act, 2013 for the removal of director. A special notice is required of any resolution, to remove a director under Section 169. Further the director concerned shall be entitled to be heard on the resolution at the meeting.

Proviso to section 169(1) of the Companies Act, 2013 provides that an independent director re-appointed for second term under section 149(10) shall be removed by the company only by passing a special resolution and after giving him a reasonable opportunity of being heard.

Hence the statement that ‘Directors can be removed only by passing a special resolution is not correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 1(c) (Old syllabus).

A small shareholder director can be removed by in pursuance to section 169 of Companies Act, 2013 by passing an ordinary resolution in a general meeting. All the shareholders are eligible to vote irrespective of small shareholder or otherwise. The argument hence is not valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 5A(i) (Syllabus 2017).

Pursuant to the provisions of Exemption Notification No. G.S.R. 463(E) dated 05- Jun-2015 providing exemptions for Government companies, Section 170 and 171 shall not apply to a Government Company in which the entire paid up share capital is held by the Central Government, or by the State Government or Governments or by the Central Government and one or more State Governments. This implies that the requirement relating to maintenance of register of Directors, KMP and their shareholding and the right of members to inspect it has been relaxed for a government company.

In the present case, total of 80% of the ownership is held by Central Government and state government. The remaining 20% held by government owned agencies of LIC and ONGC cannot be counted as government ownership for the purpose of this section. So, the argument of the directors that that being a government company, provisions of Section 170 are not applicable is wrong.

It is clearly specified that the exemption from Section 170 are applicable only to a Government Company in which the entire paid up share capital is held by the Central Government, or by the State Government or Governments or by the Central Government and one or more State Governments. So, compliance to Section 170 by SPIC Ltd is mandatory and maintenance of register of directors and their shareholding cannot be done away with.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(d) (Old syllabus).

Section 184 of the Companies Act, 2013 requires the disclosure of interest by a director and prohibits an interested director to participate or vote in respect of that particular transaction at the Board meeting subject to certain exceptions for private limited companies. Further, his presence will not be counted for quorum too. But where the whole body of directors is aware of the fact relating to interest of a director, formal disclosure is not necessary. (Ramakrishna Rao vs Bangalore Race Club).

The mere voting by an interested director will not render the contract void or voidable unless in the absence of that vote, there would have been no quorum. The mere fact that voting in such situation the director shall be liable to a penalty of one lakh rupees under section 184 (4) of the Act does not ipso facto render the contract void or voidable. In this case, there is no allegation of earning secret profits.

Under section 184 of the Act, there does not exist any ban on contract in which directors are interested. The only requirement is that interest should be disclosed. Even where the interest is not disclosed, the transaction is only voidable against the interested director and not void as decided in Narayan Das Shreeram Somani vs Sangli Bank.

Under section 184(3) of the Act, a contract or arrangement entered into by the company without disclosure under sub-section (2) or with participation by a director who is concerned or interested in any way, directly or indirectly, in the contract or arrangement, shall be voidable at the option of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5A(iv) (Syllabus 2017).

Section 185 of the Companies Act 2013 governs provisions as to loans to directors. Ministry of Corporate Affairs (MCA) vide its notification dated 5th June, 2015 provides that section 185 shall not apply to a private company;-

(a)in whose share capital no other body corporate has invested any money;

(b)if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

(c)such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section.

As per facts mentioned in the case under consideration, borrowing of the company from financial institution is Rs. 10 crore which is more than twice its paid up capital of Rs. 1.06 crore. Thus, all the conditions of notification for exemption are not satisfied.

Therefore, the company should have complied with the provisions of section 185 of the Companies Act, 2013 while granting of loan of Rs. 25 lakh by the company to firm where managing director of the company is partner in the firm.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 2A(i) (Old syllabus).

As per Rule 6(4) of the Companies (Appointment and Qualification of Directors) Rules, 2014, Every individual whose name is included in the data bank of independent directors of IICA shall pass an online proficiency self-assessment test conducted by the IICA within a period of two years from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the data bank of the institute.

The first proviso to this sub rule provides that the individual who has served for a period of not less than three years as on the date of inclusion of his name in the data bank as director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up share capital of Rs. 10 crores or more shall not be required to pass the online proficiency self-assessment test.

It is further provided that for the purpose of calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as director or as key managerial personnel in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.

In view of this proviso, the contention of Rohit is valid, as the experience of director is 7 years.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6A(iv) (Syllabus 2022).

As per rule 11 of the Companies (Appointment and Qualifications of Directors) Rules, 2014, the Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received along with fee as specified in Companies (Registration Offices and Fees) Rules, 2014 from any person, cancel or deactivate the DIN in case -

(a)the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number;

(b)the DIN was obtained in a wrongful manner or by fraudulent means;

(c)of the death of the concerned individual;

(d)the concerned individual has been declared as a person of unsound mind by a competent Court;

(e)if the concerned individual has been adjudicated an insolvent.

Provided that before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned individual;

(f)on an application made in Form DIR -5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed director in any company and the said DIN has never been used for filing any document with any authority the Central Government may deactivate such DIN. Provided that before deactivation of any DIN in such case, the Central Government shall verify e-records.

Once a person is appointed as a director in any company as per the Companies Act 2013, he cannot relinquish his DIN in the future. Even if he/she doesn’t remain a director anymore in that company or in any other company, his/ her DIN will exist as it is.

In the light of the above provisions Pankaj cannot apply for surrender of DIN as he has already worked as a director and used his DIN in filing of returns or documents.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(b) (Syllabus 2017).

Rule 11 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 provides that the Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received along with fee as specified in Companies (Registration Offices and Fees) Rules, 2014 from any person, cancel or deactivate the Director Identification Number (DIN) in case-

(a)the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number;

(b)the DIN was obtained in a wrongful manner or by fraudulent means;

(c)of the death of the concerned individual;

(d)the concerned individual has been declared as a person of unsound mind by a competent Court;

(e)if the concerned individual has been adjudicated an insolvent:

However, before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned individual;

(f)on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such DIN:

Further, before deactivation of any DIN in such case, the Central Government shall verify e-records.

The Central Government or Regional Director (Northern Region), or any officer authorized by the Central Government or Regional Director (Northern Region) shall, deactivate the Director Identification Number (DIN), of an individual who does not intimate his particulars in e-form DIR-3-KYC or the web service DIR-3-KYC-WEB as the case may be within stipulated time in accordance with Rule 12A.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(b) (Old syllabus).

As per Rule 6(4) of the Companies (Appointment and Qualification of Directors) Rules, 2014. every individual whose name is included in the data bank of independent directors of IICA shall pass an online proficiency self-assessment test conducted by the IICA within a period of two years from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the data bank of the institute.

Proviso to this sub rule provides that the individual who has served for a period of not less than three years as on the date of inclusion of his name in the data bank as director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up share capital of Rs. 10 crores or more shall not be required to pass the online proficiency self-assessment test.

It is further provided that for the purpose of calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as a director or as a key managerial personnel in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.

In view of this proviso, the contention of director is valid as the experience of director is 7 years.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 5A(v) (Syllabus 2017).

Rule 11(1)(f) of Companies (Appointment and Qualifications of Directors) Rules, 2014 provides that on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such DIN.

As, Pratap has applied for cancellation of DIN despite the fact that he was appointed director using his DIN, such DIN shall not be deactivated and DIR-5 cannot be filed under Rule 11(1)(f) of Companies (Appointment and Qualifications of Directors) Rules, 2014 as aforesaid.

Therefore, the action of the Registrar of Companies is correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 4(a) (Old syllabus).

Rule 11 of Companies (Appointment and Qualification of Directors) Rules, 2014 allows cancellation or surrender or deactivation of DIN under the following cases-

(a)If DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number;

(b)If it is obtained in a wrongful manner or by fraudulent means

(c)Death of the concerned individual

(d)Concerned individual has been declared as a person of unsound mind by a competent court

(e)Concerned individual has been adjudicated an insolvent

(f)On application made in Form DIR-5 by the DIN holder to surrender DIN along with declaration that he has never been appointed as director in any company & said DIN has never been used for filing of any document with any authority.

The issue raised in question is not covered in any of the above conditions. As Amitabh was appointed as a director using his DIN (and presumably filed e-forms using the DIN), such DIN shall not be deactivated and DIR-5 cannot be filed even though the name of the company has been struck off and he does not hold directorship in any other Company. Hence, the action of the Registrar is correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 3(b) (Syllabus 2017).