Unit 03 : Board and its Powers
É it
BoardofDirectors
Atthecoreof corporate governance practices is the BoardofDirectors which oversees
how themanagement serves andprotects the longterm interests
ofall thestakeholders
ofthe company
TheBoardgenerallyperformsthreemajorroles in a company
providesdirection setstrategicdirectionofcompany
control monitormanagement
providessupport advice advisoryrole
Aspersection2110 ofthe Companies Act 2013 BoardofDirectors or Board
relation to a company means the collective body
ofdirectors of a company
TheBoardshould comprise ofindependentminded directors It should include an
directorsand non independ
appropriate combination
of executive directors independent
nonexecutive directors to prevent one individual or a smallgroup ofindividualsfrom
dominating theBoards decisionmaking
Board Composition
OnlyIndividuals as directors thecompaniesActstates thatonly an individualcan
become a director Anindividualwhois appointed totheBoardof a company isconsider
imÉñÉi
Min
of directors section149
ofthecompaniesAct requirestheBoardto have a
minimum
of 3 directors incaseofPubliccompany
2 directorsincase Privatecompany
of
1 directors in caseofOnePersonCompany
Maximum no ofdirectors ofthecompaniesAct 2013permits
Section149 a maximumof15
directors on theBoard However a company can appointmorethan is directors after
passing a specialResolution Government companies andsection 8 companies are exempt by
, the centralGovernment fromthisprovision andcan appointmorethan15 directorswithout
passing a SpecialResolution
Noofdirectorsfallingbelowminimum if strength ofdirectorsfallsbelow statutory
minimumprescribed intheAct or Articles thedecisionstakenshallnot be valid if the
number
of
directors is as perstatutory minimum buttenthanthat asperarticles then
Bia codmpision
in identities
the BoardofDirectors shallhave an optimum
combination
of executive nonexecutive directorswith at leastonewoman director an
notlessthan 50 oftheBODshall comprise ofnon executive directors BODofthe
top500listedentities is required to have at least one independentwoman director b
April1 2019 and BODoftop1000entities is required to have at least one
independent woman director
by April1 2020 Nolistedentityshallappoint a
executive directorwho has
person or continue directorship ofanyperson as a non
attainedthe a specialresolution ispassedto thateffect
ageof75years
unless
TypesofDirectors
te firstdirector
91p fit Firstdirectors oftheArticles of association do not
section 152
aeagy
TypesofDirectors priterial
contain
any provisions regarding appointmentoffirstdirectors then the
subscribers tothe Memorandum shallbe deemed as firstdirectors They
diets figermaiator
sng.fi
will hold office untildirectors are duly appointed
Resident director section 149 3 Everycompanymust have at least one
India
directorwho resides in
fornotless than 182days in a financialyear
caseofnewly incorporated companies this requirementapplies proportionately at
the endof the
firstfinancialyear
Woman director section149 1 Certainclasses
ofcompaniesmustappoint
leastone woman director such as listed companies andpubliccompanies wi
prescribedpaidup share
capital or turnover
Professional director a professional director is notspecifically defined in
, the companies Act2013 It refers to directors who are professionals and
bring in their expertise
Nominee director section161131 TheBODcan appoint a directornominat
by an institution underany law or agreement or by the centralor state
Government Typically appointed
byfinancial institutions banks or the Governm
to representtheirinterests in a company
Smallshareholder director section151 it is applicable to listedcompanies
thatmayhave one directorelectedbysmall shareholders A smallshareholder
thiscase is one holding sharesofnominalvalueofnot more than 20,000 or as
prescribed
Independent directors section149 4 Aspersection14914 ofthe companies
Act2013 thefollowing companiesmusthave thespecifiedno of independent
directors
listedcompanies atleast43rdoftotaldirectorsshould be independent
publiccompanieswithpaid capital 10Cr
up
turnover Flooer at
1
independent
s esoer to
loans
debentures
ofthere is any intermittent vacancy of an independent director it mustbefilledby
fililanlies theBoardwithin 3monthsfromdateofvacancy or bynextBoardmeeting whichever
later
independent directormusthave skills knowledge or experience in one or more of th
qualification
followingfields finance law management sales marketing administration researe
corporategovernance or any discipline relevant to the company's business
independentdirectors are notentitled to stockoptions Theymayreceivefees
reimbursements
ofexpensesforparticipation in Board committee meetings or
any
Iihl other remuneration as approved by the members They are entitled to sittingfees
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É it
BoardofDirectors
Atthecoreof corporate governance practices is the BoardofDirectors which oversees
how themanagement serves andprotects the longterm interests
ofall thestakeholders
ofthe company
TheBoardgenerallyperformsthreemajorroles in a company
providesdirection setstrategicdirectionofcompany
control monitormanagement
providessupport advice advisoryrole
Aspersection2110 ofthe Companies Act 2013 BoardofDirectors or Board
relation to a company means the collective body
ofdirectors of a company
TheBoardshould comprise ofindependentminded directors It should include an
directorsand non independ
appropriate combination
of executive directors independent
nonexecutive directors to prevent one individual or a smallgroup ofindividualsfrom
dominating theBoards decisionmaking
Board Composition
OnlyIndividuals as directors thecompaniesActstates thatonly an individualcan
become a director Anindividualwhois appointed totheBoardof a company isconsider
imÉñÉi
Min
of directors section149
ofthecompaniesAct requirestheBoardto have a
minimum
of 3 directors incaseofPubliccompany
2 directorsincase Privatecompany
of
1 directors in caseofOnePersonCompany
Maximum no ofdirectors ofthecompaniesAct 2013permits
Section149 a maximumof15
directors on theBoard However a company can appointmorethan is directors after
passing a specialResolution Government companies andsection 8 companies are exempt by
, the centralGovernment fromthisprovision andcan appointmorethan15 directorswithout
passing a SpecialResolution
Noofdirectorsfallingbelowminimum if strength ofdirectorsfallsbelow statutory
minimumprescribed intheAct or Articles thedecisionstakenshallnot be valid if the
number
of
directors is as perstatutory minimum buttenthanthat asperarticles then
Bia codmpision
in identities
the BoardofDirectors shallhave an optimum
combination
of executive nonexecutive directorswith at leastonewoman director an
notlessthan 50 oftheBODshall comprise ofnon executive directors BODofthe
top500listedentities is required to have at least one independentwoman director b
April1 2019 and BODoftop1000entities is required to have at least one
independent woman director
by April1 2020 Nolistedentityshallappoint a
executive directorwho has
person or continue directorship ofanyperson as a non
attainedthe a specialresolution ispassedto thateffect
ageof75years
unless
TypesofDirectors
te firstdirector
91p fit Firstdirectors oftheArticles of association do not
section 152
aeagy
TypesofDirectors priterial
contain
any provisions regarding appointmentoffirstdirectors then the
subscribers tothe Memorandum shallbe deemed as firstdirectors They
diets figermaiator
sng.fi
will hold office untildirectors are duly appointed
Resident director section 149 3 Everycompanymust have at least one
India
directorwho resides in
fornotless than 182days in a financialyear
caseofnewly incorporated companies this requirementapplies proportionately at
the endof the
firstfinancialyear
Woman director section149 1 Certainclasses
ofcompaniesmustappoint
leastone woman director such as listed companies andpubliccompanies wi
prescribedpaidup share
capital or turnover
Professional director a professional director is notspecifically defined in
, the companies Act2013 It refers to directors who are professionals and
bring in their expertise
Nominee director section161131 TheBODcan appoint a directornominat
by an institution underany law or agreement or by the centralor state
Government Typically appointed
byfinancial institutions banks or the Governm
to representtheirinterests in a company
Smallshareholder director section151 it is applicable to listedcompanies
thatmayhave one directorelectedbysmall shareholders A smallshareholder
thiscase is one holding sharesofnominalvalueofnot more than 20,000 or as
prescribed
Independent directors section149 4 Aspersection14914 ofthe companies
Act2013 thefollowing companiesmusthave thespecifiedno of independent
directors
listedcompanies atleast43rdoftotaldirectorsshould be independent
publiccompanieswithpaid capital 10Cr
up
turnover Flooer at
1
independent
s esoer to
loans
debentures
ofthere is any intermittent vacancy of an independent director it mustbefilledby
fililanlies theBoardwithin 3monthsfromdateofvacancy or bynextBoardmeeting whichever
later
independent directormusthave skills knowledge or experience in one or more of th
qualification
followingfields finance law management sales marketing administration researe
corporategovernance or any discipline relevant to the company's business
independentdirectors are notentitled to stockoptions Theymayreceivefees
reimbursements
ofexpensesforparticipation in Board committee meetings or
any
Iihl other remuneration as approved by the members They are entitled to sittingfees
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