Section 149: Company to Have Board of Directors

(1) Composition of the Board of Directors

- (a) A company must have a certain minimum number of directors:
- Public company: At least 3 directors.
- Private company: At least 2 directors.
- One Person Company (OPC): At least 1 director.
- (b) The maximum number of directors is 15. However, a company can appoint more than 15 directors if it passes a special
resolution.
- Additional Requirement: Certain types of companies must have at least one woman director.

(2) Compliance Timeline for Existing Companies

- Companies that existed before this Act started must meet these director requirements within one year of the Act's
commencement.

(3) Resident Director Requirement

- Every company must have at least one director who has lived in India for at least 182 days in the previous calendar year.

(4) Independent Directors for Listed Companies

- Listed public companies must have at least one-third of their total directors as independent directors. The government may also
set minimum requirements for other types of public companies.
- Any fraction in the one-third calculation should be rounded up to the next whole number.

(5) Compliance Timeline for Existing Companies

- Companies existing before the Act started must comply with the independent director requirement within one year of the Act's
commencement or the date when relevant rules are notified.

(6) Criteria for Independent Directors

An independent director is defined as a director who:
- (a) Is seen as having integrity and relevant expertise by the Board.
- (b)
- (i) Is not a promoter of the company or its related entities.
- (ii) Is not related to any promoters or directors of the company or its related entities.
- (c) Has had no financial dealings with the company or its related entities, their promoters, or directors in the last two financial
years or the current year.
- (d) Has no relatives with significant financial dealings (2% of turnover or income, or ₹50 lakh, whichever is lower) with the
company or its related entities in the last two financial years or the current year.
- (e) Neither they nor their relatives have:
- (i) Held key managerial positions or been employees in the company or its related entities in the last three financial years.
- (ii) Been employees, proprietors, or partners in firms providing auditing or consulting services to the company or its related
entities in the last three financial years.
- (iii) Owned 2% or more of the company’s voting power.
- (iv) Been CEOs or directors of non-profits receiving significant funding from the company or its related entities.
- (f) Possesses other qualifications as prescribed.

(7) Declaration of Independence

- Independent directors must declare their independence at their first board meeting and annually thereafter, or whenever their
status changes.

Explanation of Nominee Director

- A nominee director is appointed by financial institutions, governments, or other entities to represent their interests.

(8) Compliance with Schedule IV

- Independent directors and the company must follow the rules specified in Schedule IV of the Act.

(9) Remuneration and Stock Options

- Independent directors are not entitled to stock options but can receive fees, expense reimbursements, and profit-related
commissions.

(10) Term of Office

- Independent directors can serve for up to five consecutive years. They can be reappointed for another term if approved by a
special resolution and disclosed in the board's report.

(11) Term Limits

- Independent directors cannot serve more than two consecutive terms. They can be reappointed after a three-year break during
which they cannot be associated with the company in any capacity.
 Explanation for Tenure
- Any term served before the Act's commencement does not count towards the term limits.

(12) Liability of Independent and Non-Executive Directors

- Independent and non-executive directors (not being promoters or key managerial personnel) are liable only for acts of omission
or commission that they were aware of through board processes and consented to or where they failed to act diligently.

(13) Exemption from Retirement by Rotation

- Independent directors are not subject to the retirement by rotation provisions in Section 152(6) and (7).

Section 150: Manner of Selection of Independent Directors and Maintenance of Databank of Independent Directors

(1) Selection from a Databank

- Eligibility and Willingness: Independent directors can be chosen from a databank that contains the names, addresses, and
qualifications of eligible and willing candidates.
- Maintenance of Databank: This databank is maintained by a body, institute, or association with expertise in this area, as notified
by the Central Government. The databank should be accessible on their website for companies to use when appointing
independent directors.
- Company's Responsibility: The company making the appointment is responsible for conducting due diligence to ensure the
selected individual is suitable for the role.

(2) Approval and Justification in General Meeting

- General Meeting Approval: The appointment of an independent director must be approved by the shareholders in a general
meeting, as per Section 152(2).
- Explanatory Statement: The notice for the general meeting must include an explanatory statement justifying why the appointee
was chosen as an independent director.

(3) Databank Maintenance Rules

- Data Management: The databank must be managed and updated according to rules prescribed by the government, ensuring it
contains current information about individuals willing to act as independent directors.

(4) Government Prescriptions for Selection

- Selection Process: The Central Government may establish detailed procedures and criteria for selecting independent directors
who meet the qualifications and requirements specified in Section 149.

Section 151: Appointment of Director Elected by Small Shareholders

- Provision for Small Shareholders: Listed companies can have one director elected by small shareholders.
- Definition of Small Shareholders: Small shareholders are those who hold shares with a nominal value of not more than twenty
thousand rupees or another amount as prescribed.
- Election Process: The process for electing this director, including terms and conditions, is prescribed by the relevant rules.

Section 152: Appointment of Directors

(1) First Directors

- Initial Appointment: If the company's articles do not specify the appointment of the first directors, the subscribers to the
memorandum (who are individuals) are considered the first directors until directors are properly appointed.
- One Person Company (OPC): In an OPC, the member is deemed the first director until an official appointment is made.

(2) General Meeting Requirement

- Approval by Shareholders: Except where otherwise specified in the Act, every director must be appointed by the company’s
shareholders in a general meeting.

(3) Director Identification Number (DIN)

- Requirement for Appointment: No one can be appointed as a director unless they have a Director Identification Number (DIN) as
per Section 154.

(4) Declaration by Director

- Declaration and DIN: Every person proposed as a director must provide their DIN and declare that they are not disqualified to be
a director under this Act.

(5) Consent to Act as Director

- Consent Requirement: A person appointed as a director cannot act as one until they provide their written consent, which must be
filed with the Registrar within thirty days of their appointment.
- Independent Director Appointment: When appointing an independent director in a general meeting, the explanatory statement
must include a declaration that the director meets the conditions specified in the Act.

(6) Retirement by Rotation

- Public Company Directors:
- (a) If the company's articles do not state otherwise, at least two-thirds of the directors of a public company must be subject to
retirement by rotation and must be appointed in a general meeting.
- (b) The remaining directors are also appointed by the company in a general meeting unless otherwise stated in the company's
articles.
- (c) At the first annual general meeting (AGM) after the first directors are appointed and at every subsequent AGM, one-third of
the directors subject to rotation must retire. If the number is not three or a multiple of three, the nearest number to one-third
retires.
- (d) The longest-serving directors retire first. If directors have served the same length of time, they can agree among themselves
who will retire, or it will be decided by lot.
- (e) At the AGM where a director retires, the company may fill the vacancy by reappointing the retiring director or appointing
someone else.

- Explanation: For this subsection, "total number of directors" does not include independent directors appointed under this Act or
any other law.

(7) Filling Vacancies

- Adjourned Meeting:
- (a) If the AGM does not fill the vacancy and does not resolve not to fill it, the meeting is adjourned to the same day and time
the next week (or the next working day if it’s a national holiday).
- (b) If at the adjourned meeting the vacancy is still not filled and there is no resolution not to fill it, the retiring director is
deemed reappointed unless:
- (i) A resolution for their reappointment was put to the meeting and lost.
- (ii) The retiring director has expressed in writing their unwillingness to be reappointed.
- (iii) The director is disqualified.
- (iv) A special or ordinary resolution is required for their reappointment by any provision of this Act.
- (v) Section 162 (appointment of directors to be voted on individually) applies.

- Explanation: For this section and Section 160, "retiring director" refers to a director retiring by rotation.

Section 153: Application for Allotment of Director Identification Number (DIN)

- Application Requirement: Anyone who wants to be appointed as a director of a company must apply for a Director Identification
Number (DIN).
- Form and Fees: The application must be made to the Central Government in a prescribed form and manner, along with the
prescribed fees.

Section 154: Allotment of Director Identification Number

- Time Frame: The Central Government must allot a DIN to the applicant within one month of receiving the application.
- Procedure: The manner in which the DIN is allotted is prescribed by the government.

Section 155: Prohibition to Obtain More than One DIN

- Single DIN Rule: No individual who has already been allotted a DIN can apply for or possess another DIN.

Section 156: Director to Intimate DIN

- Notification Requirement: Every director who receives a DIN must inform all the companies where they are a director within
one month of receiving the DIN.

Section 157: Company to Inform DIN to Registrar

- Furnishing DIN: Each company must inform the Registrar of Companies (or any other specified authority) of the DINs of all its
directors within fifteen days of receiving the intimation from the director.
- Form and Fees: The information must be submitted in the prescribed form and manner, along with any prescribed fees.
- Penalty for Non-compliance: If a company fails to inform the Registrar within the specified time, it faces a fine between ₹25,000
and ₹100,000. Each officer in default faces a similar fine.

Section 158: Obligation to Indicate DIN

- Mentioning DIN: Whenever a person or company submits any return, information, or particulars under this Act, they must
include the DIN if it relates to or references a director.

Section 159: Punishment for Contravention

- Penalties for Violations: If anyone contravenes the provisions of Sections 152, 155, or 156, they can be punished with
imprisonment up to six months or a fine up to ₹50,000. If the violation continues, there is an additional fine of ₹500 for each day
the contravention continues.

Section 160: Right of Persons Other than Retiring Directors to Stand for Directorship

(1) Candidature for Directorship

- Eligibility: A person who is not a retiring director can be appointed as a director at a general meeting.
- Notice Requirement: The candidate or a member intending to propose the candidate must give written notice at the company's
registered office at least 14 days before the meeting.
- Deposit: A deposit of ₹1,00,000 (or a higher prescribed amount) must accompany the notice. This deposit is refunded if the
candidate is elected or receives more than 25% of the valid votes.

(2) Informing Members

- Communication to Members: The company must inform its members about the candidature of the person in a prescribed manner.

Section 161: Appointment of Additional, Alternate, and Nominee Directors

(1) Additional Directors

- Power of Board: The company's articles can give the Board the authority to appoint additional directors at any time.
- Term: These directors hold office until the next annual general meeting or the date the meeting should have been held, whichever
comes earlier.

(2) Alternate Directors

- Appointment: The Board, if authorized by the articles or a general meeting resolution, can appoint a person to act as an alternate
director for another director.
- Conditions:
- The person can't already be an alternate director for another director.
- An alternate director for an independent director must also qualify as an independent director.
- An alternate director's term ends when the original director returns to India or when the original director's term ends, whichever
comes first.

(3) Nominee Directors

- Appointment: The Board can appoint a director nominated by any institution, government, or agreement.
- Authority: This is typically due to specific laws or agreements or because the government holds shares in a government
company.

(4) Filling Casual Vacancies

- Public Company: If a director appointed by the general meeting vacates the office before their term ends, the Board can fill the
vacancy. The replacement director's term ends when the original director's term would have ended.

Section 162: Appointment of Directors to be Voted Individually

(1) Individual Voting

- Requirement: A motion to appoint multiple directors via a single resolution cannot be made unless it's previously agreed upon at
the meeting without any votes against it.
- Void Resolution: Any resolution moved against this rule is void, regardless of objections.

(2) Motion Treatment

- Approval Motion: A motion to approve or nominate a person as a director is treated as a motion for their appointment.

Section 163: Option for Proportional Representation

- Company Articles: The company's articles can provide for the appointment of at least two-thirds of directors based on
proportional representation.
- Methods: This representation can be through single transferable voting, cumulative voting, or other methods.
- Frequency: This appointment can happen once every three years.
- Filling Casual Vacancies: Casual vacancies of such directors are filled as per the provisions in Section 161(4).

Section 164: Disqualifications for Appointment of Director

1. **Grounds for Disqualification:**
- (a) **Unsound Mind:** If a person is declared of unsound mind by a competent court.
- (b) **Undischarged Insolvent:** Individuals who are undischarged insolvents are ineligible.
- (c) **Insolvency Application:** Those who have applied for insolvency and have pending applications are disqualified.
- (d) **Conviction:** Individuals convicted by a court for any offense, whether involving moral turpitude or not, and sentenced
to imprisonment for at least six months. However, if the imprisonment term is seven years or more, they are permanently
disqualified.
- (e) **Disqualification Order:** If a court or tribunal has issued a disqualification order against an individual, and it's in force.
- (f) **Non-payment of Calls:** Directors who have not paid calls on company shares within six months from the due date.
- (g) **Related Party Offense:** Being convicted of an offense related to related party transactions under Section 188 within the
last five years.
- (h) **Non-compliance with Section 152(3):** Failure to comply with the provisions of Section 152(3).

2. **Additional Disqualifications for Directors:**

- (a) **Financial Reporting Defaults:** Directors of companies not filing financial statements or annual returns for three
consecutive financial years.
- (b) **Financial Obligations:** Companies failing to fulfill financial obligations such as repaying deposits, debentures, or
paying dividends for one year or more.

3. **Private Company Disqualifications:**

- Private companies have the authority to specify additional disqualifications in their articles.

4. **Provisions Regarding Effective Date of Disqualification:**

- The disqualifications listed in clauses (d), (e), and (g) do not take immediate effect under certain conditions:
- Thirty days from the date of conviction or disqualification order.
- During the appeal period or until the disposal of the appeal or petition, whichever is earlier.
- During the further appeal period or until the disposal of the further appeal or petition, whichever is earlier.

Section 165. Number of directorships

1. **Limitation on Directorships:**
- (1) After the commencement of this Act, an individual cannot hold office as a director in more than twenty companies
simultaneously. Additionally, the number of public companies in which a person can be appointed as a director cannot exceed ten.
- Explanation: Directorships in private companies that are either holding or subsidiary companies of a public company are
counted towards the limit of directorships in public companies.

2. **Special Resolution for Lesser Number:**

- (2) The members of a company, through a special resolution, can specify a lesser number of companies in which a director of
the company may act as directors.

3. **Transition Provisions:**
- (3) Individuals holding office as directors in companies exceeding the specified limits before the commencement of this Act
must:
- (a) Choose not more than the specified limit of those companies where they wish to continue holding the office of director.
- (b) Resign from the remaining companies exceeding the limit.
- (c) Inform each of the companies where they held the office of director before such commencement and the respective
Registrar about their choice.
- (4) Resignations made as per clause (b) of sub-section (3) become effective immediately upon dispatch to the concerned
company.

4. **Post-resignation Restrictions:**
- (5) Individuals cannot act as directors in more than the specified number of companies:
- (a) After resigning from excess directorships as per clause (b) of sub-section (3).
- (b) After one year from the commencement of this Act, whichever is earlier.

5. **Penalties for Contravention:**

- (6) If a person accepts an appointment as a director in violation of sub-section (1), they are liable to a fine ranging from five
thousand rupees to twenty-five thousand rupees for each day during which the contravention continues.

This section aims to ensure that directors can effectively discharge their duties by limiting the number of directorships they can
hold, thereby preventing overextension and potential conflicts of interest.

Section 166 - the duties of directors in a company

1. **Compliance with Articles:**

- (1) Directors must act in accordance with the articles of the company, subject to the provisions of the Act.
2. **Acting in Good Faith:**
- (2) Directors must act in good faith to promote the company's objectives for the benefit of its members collectively. They
should also consider the best interests of the company, its employees, shareholders, the community, and environmental protection.

3. **Exercise of Duties:**
- (3) Directors are required to exercise their duties with due care, skill, and diligence. They should also exercise independent
judgment in their decision-making processes.

4. **Avoiding Conflicts of Interest:**

- (4) Directors must avoid situations where their personal interests conflict, or may potentially conflict, with the interests of the
company.

5. **Preventing Undue Gain:**

- (5) Directors are prohibited from seeking or achieving any undue gain or advantage for themselves, their relatives, partners, or
associates. If found guilty of such actions, they are liable to repay an amount equal to the undue gain to the company.

6. **Non-assignability of Office:**
- (6) Directors cannot assign their office, and any such assignment would be considered void.

7. **Penalties for Contravention:**

- (7) If a director contravenes any provision of this section, they are subject to a fine ranging from one lakh rupees to five lakh
rupees.

These provisions are aimed at ensuring that directors uphold their fiduciary duties, act in the best interests of the company, and
maintain transparency and integrity in their conduct.

Section 167- Vacation of office of director

1. **Disqualifications (Sub-section 1):**

- (a) If the director incurs any disqualifications specified in Section 164.
- (b) If the director absents themselves from all board meetings for twelve consecutive months without obtaining leave of
absence from the board.
- (c) If the director acts in contravention of Section 184, which pertains to entering into contracts or arrangements in which they
have a direct or indirect interest.
- (d) If the director fails to disclose their interest in any contract or arrangement as required by Section 184.
- (e) If the director becomes disqualified by a court or tribunal order.
- (f) If the director is convicted by a court of any offence and sentenced to imprisonment for not less than six months, regardless
of whether they have filed an appeal against the court's order.
- (g) If the director is removed in accordance with the provisions of the Companies Act.
- (h) If the director, who was appointed due to holding any office or employment in the holding, subsidiary, or associate
company, ceases to hold such office or employment in that company.

2. **Penalties (Sub-section 2):**

- If a person continues to function as a director despite knowing that their office has become vacant due to disqualifications
under subsection (1), they are subject to imprisonment for up to one year, or a fine ranging from one lakh rupees to five lakh
rupees, or both.

3. **Appointment of Directors (Sub-section 3):**

- If all directors vacate their offices due to disqualifications specified in sub-section (1), the promoter or, in their absence, the
Central Government shall appoint the requisite number of directors. These appointed directors will hold office until directors are
appointed by the company in a general meeting.

4. **Additional Grounds (Sub-section 4):**

- Private companies have the flexibility to provide additional grounds for the vacation of the office of a director through their
articles.

Section 168- Resignation of director

1. **Resignation Process (Sub-section 1):**

- A director can resign from their position by providing a written notice to the company.
- Upon receiving the resignation notice, the Board must acknowledge it.
- The company is then required to inform the Registrar of Companies about the resignation within the prescribed time, manner,
and form.
- Additionally, the company must include the details of the director's resignation in the report of directors presented at the next
general meeting.
 - The resigning director must also submit a copy of their resignation along with detailed reasons for resigning to the Registrar
within thirty days of resignation.

2. **Effective Date (Sub-section 2):**

- The resignation of a director becomes effective on the date the company receives the resignation notice or on a later date
specified by the director in the notice, whichever is later.
- Importantly, even after resignation, the director remains liable for any offences that occurred during their tenure.

3. **Appointment of Directors in Case of Resignation of All Directors (Sub-section 3):**

- If all directors of a company resign or vacate their offices under Section 167, the promoter or, in their absence, the Central
Government shall appoint the necessary number of directors.
- These appointed directors will hold office until new directors are appointed by the company in a general meeting.

Section169- Removal of director

1. **Removal of Directors (Sub-section 1):**

- A company can remove a director before their term ends by passing an ordinary resolution, except for directors appointed by
the Tribunal under Section 242.
- The director must be given a chance to be heard before their removal, unless the company has chosen proportional
representation under Section 163.

2. **Special Notice Requirement (Sub-section 2):**

- If a company plans to remove a director, or appoint someone to replace the removed director, a special notice is required for
the meeting where this decision will be made.

3. **Director's Right to Representation (Sub-section 3):**

- The company must promptly send a copy of the removal resolution to the director.
- The director, whether a member of the company or not, has the right to speak at the meeting where their removal is discussed.

4. **Director's Representation (Sub-section 4):**

- If the director submits a written representation regarding their removal, the company must inform all members about it.
- If there's insufficient time to send the representation or if the Tribunal decides it's being misused, it may not be sent or read out
at the meeting.

5. **Filling the Vacancy (Sub-sections 5-7):**

- If a director is removed, the vacancy can be filled during the same meeting by appointing a new director, provided special
notice has been given.
- The newly appointed director serves until the original director's term would have ended.
- If the vacancy isn't filled during the meeting, it can be filled as a casual vacancy according to the Act, but the removed director
cannot be re-appointed.

6. **No Impact on Compensation or Other Powers (Sub-section 8):**

- This section doesn't affect any compensation or damages owed to a removed director.
- It also doesn't limit other provisions of the Act that allow director removal.

Section 170- Register of Directors and Key Managerial Personnel

1. Every company must maintain a register at its registered office containing details of its directors and key managerial personnel,
including their shareholdings in the company and its subsidiaries.
2. A return with these details must be filed with the Registrar within 30 days of appointing or making any changes to directors or
key managerial personnel.

Section 171- Members' Right to Inspect

1. The register kept under Section 170 must be open for inspection during business hours, and members can request extracts or
copies, which must be provided within 30 days free of cost.
2. The register must also be available for inspection at every annual general meeting and accessible to any person attending.
3. If inspection or copy requests are refused or not fulfilled within 30 days, the Registrar can be approached for immediate
inspection and copy supply.

Section 172- Punishment

- If a company violates any provision in this Chapter for which no specific punishment is mentioned, the company and its
defaulting officers can be fined between fifty thousand rupees and five lakh rupees.