Corporate Governance

Conceptual- legal –administrative

framework
• Frame work means – the mechanisms
• It means the setup with in which corporate
governance operates
• It is the boundaries which ensures effective
implementation of corporate governance
practices
• There are two mechanisms-internal and extenal
• Internal- conceptual
• External- legal and administrative
 Conceptual frame work
Board of Directors
a)Bard independence
b) Board Size

Committees
Audit Committee Firm’s
Remuneration and Corporate Performance
nomination Governance ROI

Representation
Women
Small shareholder

Communication
 Legal Framework
• Companies Act 2013
• SEBI Act 1992
• SEBI(LODR) Rules 2015
• SCRA 1956
 Administrative Framework
• MCA
• SEBI
 Companies Act 2013
Sections applicable

173-193
149- 172 196-200
Meeting
Directors Managerial
Audit Committee
Appointment Appointment
Remuneration
Remuneration Remuneration
Board Powers
Qualification
Vigil Mechanism
Disqualification
 149
Minimum

PUBLIC PRIVATE OPC

3 2 1

MAXIMUM -15{EXCESS CAN BE MADE BY SR IN GM}

EVERY COMPANY SHOULD HAVE A RESIDENT DIECTOR{182}

 WOMEN DIRECTOR
Mnm
LISTED ALWAYS
1
PUBLIC

PUSC 100
CR
UNLISTED Mnm
1
PRIVATE NO
TO
300 CR

OPC • NO
 INDEPENDENT DIRECTOR
Mnm
LISTED
1/3 OF ALWAYS
PUBLIC TOTAL
STRENGTH

PUSC 10 CR

UNLISTED Mnm
2
PRIVATE NO
TO
100 CR

O/L 50 CR
OPC • NO
 Independent Director 149 {6}
a) Integrity
b) Monetary relationship- should not have
monetary other than –a.remuneration as
director-b.having transaction not exceeding
10% of total income{both conditions have
to be checked with CY and PY
c) Monetary transaction with relative-
exception-upto 50 lakh or 50% of PUSC w.e.l
d) If he is debted to the co
e) If he provides any guarantee to the loans of the co
f) If he is a promoter of the co
g)Related to the promoter
i) Any partner of the audit firm
j) Member of legal firm
k) Voting power more than 2%
l) Employee or KMP for the last 3 PY
m) If the co donates more than 25% of total income to
NPO any employee, KMP shall not become ID
 FIRST TERM 5 (OR)
• term SECOND TEM 5(SR)
COOL OFF PERIOD 3

• Declaration – shall submit a declaration that

he is not disqualified as per sec 149(6)
• Remuneration-sitting fee, profit based
payment, not eligible for ESOP

Section 8 companies are out of the provisions of ID

conditions
 Maintenance of Data Bank of ID
150
• Data by organisations notified by CG
• They should host the name and address of
qualified persons
• Company can select from the list
• Responsibility of due diligence is in the hands
of the Co
• The appointed person can have the right to
express his unwillingness
 Small shareholder director
151
Meaning- holding upto nominal value 20000
Applicable only to listed public companies
Manner of Suomoto
Appointment Application of 1000 small share holdres or
1/10th of small shareholders w,e.l

Small shareholder also not to be disqualified U/s

164
Appointment for 3 year- not eligible for
reappointment-cool off period 3 yrs
Maximum directorship : 2 companies at a time;
 Appointment of directors
152
First Director – If AOA specifies that person
- if manner specified – as per the manner
-if manner not specified- all subscribers of
MOA
Subsequent- At AGM
DIN should be obtained
Not disqualified u/s 164
Selected person should give his willingness/refusal
within 30 days
 DIN
• 153- apply to CG (MOC portal)
• 154- CG will allot within one month
• 155- a person shall hold only one DIN at a Time
• 156- intimate DIN with in one month
• 157- Co should intimate within 15 days to ROC
• 158- every director should quote DIN when he
sign in the capacity as director
• 159 -Penalty – co- Mnm 25000plus 100/day-
maxm 100000
OIC-Mnm-25000 plus 100/day maxm 100000
 Procedure of filing candidateship
160
• Any person can submit application for
directorship in a co.
• He should submit his application before 14 days
of AGM. Should deposit 100000
• Co should intimate to the shareholders before 7
days regarding contesting candidates
• Resolution should be passed with 51% majority
• If he fails to secure atleast 25% of vote casted his
deposit will be forfeited (Contd)
• In case of Nidhi Company(406) Mnm deposit
10000( cannot open current a/c, cannot issue
preference shares or debentures, borrow and
lend to members only)
• In case of sec 8 companies refund is granted
even if the contesting candidate secured at
least 25% of votes
Deposit is not required in case of
Independent Directors, Directors
recommended by NRC
 AAN CV 161
• Additional DIRECTOR
Person require such qualification and expertise
who are appointed for a short span of time
a) Appointed as per AOA
b) As per the decisions of BOD
c) Term –next AGM
A person rejected by shareholders to appoint as
Director shall not be appointed as Alternate Director
Alternate Director
Appointed when the appointed director go outside
India for more than 3 months
a) Appointed as per AOA
b) Appointed by BOD
c) Term-original Dr retire or return w i e
d) Same person cannot be appointed for two
persons
e) Existing Dr cannot be appointed as AD
Nominal Dr
Appointed by CG
Casual vacancy
Appointed by BOD
Should be approved by next AGM
 Voting mechanism
162 and 163
162 –First propose unanimous resolution
if not possible individual resolution (51%)
163- cumulative voting system
 Disqualifications
164
Default by individual and default by Co
• Unsound mind
• Undisharged insolvent
• Applied for insolvency
• Convicted in an offence of moral turpitude (6m)
• Court disqualified due negligence or misfeasance
• call in arrear for 6 month
• If no DIN
• RPTF(for 5 years )
 164(2)

3D
Non filing Matured
of annual Deposit
return for 3 Matured
years debenture
Declared
Dividend
 Maximum directorship 165
• 20 companies at a time, not more than 10
should be public co
• Sec 8 cos and Dormant companies are
excluded
 Duties of Director 166
DUBAII
Due and reasonable care
Undue gain
Best interest
Aoa- works as per AOA
Assign Duties- shall not assign duties
Indirect interest- subordinate individual interest
to general interest
 Vacation of office 167
• If he possess any disqualification u/s 164
• If he is absent from attending Board meeting
for 12 months
• If he acquires disqualification u/s 184(RPTD)
 Resignation 168
• A director may resign by giving notice to the
BOD
• Co should intimate to the ROC and represent
it in the next AGM
• Director may also intimate to the ROC within
30 days from the date of resignation
 Removal 169
• Co can remove by passing OR
• Before passing the resolution the director
should be given OOBH
• SR is required for removing and appoint
somebody as director
 Register of SH 170
• Shall be maintained ate Registered office
171 members right to inspect- at office hrs-
entitled to get a free of copy
172- Mnm 50000, maxm 500000