Chapter 1A-Directors - (01-43)

1 Directors
PRACTICAL QUESTION
Q-1 As per their Articles of Association, the maximum number of Directors of each of the
following companies is 9:
(i) Goodheart Company Limited.
(ii) Frontline Trading Private Limited.
(iii) Hindustan Zink limited (a Government company under section 2(45) of the Companies
Act, 2013).
The Board of Directors of the aforesaid companies proposes to increase the number of
Directors to 18. Advise, whether under the provisions of the Companies Act, 2013, the Board
of Directors can do so?
Sol According to section 149(1) of the Companies Act, 2013, every company shall have a Board of
Directors consisting of individuals as directors and shall have a minimum three directors in t h e
case of a public company and two directors in the case of a private company, whereas one
director in the case of a One-Person Company;
Maximum no of directors shall be fifteen directors.
The proviso to section 149(1) states that a company may appoint more than fifteen directors
after passing a special resolution. However, this proviso is not applicable to government
company
In the given case, in case of the first two companies, since the maximum limit is 18 direct ors.
Hence, the Board of Directors of these two companies can increase the number by
:- Altering their Article of Association as per Section 14 and
:- Passing a special resolution for increase in Directors beyond 15
Whereas in the case of Hindustan Zink Ltd. the increase beyond 15 directors will not require
the approval of members through a special resolution. Even though Company need t o alt er it s
Article by passing S/Res as per Sec 14
However any such exemption to Government company shall be available If company has not
committed a default in filing of their financial statement u/s 137 or annual return u/s 92 with
ROC
Q-2 The composition of the Board of Directors of a listed company as on 31-03-2017 comprised of
(i) Mr. A, Director, (ii) Mr. B, Director (iii) Mr. C, Director (iv) Mr.· D, Director, (v) Mrs. E,
Independent Director, (vi) Mr. F, Independent Director and (vii) Mr. G, Independent Direct or.
Mr. D & Mrs. E vacated their office of Director on 15-04-2017.
You are required to examine with reference to the provisions of the Companies Act , 2013 an d
what course of action would you suggest which can be taken up by t he Company in this
regard?
2 Directors Chap. 1
Sol Women director [2nd Proviso to Section 149(1)]: At least one-woman director shall be on the
Board of following class of companies
[Rule 3:- According to the Companies (Appointment and Qualification of Directors) Rules,
2014,]
✓ every listed company;
✓ every other public company having
:-paid-up share capital of 100.0 Cr rupees or more; Or
:-turnover of 300.0 Cr rupees or more:
Provided further that any intermittent vacancy of a woman director shall be filled-up by the
Board at the earliest but not later than immediate next Board meeting or three months from t h e
date of such vacancy whichever is later.
Every listed public company shall have at least one-third of the total number of directors as
independent directors. [Section 149(4)]
Incase of vacation of Directorship by Mr. D & Mrs. E. company shall still continue to have
required number of Independent Director
Even though, company shall left with no woman director, thus intermittent vacancy of
woman director need to be filled.
Conclusion: - Thus board have to fill up the intermittent vacancy at the earliest but not later
than immediate next board meeting or three months from the date of such vacan cy wh ich ever
is later.
Q-3 There are four directors in Two Squares Ltd. Mr. Rao, being the director in station, has been
authorized to draw and endorse cheque or other negotiable instruments on account of the
company and also to direct registration of transfer of shares and signing the share certificates
etc. Whether as per provisions of the Companies Act, 2013, he will be treated as managing
director of the company? Also narrate the procedure of appointment of a managing direct or in
a company.
Sol According to the provisions of Sec 2(54) Managing Director
✓ means a director who,
✓ by virtue of the articles of a company or
✓ an agreement with the company or
✓ a resolution passed in its general meeting, or by its Board of Directors,
✓ is entrusted with substantial powers of management of the affairs of the company
✓ and includes a director occupying the position of managing director, by whatever name
called.
Explanation. —For the purposes of this clause, the power to do administrative acts of a
routine nature when so authorised by the Board such as
• the power to affix the common seal of the company to any document or
• to draw and endorse any cheque on the account of the company in any bank or
• to draw and endorse any negotiable instrument or
• to sign any certificate of share or
• to direct registration of transfer of any share,
shall not be deemed to be included within the substantial powers of management
:- Now in this case, Mr. Rao, a director in Two Squares Ltd. has been authorized to draw and
endorse cheque or other negotiable instruments on account of the company and also to direct
registration of transfer of shares and signing the share certificates etc.
Chap. 1 Directors 3
:-Hence, according to explanation to section 2(54), Mr. Rao will not be treated as managing
director of the company as he is authorized to do administrative acts of a routine nature.
Procedure of appointment of a managing director [Section 196(4)]
1. Subject to the provisions of section 197 and Schedule V, a managing director, wh ole -t im e
director or manager shall be appointed, and the terms and conditions of such appoin t m en t
and remuneration payable be approved by the Board of Directors at a meeting.
2. The terms and conditions and remuneration approved by Board of Directors as above sh all
be subject to the approval of shareholders by a resolution at the next general meeting of the
company.
3. In case such appointment is at variance to the conditions specified in Part I of the Schedu le
V of the Companies Act, 2013, the appointment shall be approved by the Central
Government.
4. The notice convening Board or general meeting for considering such appointment shall
include the terms and conditions of such appointment, remuneration payable and such
other matters including interest, of a director or directors in such appointments, if any.
5. A return in the prescribed form (Form No. MR.1) along with the prescribed fee shall be
filed with the Registrar within sixty days of such appointment.
Q-4 The Board of Directors of MNP Limited appointed Ms. Neha as a Women Director in the
Board Meeting held on 10th September, 2014. The said appointment was made to fill the
vacancy of the Woman Director, which had occurred as a result of resignation of Ms. Sheela
on 30th June, 2014.
Will your answer differ if the Board Meeting of the company was held on 8th November,
2014?
Sol As per 2nd Proviso to Sec 149(1)
At least one woman director shall be on the Board of following class of companies
2014,]
✓ every other public company having paid-up share capital of 100.0 Cr rupees or more;
Or turnover of 300.0 Cr rupees or more:
Further, any intermittent vacancy of a woman director shall be filled up by the Board at the
earliest but not later than immediate next Board meeting or three months from the date of su ch
vacancy, whichever is later.
As per the above provisions, the appointment of Ms. Neha is valid. The vacancy of a woman
director of MNP Limited which arose on 30th June 2014, due to the resignation of Ms. Sh eela,
should be filled up latest by 29th September 2014 or the day of the next Board Meeting,
whichever is later. Since Ms. Neha was appointed in the next Board Meeting after the vacan cy
arose, i.e. on 10th September 2014, her appointment is valid.
The answer will remain the same, even if MNP Ltd. appoints Ms. Neha in the Board Meeting
held on 8th November 2014, provided the said meeting is the first meeting of the Board after
30th June 2014 i.e. after the resignation of Ms. Sheela.
Q-5 Explaining the regulatory provisions of the Companies Act, 2013 and the rules thereof
regarding the appointment of independent directors on a company’s Board, state wheth er BCD
company Ltd. is required to appoint Independent directors in the following situations:
(i) The company has a paid up share capital of ` 10 crore.
(ii) What shall be your answer in case the company’s paid up share capital is only 2 crore.
(iii) Whether a person who hold the position of a key Managerial Personnel can be appointed
as an Independent Director?
4 Directors Chap. 1
Sol In accordance with the provisions of the Companies Act, 2013, as contained under section
149(4) every listed public company shall have at least one-third of the total number of directors
as independent directors.
According to Rule-4 of the Companies (Appointment and Qualification of Directors) Rules,
2014, the following class or classes of companies shall have at least 2 directors as indepen den t
directors:
(1) the Public Companies having paid up share capital of 10 crore rupees or more; or
(2) the Public Companies having turnover of 100 crore rupees or more; or
(3) the Public Companies which have, in aggregate, outstanding loans, debentures and
deposits, exceeding 50 crore rupees.
However, in case a company covered as under the above 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.
Accordingly, the sub-questions can be answered as under:
(i) Since, the company has a paid up share capital of ` 10 crore, it is mandatory to appoint
atleast 2 directors as Independent Directors.
(ii) Since, the paid up share capital is only ` 2 crore, it is not mandatory to appoint the
Independent Directors.
(iii) As per the provisions a person who has been or is a one of the key Managerial Personnel
cannot be appointed as an independent director in the given case.
Q-6 Examine the validity of the following appointments with reference to the provisions of the
Companies Act, 2013:
(i) Mr. Person together with one of his relatives holds 3% of the total voting power of XYZ
Ltd. The Board of Directors of the company appointed him as an independent director.
(ii) ABC Ltd., a listed company having 5,000 small shareholders, upon receiving not ice from
400 of such small shareholders has refused to appoint a small shareholders’ director under
section 151 of the Companies Act, 2013.
(iii) Mr. D, who fails to get appointed as a director in the general meeting of AJD Limited,
subsequently was appointed as an additional director by the Board of Directors of the
company.
Sol (i) An independent director means a director who, neither himself nor any of his relatives
holds together with his relatives 2% or more of the total voting power of the company
[Section 149(6) of the Companies Act, 2013].
In the given problem, Mr. Person holds together with his relatives 3% of the total voting
power of XYZ Ltd. Hence his appointment as an independent director is not valid.
(ii) According to section 151 of the Companies Act, 2013, a listed company may have one
director elected by such small shareholders in such manner and on such terms and
conditions as given in rule 7 of the Companies (Appointment and Qualification of
directors) Rules, 2014.
As per the rule, 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 shareholders’ director elected by the small shareholders.
Thus, according to the provisions stated above, since the number of small shareholders of
ABC Ltd. who applied is less than 1000 and 500 (1/10th of the total 5000) small
shareholders, ABC Ltd. can validly refuse to appoint such a director.
Chap. 1 Directors 5
(iii) According to section 161(1) of the Companies Act, 2013, a person who fails to get
appointed as a director in a General Meeting, cannot be appointed as an additional
director.
Hence the appointment of Mr. D as an additional director in AJD Ltd. is not valid.
Q-7 A Limited crossed turnover of ` 100 Cr during 2013-14. Company Secretary of company
advised that company shall appoint Independent Director to comply provisions of Section
149(4). However since such appointment company never touched turnover of ` 100 cr and even
it failed to satisfy other conditions as stipulated under Rule 4 of the Companies (Appoin t m en t
and Qualification of Directors) Rules, 2014. On 15 th Sept 2018. Management decide to
Dispense with services of Independent Director. Decide in light of provisions of Companies
Act 2013
Sol As per the provisions of Section 149(4)
The Central Government may prescribe the minimum number of independent directors in case
of any class or classes of public companies. Any fraction contained in such one-third n u m bers
shall be rounded off as one.
Rule 4: According to 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:
➢ 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.
However, where a company ceases to fulfill any of three conditions laid down above for three
consecutive years, it shall not be required to comply with these provisions until such t im e as it
meets any of such conditions.
In given case, A Limited crossed turnover of ` 100 Cr during 2013-14 and company Appoin t ed
Independent Director. However since such appointment company never touched turnover of
` 100 cr and even it failed to satisfy other conditions as stipulated under Rule 4 and thus
management decide to Dispense with services of Independent Director.
Conclusion:—We may conclude that management is correct in its decision to dispense with
such services as company has failed to fulfil the criteria as prescribed in rule 4 for 3
consecutive years
Q-8 CTC Limited is an unlisted public company having a paid up capital of ` 100 crores as on 31st
March, 2017. The company made a turnover of ` 300 crores for the financial year ended 31st
March, 2017. The Articles of Association of the company provides for payment of sitting fee
to Directors for each Board Meeting/Committee thereof subject to a maximum of ` 40,000 per
meeting. The Board of Directors is comprised of Independent Directors and Women Directors
also. The Company is having 7 directors in its Audit Committee. Shri PKV, working as
Financial Advisor of the company, was designated as Chief Financial Officer from 1st April,
2015. He retired from service on superannuation on 31st March, 2016, He is in receipt of
monthly pension of ` 80,000 from the company. It is proposed to appoint Shri PKV as
Independent Director of the Company. The Board of Directors proposes to fix sitting fee of `
50,000 per meeting to Independent Director and ` 30,000 per meeting to Woman Director,
taking into consideration their experience and qualification.
In the light of the provisions of the Companies Act, 2013, advise the Board of Directors in t h e
following matters:
6 Directors Chap. 1
(1) Appointment of Mr. PKV as Independent Director.

(2) Fixing sitting fee of ` 50,000 to Independent Director and ` 30,000 to Woman Director.
(3) Minimum number of Independent Directors.
(4) Maximum sitting fee to a Director.
Assuming CTC Ltd. is a Government Company, what will be your advice in the matter of
appointment of Mr. PKV as Independent Director.
Sol (1) Appointment of Mr. PKV as an Independent Director
As per Sec 149(6)(e)(i) of the Companies Act, 2013, an Independent Director shall be a person
who, neither himself nor any of his relatives holds or has held the position of a Key Managerial
Personnel (KMP) or is or has been an employee of the Company or its Holding, Subsidiary or
Associate Company in any of the 3 financial years immediately preceding the financial year in
which he is proposed to be appointed.
In the instant case, the Company, CTC Limited is proposing to appoint Mr. PKV as an
Independent Director who was working as Financial Advisor in the Company and then was
designated as Chief Financial Officer for the financial year 2015-2016.
As, he was an employee and also a Key Managerial Personnel in one of the 3 financial years
immediately preceding the financial year in which he is proposed to be appointed, Mr. PKV
shall not be appointed as an Independent Director in CTC Limited.
(2) Fixing sitting fee to Independent Director and Women Director
As per Section 197(5) of the Companies Act, 2013, a Company may pay a sitting fee to a
Director for attending meetings of the Board or Committees thereof, such sum as may be
decided by the Board of Directors thereof which shall not exceed one lakh rupees per meeting
of the Board or Committee thereof.
However, for Independent Directors and Women Directors, the sitting fee shall not be less than
the sitting fee payable to other directors.
In the instant case, the Articles of Association of the Company provides for payment of sit t in g
fee to Directors of ` 40,000.
Hence, the sitting fee of ` 50,000 can be paid to the Independent Director subject t o alt erat ion
of article of association by passing S/Resolution, but the sitting fee payable to Woman Director
shall not be less than ` 40,000 i.e. limit fixed as per Article.
Thus, the amount of Sitting fee payable to Woman Director has to be increased from ` 30,000
(as proposed) to minimum ` 40,000.
(3) Minimum number of Independent Directors
According to the Rule 4 of the Companies (Appointment and Qualification of Directors) Rules,
2014, the following class or classes of Companies shall have at least 2 directors as Independent
Directors:
1. The Public Companies having paid up share capital of 10 crore rupees or more; or
2. the Public Companies having turnover of 100 crore rupees or more; or
3. the Public Companies which have, in aggregate, outstanding loans, debentures and deposit s,
exceeding 50 crore rupees
However, in case a Company covered as under the above 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.
As per Section 177(2) of the Companies Act, 2013, the Au dit Committee shall consist of a
minimum of three directors with Independent Directors forming a majority.
In the given case, CTC Limited shall appoint at least 2 directors as Independent Direct ors as it
is covered under Rule 4 of the above Rules since the Company is having a paid up capital of
` 100 crores and a turnover of ` 300 crores for the financial year ended 31st March, 2017.
Chap. 1 Directors 7
But since the Company is having an Audit Committee having 7 directors, therefore 4 direct ors
out of 7 must be Independent directors (4 is forming majority).
(4) Maximum sitting fee to a Director
As per Section 197(5) of the Companies Act, 2013, a Company may pay a sitting fee to a
Director for attending meetings of the Board or Committees thereof, such sum as may be
decided by the Board of Directors thereof which shall not exceed one lakh rupees per meeting
of the Board or Committee thereof. Accordingly, the maximum sitting fee payable to a
Director shall not exceed one lakh rupees.
(5) Appointment of Mr. PKV if CTC Ltd is a government company
If CTC Ltd. is a Government Company, then also Mr. PKV shall not be appointed as an
Independent Director in CTC Limited because, he was an employee and also a Key Managerial
Personnel in one of the 3 financial years immediately preceding the financial year in wh ich h e
is proposed to be appointed.
Q-9 XYZ Limited is an unlisted public company having a paid-up capital of twenty crore ru pees as
on 31st March, 2018 and a turnover of one hundred fifty crore rupees during the year ended
31st March, 2018. The total number of directors is 13. State the following answers:
(i) Minimum number of directors appointed as Independent Director in XYZ Limited.
(ii) What will be the consequences where XYZ Ltd. ceases to fulfill any of the required
conditions with respect to appointment of Independent directors for three continuous
years?
(iii) If suppose XYZ Ltd. (Unlisted public company) is a dormant company, what shall be t h e
law related to the appointment of Independent director?
Sol Rule 4: According to 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:
➢ 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.
(i) In given case, XYZ Limited being an unlisted public company having a paid-up capital of
` 20 crores and a turnover of ` 150 crores. Thus, as per the Companies (Appointment and
Qualification of Directors) Rules, 2014, XYZ Limited shall have at least 2 directors as
independent directors.
(ii) Where a company ceases to fulfil any of 3 conditions for three consecutive years, it shall
not be required to comply with provisions related to appointment of Independent directors until
such time as it meets any of such conditions.
(iii) As per Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014
the following classes of unlisted public company are not required to appoint an independent
director
(a) a joint venture;
(a) a wholly owned subsidiary; and
(b) a dormant company as defined under section 455 of the Act.
Thus, XYZ, a dormant company does not require to fulfil the conditions stated in Rule 4(1) for
appointment of Independent Directors.
Q-10 VGP Ltd. is a listed public company with a paid up capital of ` 100 crores as on 31st March,
2018. Mrs. Jasmine, who was one of the promoters of PDS Ltd. (a Joint venture company of
8 Directors Chap. 1
VGP Ltd.), was appointed as Woman Director on the Board of VGP Ltd.
VGP Ltd has the following proposals:
(1) To remove Mr. Z, an independent Director who was re-appointed for a second term.
(2) To appoint Mr. N, A nominee Director in the Board as an Independent Director.
(3) To appoint Mrs. Jasmine as an Independent-cum woman Director.
With reference to the relevant provisions of the Companies Act, 2013, examine:
(i) The validity the above proposals and the appointment of Woman Director already made.
(ii) whether Mr. N, can be appointed as an Independent Director of PDS Ltd.?
(iii) Is an Independent Director entitled for stock option?
Sol Women director [2nd Proviso to Section 149(1)]: At least one-woman director shall be on the
Board of following class of companies
2014,]
✓ every other public company having
:-paid-up share capital of 100.0 Cr rupees or more; Or
:-turnover of 300.0 Cr rupees or more:
Provided further that any intermittent vacancy of a woman director shall be filled-up by the
Board at the earliest but not later than immediate next Board meeting or three months from t h e
date of such vacancy whichever is later.
Now, based on these provisions, we may conclude as follow:-
1. Comment on Validity of above proposals
(1) To remove Mr. Z, an independent Director who was re-appointed for a second term.
Ans: Company may remove Mr Z provided Special Resolution has been passed as per Sec 169,
as director appointed for second term can be removed from his office by passing of special
resolution only
(2) To appoint Mr. N, A nominee Director in the Board as an Independent Director.
Ans: As per Sec 149(4), Independent Director shall exclude Managing Director and Nominee
Director. Thus Nominee Director can not become an Independent Director
(3) To appoint Mrs. Jasmine as an Independent-cum woman Director.
Ans: Company may appoint Mrs Jasmine as Woman Director but not as an Independent
Director as it would be in violation of provisions of Sec 149(6)
As per the provisions of Sec 149(6) (b)(i) “A person may be appointed as an Independent
Director, who is or was not a promoter of the company or its holding, subsidiary or
associate company
Now as per Sec 2(6), definition of associate company includes Join Venture company as well
Thus, we may conclude that Mrs Jasmine is not eligible to be appointed as an Independent
director of VGP Ltd.
Since company has already appointed a woman Director, thus no need to appoint Mrs Jasm in e
as director now
Appointment of Mr. N as an Independent Director of PDS Ltd
As per Rule 4 of Companies (Appointment and Qualification of Directors) Rules, 2014
The following classes of unlisted public company shall not be required to have Independent
Director:—
(a) a joint venture;
(b) a wholly owned subsidiary; and
Chap. 1 Directors 9
(c) a dormant company
Thus, PDS Ltd being a Joint Venture company, there is no need to appoint any Independent
Director
Q-11 The Board of directors of M/s ABC Limited, an unlisted company having a paid-up capital of
` 6 crores consisting of equity share capital of ` 5 crores and preference share capital of ` 1
crore and also 1,100 ‘Small Shareholders’ holding equity shares seeks your advice on the
following:
“Is it necessary for the Company to appoint a Director to represent the ‘Small Shareholders’”?
Sol Section 151 of the Companies Act, 2013 provides that a listed company may have one director
elected by such small shareholders in such manner and with such terms and conditions as m ay
be prescribed.
As the company given in the question is an unlisted company, it is not bou n d by sect ion 151
and hence, it is not necessary for the company to appoint a director to represent the “small
shareholders”.
Q-12 Mr. Intelligent was appointed as a small shareholder’s director of XYZ Limited, which is in
the business of Oil refining. Subsequently, A Limited and B Limited have also appoin t ed h im
as small shareholder’s director. Is the appointment valid?
Sol As per the Rule 7 of the Companies (Appointment and Qualification of Directors) Rules,
2014, read with section 151 of the Companies Act, 2013
No person shall hold the position of small shareholders’ director in more than 2 com pan ies at
the same time. However, the second company in which he has been so appointed sh all n ot be
in a business which is competing or is in conflict with the business of the first company.
In the given case, Mr. Intelligent was appointed as a small shareholder’s director of XYZ Lt d.
Subsequently A Ltd. and B Ltd. have also appointed him as small shareholder’s director.
Conclusion: - Considering the above provision, appointment of Mr. Intelligent in both A Lt d.
and B Ltd. is invalid. However, he can accept appointment in either A Ltd. or B Lt d., su bject
to the maximum limit of 2 companies provided either A Ltd. or B Ltd. is not having a business
which is competing or is in conflict with the business of the XYZ Ltd.
Q-13 DD Ltd. is a listed company and it has been served with notice for appointment of small
shareholders' director. Referring to the provisions of the Companies Act, 2013, advise on the
following:
(i) Define the expression 'small shareholder' and specify the number of small shareholders
who may serve notice on the company for a director representing them.
(ii) Is it possible to appoint a person who does not hold any share in the company, as small
shareholders' director?
(iii) What is the tenure of small shareholders' director and whether he can be reappointed as
such, after expiry of his tenure? Also state whether he can be appointed as an officer of
the company on expiry of his tenure as small shareholders' director.
Sol (a) (i) As per the provisions of section 151 of the Companies Act, 2013, a listed company
may have one director elected by small shareholders in such manner and on su ch terms and
conditions as may be prescribed.
In this section “Small Shareholders” means a shareholder holding shares of nominal value of
not more than ` 20,000 or such other sum as may be prescribed.
A listed company may upon notice of not less than
(b) one- tenth of the total number of such shareholders, whichever is lower, have a small
shareholders’ director elected by the small shareholders.
(ii) The small shareholders intending to propose a person as a candidate for the post of small
shareholders’ director shall leave a notice of their intention with the company at least fou rt een
10 Directors Chap. 1
days before the meeting under their signature specifying the name, address, shares held and
folio number of the person whose name is being proposed for the post of director and of the
small shareholders who are proposing such person for the office of director.
However, if the person being proposed does not hold any shares in the company, the details of
shares held and folio number need not be specified in the notice.
(iii) 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.
A small shareholders’ director shall not, for a period of 3 years from the date on which he
ceases to hold office as a small shareholders’ director in a company, be appointed in or be
associated with such company in any other capacity, either directly or indirectly.
Q-14 The Board of Directors of M/s. Diya Steels and Aluminium Limited, a listed Compan y h avin g
a paid up equity share capital of 15 crores and preference share capital of ` 1 crore and 1100
small shareholders holding equity shares, seeks your advice on the following
(i) Is it mandatory for the Company to appoint a Director to represent Small Shareholders?
(ii) If the Company decides to appoint such a Director, the procedure to be followed by the
Company for such appointment and the tenure for which such appointment can be made.
(iii) Whether such a Director be considered as an Independent Director?
(iv) When does a person appointed as a small shareholders Director vacate his office?
Sol As per Sec 151 read with Rule-7-The Companies (Appointment and Qualification of
directors) Rules, 2014 provides for the procedure for appointment of Small shareholders’
director according to which:
(i) A listed company, may upon notice of not less than
(b) one- tenth of the total number of such shareholders,
Based upon the provisions of Sec 151 along with rule 7, we may conclude as follow:-
1. Is it mandatory for the Company to appoint a Director to represent Small Shareholders?
It is not mandatory even for listed company to appoint small shareholder director, as law has
used the term “May”. Thus the provision id directory but not mandatory
2. Procedure for appointment of Small shareholder director shall be as follow
(i) The small shareholders intending to propose a person as a candidate for the post of small
shareholders’ director shall leave a notice of their intention with the company at least
fourteen days before the meeting under their signature specifying the name, address,
shares held and folio number of the person whose name is being proposed for the post of
director and of the small shareholders who are proposing such person for the office of
director.
However, if the person being proposed does not hold any shares in the company, the
details of shares held and folio number need not be specified in the notice.
(ii) The notice shall be accompanied by a statement signed by the person whose name is bein g
proposed for the post of small shareholders’ 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.
(iii) The appointment of small shareholders’ director shall be subject to the provisions of
section152 except that—
(a) such director shall not be liable to retire by rotation;
(b) such director’s tenure as small shareholders’ director shall not exceed a period of
three consecutive years; and
Chap. 1 Directors 11
(c) on the expiry of the tenure, such director shall not be eligible for re-appointment.
(vi) A person shall not be appointed as small shareholders’ director of a company, if he is not
eligible for appointment in terms of section 164 which specifies the disqualifications for
appointment of a director.
3. Whether such a Director be considered as an Independent Director?
Since a person proposed as small shareholder director need to satisfy all requirements of Sec
149(6) as applicable to appointment of Independent director, thus they can be treated as
Independent director
4. When does a person appointed as a small shareholders Director vacate his office?
A person appointed as small shareholders’ director shall vacate the office if—
(a) the director incurs any of the disqualifications specified in section 164;
(b) the office of the director becomes vacant in pursuance of section 167;
(c) the director ceases to meet the criteria of independence as provided in sub-section (6) of
section 149.
Q-15 ABC Ltd. is a listed company having 50,00,000 equity shares of ` 100 each as its paid up
capital. Of the total shareholders of the company there are 20000 shareholders who are holdin g
shares of nominal value of not more than ` 20000 each. A group of shareholders who had
applied for these shares at the time of issue of such shares by the company by issuing
prospectus and been allotted these shares, wants to appoint a small shareholder’s director to
safeguard their interest and to get a proper representation in the company. A total number of
1500 such small shareholders decided to propose Mr. X as their candidate for this post. In the
light of the Companies Act, 2013 on the basis of the facts provided, determine the following
situations—
(1) What procedure should be followed by group of shareholders to have Mr. X, a small
shareholder director in the Board of Directors of the company?
(2) What are the provisions related to his (Mr. X) status as an independent director and what
exceptions are available to him in relation to his appointment as a director?
Sol As per Sec 151 read with Rule-7-The Companies (Appointment and Qualification of
directors) Rules, 2014 provides for the procedure for appointment of Small shareholders’
director according to which:
(1) Procedure for appointment of Small shareholder director shall be as follow
(i) The small shareholders intending to propose a person as a candidate for the post of small
shareholders’ director shall leave a notice of their intention with the company at least
fourteen days before the meeting under their signature specifying the name, address, shares
held and folio number of the person whose name is being proposed for the post of direct or an d
of the small shareholders who are proposing such person for the office of director.
However, if the person being proposed does not hold any shares in the company, the details of
shares held and folio number need not be specified in the notice.
(ii) The notice shall be accompanied by a statement signed by the person whose name is bein g
proposed for the post of small shareholders’ 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.
(iii) The appointment of small shareholders’ director shall be subject to the provisions of
section152 except that—
(b) such director’s tenure as small shareholders’ director shall not exceed a period of three
consecutive years; and
(vi) A person shall not be appointed as small shareholders’ director of a company, if he is not
eligible for appointment in terms of section 164 which specifies the disqualifications for
appointment of a director.
(2) Such small shareholders’ director shall be considered as an independent director if he fulfils
all the conditions/pre-requisite to become an independent director as mentioned in Section
149(6) and gives a declaration of his independence in accordance with the provisions of section
149(7) of the Companies Act, 2013.
Exception in relation to appointment of small shareholder director in comparison to other
directors
The appointment of small shareholder’s director shall be as per the provisions of Companies
Act, 2013, except that—
(b) such director’s tenure as small shareholder’s director shall not exceed a period of three
consecutive years; and
Q-16 Annual general meeting of Hero Ltd. has been scheduled in compliance with the requiremen t s
of the Companies Act, 2013. In this connection, it has some directors who are rotational and
out of which some have been appointed long back, some have been appointed on the same
day.
Decide in this connection:
(i) Which of the directors shall be retiring by rotation and be eligible for re-election?
(ii) In case two directors were appointed on the same day, how would you decide their
retirement by rotation?
(iii) In case the meeting could not decide how the vacancies caused by retirement t o be dealt
with, what shall be consequences?
Sol (i) According to Section 152(6)(a) of the Companies Act, 2013
Unless the Articles provide for retirement of all the directors at every general meeting, not less
than two-thirds of the total number of directors of a public company, shall be persons whose
period of office is liable to be determined by retirement by rotation.
According to section 152(6)(c) of the Act, one- third or nearest of the directors liable to retire
by rotation shall retire at the Annual General Meeting of the Company.
In order to determine the directors who shall retire by rotation at every general meeting, section
provide that the persons who have been longest in office since their last appointment shall be
liable to retire.
(ii) As between the persons who became directors on the same day, the directors who shall
retire may be determined by agreement among themselves or through draw by lot.
In the absence of any such agreement the persons liable to retire shall be chosen by lot.
(iii) Section 152(7) (a) provides that if the vacancy of the director retiring by rotation, is n ot so
filled-up and the meeting has not expressly resolved not to fill the vacancy,
the meeting shall stand adjourned till the same day in the next week, at the same time and
place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at
the same time and place.
Section further provides that if at the adjourned meeting also, no decision could be taken on
appointment of director, then the retiring director shall be deemed to have been re-appointed at
the adjourned meeting
Q-17 ADJ Company Limited has 10 directors on its board. Two of the directors have retired by
rotation at an Annual General Meeting. The place of retiring directors is not so filled up and
the meeting has also not expressly resolved 'not to fill the vacancy'. Since the AGM cou ld n ot
complete its business, it is adjourned to a later date. At this adjourned meetin g also t h e place
of retiring directors could not be filled up, and the meeting has also not expressly resolved 'not
to fill the vacancy'.
Referring to the provisions of the Companies Act, 2013, decide:
(i) Whether in such a situation the retiring directors shall be deemed to have been re-
appointed at the adjourned meeting?
(ii) What will be your answer in case at the adjourned meeting, the resolutions for re-
appointment of these directors were lost?
(iii) Whether such directors can continue in case the directors do not call the Annual Gen eral
Meeting?
Sol Retirement by rotation [Section 152(6)]

(a) Unless the articles provide for the retirement of all directors at every annual general
meeting, not less than two-thirds of the total number of directors of a public company
shall—
➢ be persons whose period of office is liable to determination by retirement of directors
by rotation; and
➢ be appointed by the company in general meeting.
(b) The remaining directors in the case of any such company shall, in default of, and subject t o
any regulations in the articles of the company, also be appointed by the company in
general meeting.
(c) At the first annual general meeting of a public company held next after the date of
the general meeting at which the first directors are appointed and at every subsequent
annual general meeting, one-third or nearest of such of the directors are liable to retire by
rotation
(d) The directors to retire by rotation at every annual general meeting shall be those who
have been longest in office since their last appointment, but as between persons who
became directors on the same day, those who are to retire shall, in default of and subject t o
any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill
up the vacancy by appointing the retiring director or some other person thereto.
“Total number of directors” shall not include independent directors, whether appointed
under this Act or any other law for the time being in force, on the Board of a company.
Vacancy in case of retiring director [Section 152(7)]
(a) If the vacancy of the retiring director is not so filled-up and the meeting has not
expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the sam e
day in the next week, at the same time and place, or if that day is a national holiday, till th e
next succeeding day which is not a holiday, at the same time and place.
(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that
meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be
deemed to have been re-appointed at the adjourned meeting, unless—
I. at that meeting or at the previous meeting a resolution for the re-appointment of such
director has been put to the meeting and lost;
II. the retiring director has, by a notice in writing addressed to the company or its Board
of directors, expressed his unwillingness to be so re-appointed;
III. he is not qualified or is disqualified for appointment;
IV. a resolution, whether special or ordinary, is required for his appointment or re
appointment by virtue of any provisions of this Act; or
V. section 162 is applicable to the case.
Based upon the above provisions, we may conclude as follow:-
(i) In the first case, the retiring directors shall be deemed to have been re-appointed.
(ii) In the second case, where the resolutions for the reappointment of the retiring direct ors
were lost, the retiring directors shall not be deemed to have been re-appointed.
(iii) In the case of B.R. Kundra vs Motion Pictures Association
It was held that, where AGM could not be held then director liable to retire shall deem ed t o be
retired as on the last due date on which AGM ought to have been held
Q-18 A and B were appointed as first directors on 4th April 2014 in Sun Glass Ltd. Thereaft er, C, D
and E were appointed as directors on 6th July 2014 and F, G and H were also appointed as
directors on 7th August 2014 in the company. In the Annual General meeting (AGM) of the
company held after the above appointments, A and B were proposed to be retired by rotation
and re-appointed as directors. At the AGM, resolution for A’s retirement and re-appointment
was passed. However, before the resolution for ‘B’ could be taken up for consideration, the
meeting was adjourned. In the adjourned meeting also, the said resolution could not be taken
up and the meeting was ended without passing the resolution for B’s retirement and
reappointment.
In the light of above and with reference to relevant provision of the Companies Act, 2013,
answer the following:
(i) Whether proposals for retirement by rotation and re-appointment of A and B only were
sufficient?
(ii) What will be the status of B as a director in the company?
Sol As per the provisions of Sec 152(6)
(a) Unless the articles provide for the retirement of all directors at every annual general
meeting, not less than two-thirds of the total number of directors of a public company
shall—
➢ be persons whose period of office is liable to determination by retirement of directors
by rotation; and
➢ be appointed by the company in general meeting.
(b) The remaining directors in the case of any such company shall, in default of, and subject t o
any regulations in the articles of the company, also be appointed by the company in
general meeting.
(c) At the first annual general meeting of a public company held next after the date of
the general meeting at which the first directors are appointed and at every subsequent
annual general meeting, one-third or nearest of such of the directors are liable to retire by
rotation
(d) The directors to retire by rotation at every annual general meeting shall be those who
have been longest in office since their last appointment, but as between persons who
became directors on the same day, those who are to retire shall, in default of and subject t o
any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill
up the vacancy by appointing the retiring director or some other person thereto.
Further section 152(7)(a) provides that if the vacancy of the director retiring by rotation, is n ot
so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting
shall stand adjourned till the same day in the next week, at the same time and place, or if t h at
day is a national holiday, till the next succeeding day which is not a holiday, at t h e sam e t im e
and place.
If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that
meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be
deemed to have been re-appointed at the adjourned meeting
(i) In the given case there are total 8 directors, out of which A and B were appointed as first
directors of Sun Glass Ltd.
As per the provisions of section 152 of the Companies Act, 2013, the number of direct ors
liable to retire by rotation at the next Annual General Meeting are 2 [1/3 of (2/3 of 8)].
Therefore, in the given case, 2 directors will be liable to retire by rotation at the next AGM of
the Company, which in this case will be A and B as they are who have been longest in office
since their last appointment. Thus, the proposals for retirement by rotation and re-appoin t m en t
of A and B only were sufficient.
(ii) According to section 152(6)(c), at the annual general meeting, one-third of rotational
directors shall retire from office.
Thus, B shall retire at the Annual General Meeting in which he was due to retire even though it
was adjourned without the resolution for B’s retirement could have been taken up.
At the adjourned meeting also, the vacancy of the retiring director is not filled up and that
meeting also has not expressly resolved not to fill the vacancy, thus the retiring director shall
be deemed to have been re-appointed at the adjourned meeting.
Q-19 The Promoters of M/s Frontline Limited, a listed public company propose to have the st ren gt h
of the Board of Directors as eleven. They also propose to make the Managing Director and
whole-time directors as directors not liable to retire by rotation. Advise on the following
matters as per the provisions of the Companies Act, 2013:
(i) Maximum number of persons, who can be appointed as directors not liable to retire by
rotation.
(ii) How many of the remaining directors will have to retire by rotation every year at the
Annual General Meeting (AGM)?
(iii) For the purpose of increasing the strength, certain nominations were received to nomin at e
candidates for contesting elections. One of the nominations was rejected by the directors
as it was received after sending the notice of AGM and that too after the working hours of
the last day on which nomination should have been received.
(iv) Can the Board of Directors increase the strength of companies' directors to 18 from 11 by
appointing additional directors through passing single resolution?
Sol Refer the provisions of Sec 152(6)

Based on Sec 152(6), we may conclude as follow:—
(i) Directors liable to retire by rotation: 11 × 2/3 =7.3 i.e 8
So, maximum number of persons, who can be appointed as directors not liable to retire by
rotation: 11-8 = 3.
(ii) As per Section 152(6)(c) of the Companies Act, 2013, 1/3rd of such of the Directors for th e
time being as are liable to retire by rotation, or their number is neither three nor a multiple of
three, then, the number nearest to the 1/3rd shall retire from office. Therefor the Directors
liable to retire at AGM are: 8 × 1/3 i.e. 2.67 i.e. 3
(iii) According to Section 160 of the Companies Act, 2013, a person who is not a retiring
director in terms of Section 152 shall, subject to the provisions of this Act, be eligible for
appointment to the office of a director at any general meeting, if he has, not less t h an 14 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.
In given case, one nomination was rejected by the directors as it was received after sending t h e
notice of AGM and that too after the working hours of the last day on which nomination
should have been received i.e. 14th day.
Conclusion:—Based on provision of Sec 160, we may conclude that the contention of the
directors are valid.
(iv) According to 1st proviso to Section 149(1) of the Companies Act, 2013, if the company
wants to appoint more than 15 directors, it can do so after passing a special resolution.
Thus, the Board of directors of Frontline Limited have to pass a special resolution for in crease
in directors from 11 to 18.
However, these appointments cannot be done through single resolution. As per Sec 162, each
director shall be appointed by a separate resolution unless the meeting first agreed that the
appointment shall be made by a single resolution and no vote has been cast against such
agreement. A resolution moved in contravention of this provision shall be void
Q-20 Prince Ltd. desires to appoint an additional director on its Board of directors. The Articles of
the company confer upon the Board to exercise the power to appoint such a director. As su ch
M is appointed as an additional director. In the light of the provisions of the Companies Act,
2013, examine:
(i) Whether M can continue as director if the annual general meeting of the com pan y is n ot
held within the stipulated period and is adjourned to a later date?
(ii) Can the power of appointing additional director be exercised by the Annual General
Meeting?
(iii) As the Secretary of the company what checks would you make after M is appointed as an
additional director?
Sol Additional Director [Section 161(1)]

• The articles of a company may confer on its Board of Directors the power to appoint
any person as an additional director at any time.
• A person, who fails to get appointed as a director in a general meeting, cannot be
appointed as an additional director.
• 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 h eld, wh ich ever is
earlier.
Based upon the provisions of section 161(1), we can conclude as follow:-
(i) M cannot continue as director till the adjourned annual general meeting, since he can hold
the office of directorship only 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.
Such an additional director shall vacate his office latest on the date on which the annual
general meeting could have been held
(ii) The power to appoint additional directors vests with the Board of Directors and not with
the members of the company. The only condition is that the Board must be conferred such
power by the articles of the company.
(iii) As a company secretary, following checks shall be put in place in respect of M’s
appointment as an additional director:
(a) He must have got the Directors Identification Number (DIN) or other number as
prescribed;
(b) He must furnish the DIN and a declaration that he is not disqualified to become a
director under the Companies Act, 2013;
(c) He must have given his consent to act as director and such consent has been filed wit h
the Registrar within 30 days of his appointment;
(d) His appointment is made by the Board of Directors;
Q-21 Examine the validity of the following:

Mr. Q, a Director of PQR Limited proceeding on a long foreign tour, appointed Mr. Y as an
alternate director to act for him during his absence. The articles of the company provide for
appointment of alternate directors. Mr. Q claims that he has a right to appoint alternate director
Sol Under section 161(2) of the Companies Act, 2013 the Board of Directors of a company may,
if so authorised by its articles or by a resolution passed by the company in general meeting,
appoint a person, not being a person holding any alternate directorship for any other director
in the company, to act as an alternate director for a director during his absence for a period of
not less than three months from India.
From the above provision it is clear that the authority to appoint alternate director has been
vested in the board of directors only and that too subject to empowerment by the Articles.
Therefore, Q is not authorized to appoint an alternate director and the appointment of Mr. Y is
not valid.
Q-22 The Board of directors of XYZ Limited appointed Mr. A as a Director in the casual vacancy
caused by resignation of Mr. X. Mr. A is proposed to be re-appointed as a Director at the
Annual General Meeting, when he vacates his office. Examine with reference to the relevant
provisions of the Companies Act, 2013 whether Mr. A can be considered as a 'Retiring
Director'
Sol According to section 161(4) of the Companies Act, 2013, in the case of a company, if the
office of any director appointed by the company in general meeting is vacated before his t erm
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
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, Mr. A would be eligible to hold office till the date upto which Mr. X wou ld
have held office. Therefore, Mr. A will not automatically be considered as a “retiring director”
at the next AGM of the company.
Q-23 The Board of directors of XYZ Ltd. filled up a casual vacancy caused by the death of Mr. P by
appointing Mr. C as a director on 3rd April, 2014. Unfortunately, Mr. C expired on 15t h May,
2014 after working about 40 days as a director. The Board now wishes to fill up the casual
vacancy by appointing Mrs. C in the forthcoming meeting of the Board. Advise the Board in
this regard as per the provisions under the Companies Act, 2013
Sol Casual Vacancy [Section 161(4)]

According to this section:
• If the office of any director appointed by the company in general meeting is vacated
before his term of office expires, 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 Direct ors
at a meeting of the Board which shall be subsequently approved by members in the
immediate next general meeting
• 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.
Given problem is based on Section 161(4) in the given case, the appointment of Mr. C in place
of the deceased director Mr. P was in order.
However, Mr. C expired on 15th May, 2014 and again a vacancy has arisen in the office of
director owing to death of Mr. C who was appointed by the board to fill up the casual vacan cy
resulting from P’s demise.
Vacancy arising on the Board due to vacation of office by the director appointed to fill a
casual vacancy in the first place, does not create another casual vacancy as section 161 (4)
clearly mentions that such vacancy is created by the vacation of office by any director
appointed by the company in general meeting.
Hence, the Board cannot fill in the vacancy arising from the death of Mr. C.
The Board may however appoint Mrs. C as an additional director under section 161(1) of the
Companies Act, 2013 provided the articles of association authorizes the board to do so
Q-24 Mr. Vinay Kumar, applied for the first time for allotment of a Directors identification Nu m ber
(DIN) on 1st November, 2016 as he is planning to incorporate a private limited company in
Form No. DIN-3 under the Companies Act, 2013. The status of his DIN applications presen t ly
is showing as "Put Under Resubmission". He seeks your guidance as to whether his application
has been rejected and is he required to obtain a fresh DIN. Advise.
Sol As per Section 154 of the Companies Act, 2013, the Central Government shall, within one
month from the receipt of the application under section 153, allot a Director Identification
Number (DIN) to the applicant in such manner as may be prescribed.
The status of the DIN applications showing “Put under resubmission”:
According to Rule 10 of the Companies (Appointment and Qualificat ions of Direct ors) Ru les,
2014 of the Companies Act, 2013, incase where DIN application is put under Resubmission
due to following reasons, one can submit additional documents for rectifying DIN applicat ion ,
within a period of 15 days from the date on which it is marked as Resubmission
(i) Proof of Identity/ residence is not enclosed or expired.
(ii) Proof of Date of Birth is not enclosed.
(iii) Supporting documents are not properly attested.
(iv) Non-submission of affidavit (if required).
On resubmitting with the additional documents, same DIN will be approved, if document s are
found in correct order as per marked in resubmission. So, accordingly the application of Mr.
Vinay Kumar has not been rejected and does not require to obtain a fresh DIN.
Q-25 A Public limited Company has recently received a notice wherein a member has proposed
himself as Director of company for upcoming AGM. As a company Secretary, how would you
deal with given situation
Sol As per the provisions of Section 160 of companies Act 2013

1. A person who is not a retiring director in terms of section 152 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, submitted with company at its registered office, the intention to propose h im as a
candidate for that office atleast 14 days before the meeting, under his han d sign ifyin g
his candidature as a director
Such notice must come along with the deposit of 1,00,000 rupees or such higher amount as
may be prescribed. Such deposit shall be refunded to such person or, as the case may be, to t h e
member, if the person proposed gets elected as a director or gets more than twenty-five per
cent. Of the total valid votes cast either on show of hands or on poll on such resolution.
Provided that 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.
2. The company shall inform its members of the candidature of a person for the office of
director under sub-section (1) in such manner as may be prescribed.
Q-26 Mr. Abhi was appointed as an additional director of Pioneer Limited on 14th March, 2016. Th e
annual general meeting of the company was scheduled to be held on 29th September, 2016 bu t
due to heavy rains and floods all records of the company were destroyed. In order to rebuild
the records, the company approached the Registrar of Companies for extension of time for
holding the annual general meeting till 30th December, 2016. In the light of the Companies
Act, 2013 advise Mr. Abhi, who was appointed as additional director during the year.
Sol Given problem is based on Section 161(1) of the Companies Act, 2013
According to this section:
• The articles of a company may confer on its Board of Directors the power to appoint any
person as an additional director at any time.
• A person, who fails to get appointed as a director in a general meeting, cannot be appointed
as an additional director.
• 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 given case, due to heavy rains and floods all the record of the company were destroyed. So,
company approached the Registrar of Companies for extension of time for holding of the
Annual General Meeting till 30th December 2016.
Section 96 of the Companies Act, 2013, empowered Registrar to grant extension upto 3
months in case of AGM, other than the first annual general meeting.
Thus Mr. Abhi may continue as an additional director of Pioneer Limited till 30th December
2016.
Q-27 Mr. Narayan, a Director of KPR Limited who is proceeding on a long foreign tour, appointed
Mr. Shankar as an alternate director to act for him during his absence. The Articles of the
company provide for appointment of alternate directors. Mr. Narayan claims that he has a righ t
to appoint an alternate director.
Sol According to section 161(2) of the Companies Act, 2013, the Board of Directors of a company
may, if so authorised by its articles or by a resolution passed by the company in general
meeting, appoint a person, not being a person holding any alternate directorship for an y ot h er
director in the company, to act as an alternate director for a director during his absence for a
period of not less than three months from India.
Thus power to appoint alternate director lies with the Board of Directors and not with the
director himself. Hence, Mr. Narayan cannot himself appoint Mr. Shankar as an alternate
director to act for him during his absence.
Assumption.—We have based our answer on assumption that Mr Narayan would be on
foreign tour for period exceeding 3 months
Q-28 A company has 11 directors on the Board consisting of the following:

(a) Mr. Active, Mr. Archive as nominees from two Public Financial Institutions.
(b) Mr. First, Mr. Second, Mr. Third appointed at the 1st AGM.
(c) Mr. Fourth, Mr. Fifth appointed at the 2nd AGM.
(d) Mr. Addition was appointed as additional director subsequent to 2nd AGM.
(e) Mr. Casual was appointed as director in place of Mr. Soul who died and was earlier
appointed during the 2nd AGM.
(f) Mr. Excellent was appointed as Managing Director for 5 years w.e.f. 1st AGM.
(g) Mr. One more was appointed as additional Director soon after Mr. Addition was appoin t ed
as Additional Director.
List out in order, who shall be Rotational/Non-Rotational/neither of above category.
Sol Table containing list of Rotational/Non-Rotational/Neither of 2 categories

Rotational Non-Rotational Not to be counted
u/s 152(6)
First Excellent Active
Second Archive
Third One More
Fourth Addition
Fifth
Casual (In place of Soul)
Q-29 Mr. Single, a director of XYZ Ltd. goes Singapore, for a period of 6 months. Board appoints
Mr. Replacement, in his place as an alternate director. Mr. Replacement was also holding
directorship in XYZ Ltd. Identify the nature of appointment of Mr. Replacement in XYZ Ltd
as an alternate director.
Sol Alternate Director [Section 161(2)]

• The Board of Directors of a company may, if so authorised by its articles or by a
resolution passed by the company in general meeting, appoint a person to act as an
alternate director in place of another director (original director) during his absence
for a period of not less than three months from India.
• A person who is holding any alternate directorship for any other director in the company or
holding directorship in the same company cannot be considered for appointment as above.
• No person shall be appointed as an alternate director for an independent director u n less h e
is qualified to be appointed as an independent director under the provisions of this Act.
• An alternate director shall not hold office for a period longer than that permissible to the
original director in whose place he has been appointed and shall vacate the office if and
when the original director returns to India.
• If the term of office of the original director is determined before he so returns to India, an y
provision for the automatic re-appointment of retiring directors in default of another
appointment shall apply to the original, and not to the alternate director.
Now, in given case, we may conclude that Mr. Replacement shall not be appointed as an
alternate director due to his holding of directorship in the same company in which he is
appointed as an alternate director. So his appointment is invalid.
Q-30 In ABC Ltd. Three Directors were to be appointed. The item was included in agenda for the
Annual General Meeting scheduled on 30th September, 2014, under the category of 'Ordin ary
Business'. All the three persons as proposed by the Board of directors were elected as direct ors
of the company by passing a 'single resolution' avoiding the repetition (multiplicity) of
resolution. After the three directors joined the Board, certain members objected to their
appointment and the resolution. Examine the provisions of Companies Act, 2013 and decide:
Whether the contention of the members shall be tenable and whether both the appoin t m en t of
Directors and the 'single resolution' passed at the Company's Annual General Meeting sh all be
void.
Sol According to the provisions of 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 t h e
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.
Section 162(2) further provides that a resolution moved in contravention of sub-section (1)
shall be void
Taking into account of the above, the contention of the members shall be tenable. Each director
has to be appointed by way of a separate resolution.
Thus, both the appointment of Directors and the 'single resolution' passed at the Company's
Annual General Meeting shall be void unless a proposal to move such a motion has first been
agreed to at the meeting without any vote being cast against it.
Q-31 M/s EVA Optical Networking India Private Limited having its registered office situated in t h e
city of Gurugram, Haryana State, falling within the jurisdiction of Registrar of Companies,
NCT, Delhi & Haryana has filed a petition before the Honorable National Company Law
Tribunal, New Delhi Bench (NCLT) under the Companies Act, 2013 seeking an exem pt ion be
granted to the petitioner company to change the financial year of the compan y from 1st April
to 31st March presently adopted by following the financial year in below manner:-
(i) For the next financial year: From 1st April, 2018 to 31st December, 2018 both days
inclusive.
(ii) For the subsequent financial year: Be changed to a period of one calendar year begin n in g
1st January of one year and concluding on 31st December of the same year.
The Petitioner company in its petition avers that it is a part of EVA Optical Networking
Singapore Pvt. Ltd., a company incorporated in Singapore (being the parent company) holdin g
99% of the Equity Share Capital of the petitioner and the remaining 1% of the Equity Share
Capital is held by EVA Optical Networking SE, a company incorporated in Germany, which is
represented to be the ultimate holding company. The parent company as well as the ultimate
holding company follows their Financial Year as 1st January to 31st December of the same
year for the purpose of consolidation of accounts and hence in order to streamline the
preparation of the consolidated financials of the parent company, the petitioner company is
required to align with it. Advise whether the petition will stand before the Honorable NCLT as
per the provisions of the Companies Act, 2013. What would be your answer if M/s EVA
Optical Networking India Private Limited was registered as a Specified International Financial
Services Center (IFSC) private company?
Sol As per the provisions of Sec 2 (41) "financial year", in relation to any company or body
corporate, means the period ending on the 31st day of March every year, and where it has been
incorporated on or after the 1st day of January of a year, the period ending on the 31st day of
March of the following year, in respect whereof financial statement of the company or body
corporate is made up:
Provided that where a company or body corporate, which is a holding company or a subsidiary
or associate company of a company incorporated outside India and is required to follow a
different financial year for consolidation of its accounts outside India, the Central Government
may, on an application made by that company or body corporate in such form and manner
as may be prescribed, allow any period as its financial year, whether or not that period is a
year:
In the given case, EVA Optical Networking Singapore Pvt. Ltd. (incorporated in Singapore)
and EVA Optical Networking SE (incorporate in Germany) together hold all the shares of M/s
EVA Optical Networking India Private Limited. Thus, M/s EVA Optical Networking India
Private Limited becomes subsidiary of a foreign company.
1. M/s EVA Optical Networking India Private Limited, can apply to CG for exemption to
change the next financial year of the company from 1st April to 31st March to 1st April,
2018 to 31st December, 2018 and the subsequent financial year to a period of one calen dar
year beginning 1st January of one year and concluding on 31st December of the sam e year
in order to streamline the consolidation of financials with its parent company.
2. If M/s EVA Optical Networking India Private Limited was registered as a Specified
International Financial Center (IFSC) private company, its financial year can be same as
the financial year of its foreign holding company and approval of the CG shall not be
required.
Q-32 Mr. Kishore is a Director of AB Limited and PQ Limited. AB Limited did not file financial
statements for the years ended 31st March, 2010, 2011 and 2012. AB Limited did not pay
interest on loans taken from a public financial institution from 1st April, 2012 and also failed
to repay matured deposits taken from public on due dates from 1st April, 2013 onwards.
Answer the following in the light of relevant provisions of the Companies Act, 2013:—
(i) Whether Mr. Kishore is disqualified under the Companies Act, 2013 and if so; whether h e
can continue as a Director in AB Limited and can he also seek reappointment when he
retires by rotation at the Annual General Meeting of PQ Limited to be held in Sept em ber,
2014?
(ii) Mr. Kishore is proposed to be appointed as Additional Director of XY Limited in June,
2014. Is he eligible to be appointed as Additional Director in XY Limited?
Sol Sec 164(2) 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 three
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 continues 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.
Provided that where a person is appointed as a director of a company which is in default of
clause (a) or clause (b), he shall not incur the disqualification for a period of 6 months from
the date of his appointment
Sec 167(1)(a) The office of a director shall become vacant in case he incurs any of the
disqualifications specified in section 164;
Provided that where he incurs disqualification under sub-section (2) of section 164, the office
of the director shall become vacant in all the companies, other than the company which is in
default under that sub-section
Conclusion:—
(i) Since, Mr. Kishore has become disqualification under section 164(2) of the Companies Act ,
2013, thus he is not eligible to be re-appointed in AB Ltd, even though immediate vacat ion in
AB Ltd is not required [As per proviso to Sec 167(1)(a)]
Mr. Kishore shall vacate his office immediately in PQ Ltd
(ii) In view of his disqualification under section 164(2), Mr. Kishore is not eligible to be
appointed as additional director in XY Ltd. in June 2014
Q-33 Mr. Vikram, a director of M/s Tubelight Limited has made default in filing of annual accou n t s
and annual returns with Registrar of Companies for a continuous period of 3 financial years
ending on 31st March 2016. Examine the validity of the following under the Companies
Act,2013:
(i) Whether Mr. Vikram can continue to be a director of M/s Tubelight Limited (default in g
company) and also M/s Green Light Limited, where he is also a director? Also state
whether he can be re-appointed as director in these two companies.
(ii) What would your answer be in case Mr. Vikram is a nominee director of a Public
Financial Institution?
(iii) What would be your answer in case the defaulting company (i.e. M/s. Tubelight
Limited) is a private limited company?
Sol Sec 164(2) No person who is or has been a director of a company which—
financial years; or
(b) has failed to repay the deposits accepted by it or pay interest t hereon 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 continues 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.
clause (a) or clause (b), he shall not incur the disqualification for a period of 6 months from
the date of his appointment
Sec 167(1)(a) The office of a director shall become vacant in case he incurs any of the
disqualifications specified in section 164;
default under that sub-section
Based upon the above provisions, we may conclude as follow:-
(i) M/s Vikram can continue to be a director in M/s Tubelight Limited i.e. a defaulting
company, but he shall vacate his office immediately in M/s Green light Limited
(ii) In Case Mr. Vikram is a nominee director of a Public Financial Institution, then in such
case, section 164 is not applicable.
(iii) As per Sec 164(3), a private company may by its articles provide for any further ground
for disqualifications for appointment as a director in addition to those specified in sub-sect ion s
(1) and (2) of section 164.
Thus, in this case the answer would be same as above i.e. Mr. Vikram has to vacate his office
of directorship from Tubelight Limited and Green Light Limited and cannot be reappointed in
both the companies for a period of five years from the date on which the said company incurs
the default.
Q-34 State with reference to the relevant provisions of the Companies Act, 2013 whether the
following persons can be appointed as a Director of a company:
(i) Mr. A, who has huge personal liabilities far in excess of his Assets and Properties, has
applied to the court for adjudicating him as an insolvent and such application is pending.
(ii) Mr. B, who was caught red-handed in a shop lifting case two years ago, was convicted by
a court and sentenced to imprisonment for a period of eight weeks.
(iii) Mr. C, a Former Bank Executive, was convicted by a court eight years ago for
embezzlement of funds and sentenced to imprisonment for a period of one year.
(iv) Mr. D is a Director of DLT Limited, which has not filed its Annual Returns pert ain in g t o
the Annual General Meetings held in the calendar years 2011, 2012 and 2013.
Sol Based on the provisions of Section 164, we can conclude as follow:-

(i) Section 164(1)(c) states that a person shall not be eligible for appointment as a director of
a company if he has applied to be adjudicated as an insolvent and his application is
pending.
Therefore, in the present case, Mr. A cannot be appointed as a Director of a Company –
whether public or private.
(ii) Section 164(1)(d) states that a person shall not be eligible for appointment as a director of
a company if he has been convicted by a court for any offence involving moral turpit u de
or otherwise and sentenced in respect thereof to imprisonment for not less than six
months, and a period of five years has not elapsed from the date of expiry of the
sentence.
In the present case, although the sentence was only two years ago, but the period of
sentence was only eight weeks, i.e., less than six months. Hence, Mr. B does not come
under the purview of this disqualification and can be appointed as a director of a
company.
(iii) The third case also falls within the provisions of section 164(1)(d). In this case the
imprisonment was for a period of one year, i.e., for more than six months, but sin ce m ore
than five years have elapsed from the expiry of the sentence, Mr. C is no longer
disqualified and can be appointed as a director of a company
(iv) Refer provisions for Sec 164(2)
In the present case, DLT Limited has failed to file annual returns. Hence, the disqu alificat ion
for Mr. D is attracted and he cannot be appointed as a director in other company nor can h e be
reappointed in the same company, moreover, read with sec 167(1), we may conclu de t h at Mr
D shall vacate his office from any other company, where he is holding directorship
Q-35 Mr. John is a director of MNC Ltd., which had accepted deposits from public. The Financial
position of MNC Ltd. turned very bad and it failed to repay the deposits which fell due for
payment on 10th April, 2013 and such repayment has not been made till 5th May, 2014.
Another company JKL Ltd. wants to appoint the said Mr. John as its director at its annual
general meeting to be held on 6th May, 2014. You are required to state with reference to the
provisions of the Companies Act, 2013 whether Mr. John can be appointed as a director of
JKL Ltd.
Sol Mention provisions of Sec 164(2)

Since in given case, MNC Ltd., has failed to repay its deposit on due dates and the default
continues for more than one year. Hence, Mr. John will not be eligible to be appointed as a
director of JKL Ltd.
Q-36 Mr. Ramanathan is a Director of Fraudulent Ltd., Honest Ltd. and Regular Ltd. for the
financial year ended on 31st March, 2013. Two irregularities were discovered against
fraudulent Ltd. Fraudulent Ltd. did not file its financial statements for th e year ended
31.3.2013 and failed to pay interest on loans taken from a financial institution for the last t h ree
years.
On 1st June, 2014 Mr. Ramnathan is proposed to be appointed as additional director of
Goodwill Ltd, which company has sought a declaration from Mr. Ramnathan and he also
submitted the declaration stating that the disqualification specified in Section 164 of the
Companies Act, 2013 is not attracted in his case. Decide under the provisions of the
Companies Act:
(i) Whether the declaration submitted by Mr. Ramanthan to Goodwill Ltd. is in order?
(ii) Whether Mr. Ramnathan can continue as a Director in Honest Ltd. and Regular Ltd.?
Sol (i) The declaration of Mr. Ramanthan is in order.

Since the financial statements were not filed only for one year, no disqualification
attaches to him. Further, the non-payment of interest to the financial institution is no
ground for disqualification under section 164 (2) of the Act.
(ii) Mr. Ramanthan can continue his directorship in all companies as no disqualification
attaches to him under section 164 (2) of the Companies Act, 2013.
Q-37 State with reference to the provisions of the Companies Act, 2013, whether the following
persons can be appointed as a Director of a company.
(i) Mr. L, who has not paid any calls in respect of any shares of the company held by h im an d
five months have passed from the last day fixed for the payment of calls.
(ii) Mr. G is Director of LDT Limited, who has not filed the company’s annual return
pertaining to the annual general meeting held in the calendar years 2014, 2015 and 2016.
Sol (i) According to section 164(1)(f) of the Companies Act, 2013, a person shall not be eligible
for appointment as a director of company, if he has not paid any calls in respect of any shares
of the company held by him and 6 months have elapsed from the last day fixed for the payment
of the call.
In the given case, Mr. L who has not paid any calls in respect of any shares of the company
held by him and five months have passed from the last day fixed for the paymen t of calls.
Thus, we may conclude that Mr. L can be appointed as a Director of a company as only five
months have passed from the last day fixed for the payment of calls.
(ii) According to section 164(2)(a) of the Companies Act, 2013, no person who is or h as been a
director of a company which has not filed financial statements or annual returns for any
continuous period of three financial years 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.
In the present case, Mr. G is director of LDT Limited, who has not filed the company’s
annual return pertaining to the annual general meeting held in the calendar years 2014, 2015
and 2016.
Thus, Mr. G who is a director of LDT Limited cannot be appointed as a Director of any other
company for 5 years
Q-38 Mr. Influential is already a director of 19 companies out of which 10 are public limited
companies and 9 are private companies. He is being appointed as a director of another
company named Expensive Remedies Ltd. Advise Mr. Influential in regard to the following:
(i) Restrictions on the number of directorships to be held by an individual and whether he
can accept the new appointment in view thereof.
(ii) What are the companies to be excluded for the purpose of calculating the ceiling on the
appointment of directors in a public company?
Sol According to section 165(1):

No person shall hold office as director, including any alternate directorship, in more than 20
companies at the same time.
Provided that out of the limit of 20, the maximum number of public companies in which a
person can be appointed as a director shall not exceed 10.
Explanation I.—Private companies that is either holding or subsidiary company of a public
company shall be included in reckoning the limit of public companies in which a person can be
appointed as a director.
Explanation II.—For reckoning the limit of directorships of twenty companies, the
directorship in a dormant company shall not be included
Similarly, In case of section 8 company - Section 165 (1) shall not apply
(i) In the said question, Mr. Influential is already a director in 10 public companies and as
Expensive Remedies Ltd is a public company, he cannot be appointed as a director
therein, even though his directorships are less than 20.
(ii) For calculating the limit of 10 public companies, Dormant Company, Section 8
Company, a private company which is neither a subsidiary nor a holding company of a
public company will be excluded
Q-39 Mr. Raj is director in 10 public limited companies as on 30th July, 2014 and continues to be so
till 26th September, 2014. Thereafter, the following companies appoint Mr. Raj as a director at
their respective Annual General Meetings held on dates mentioned against their names:
(1) MLP Ltd. (AGM held on 27th September, 2014)
(2) PAT Private Ltd. (AGM held on 28th September, 2014)
(3) KMC Ltd. (AGM held on 29th September, 2014)
You are required to state with reference to the relevant provisions of th e Companies Act , 2013
the options available to Mr. Raj in respect of accepting or not accepting the appointment of t h e
above companies.
Sol Mention provisions of Sec 165(1)

In the given case, Mr. Raj is already a director in 10 public companies, hence he cannot hold
office in any additional public company.
He cannot accept appointment in MLP Ltd. and KMC Ltd. as these are public companies.
However, he can be appointed as director in PAT Private Ltd. as total number of directorship
does not exceed 20 in the present case.
Q-40 Referring to the provisions of the Companies Act, 2013, examine the validity of th e followin g
appointment of Directors:
(A) Brown Limited, having a turnover of ` 60 crore in the financial year 2016-17 appoin t s Ms.
Rose as the women director on 1st March 2017. Ms. Rose already holds directorship in t welve
companies including ten public companies. She is whole time Cost Accountant in practice.
(B) Ms. Jasmine holds directorship in eight public companies including managing direct orsh ip
in two companies and directorship in six companies. In addition, she also holds alternate
directorship in three companies and independent directorship in three subsidiary com pan ies of
Brown Limited.
Sol As per section 165(1) of the Companies Act, 2013, no person shall hold office as director,
including any alternate directorship, in more than 20 companies at the same time. Out of the
limit of 20, the maximum number of public companies in which a person can be appointed as a
director shall not exceed 10.
Private companies that is either holding or subsidiary company of a public company shall be
included in reckoning the limit of public companies in which a person can be appointed as a
director.
Based upon the above provision, we may conclude as follow:-
(A) Ms. Rose was appointed as a women director on 1st March, 2017 in Brown Limited. She
was already holding directorship in twelve companies including ten public companies. She is
whole time Cost Accountant in practice.
As Ms. Rose was already a director in ten public companies, her appointment in Brown
Limited is not valid as it will lead to her directorship in 11 public companies.
Thus she can choose between the companies in which she wishes to continue to hold the office
of director or resign her office as director in the other remaining companies.
(B) Ms. Jasmine was already holding directorship in eight public companies and alternate
directorship in three companies and independent directorship in three subsidiary com pan ies of
Brown Limited.
Directorship in three subsidiary companies of Brown Limited will be considered as
directorship in three more public companies.
Hence, total holding of directorship by Ms. Jasmine in public companies amounts to 11 (8+3)
which is invalid.
Assumption: As nothing is mentioned that whether three companies in which Ms. Jasmine is
holding alternate directorship are private or public, assumption is taken that these
companies are private in nature.
Q-41 Mr. Ram have been appointed as a director in X Ltd. due to his holding of an office as
Managing Director (MD) in its holding company, ABC Limited. In due course of time, Mr.
Ram was offered by HXL Limited to join the company as managerial personnel on very good
package. He was offered the said position on the term that he has to resign from th e ABC Lt d.
Mr. Ram served a notice in writing to the company by mail and through post t o h is regist ered
office on 1.02.2018. His notice of resignation specified the date 15.02 2018 as the last date in
the ABC Ltd. However, due to pressure of HXL Ltd., he joined the company on 13.02.2018.
Analyze, Integrate and apply in terms of the Companies Act, 2013, the legal position of Mr.
Ram in the given situations-
(i) Holding of directorship of Mr. Ram in X Ltd. after ceasing to hold office as MD in ABC
Ltd.
(ii) Joining of HXL Ltd on 13. 02.2018.
Sol As per sec 167(1)(h) of the Companies Act, 2013,

office of a director shall become vacant in case he, having been appointed a director by virtue
of his holding any office or other employment in the holding, subsidiary or associate compan y,
ceases to hold such office or other employment in that company.
As per section 168 a director may resign from his office by giving a notice in writing to the
company. The Board shall on receipt of such notice take note of the same and intimate
Registrar.
Director shall forward his resignation to registrar within 30 days of his resignation. 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, based upon the above provisions, we may conclude as follow:-
(i) Holding of directorship of Mr. Ram in X Ltd. is invalid as per Sec 167(1)(h) of the
Companies Act, 2013.
Since in this case, Mr. Ram was appointed as director in X Ltd. due to holding of office in its
holding company, ABC Ltd.
Thus, office of director in X Ltd. shall become vacant due to cease of its holding of his office
or employment in ABC Ltd. So holding of directorship in X Ltd. by Mr. Ram is invalid an d h e
is liable to vacate.
(ii) As per Section 168 of the Companies Act, 2013, Resignation shall be effective 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 joining of HXL Ltd. during the notice period i.e.
on 13.02.2018, is not valid.
As per section 172 of the Companies Act, 2013, If a company is in default in complying with
any of the provisions of this Chapter and for which no specific penalty or punishment is
provided therein, the company and every officer of the company who is in default shall be
liable to a penalty of fifty thousand rupees, and in case of continuing failure, with a further
penalty of five hundred rupees for each day during which such failure continues, subject to a
maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer
who is in default.
Q-42 Mr. fortune is holding directorship in the following types of companies:
(i) 4 Public companies
(ii) 10 private companies
(iii) 2 companies registered under section 8 of the Companies Act, 2013.
Mr. Fortune further received offer from 7 public companies, 6 private companies and 2
companies registered under section 8 of the Companies Act, 2013. He wants to take up
maximum permissible directorship.
His order of preference is as follows:
(1) Public companies
(2) Private companies (not being holding or subsidiary of any public company) and
(3) Companies registered under section 8 of the Companies Act, 2013
Decide the number of companies in which Mr. Fortune can hold the directorship.
Sol Refer to the provisions of Sec 165(1) of companies Act 2013

We may conclude as follow about directorship of Mr Fortune:-
(i) 7 Public companies. Not allowed, as the maximum number of public companies in which
one can be a director is 10 only, thus Mr Fortune can accept further directorship in 6 more
public companies
(ii) No more private company. Upon acceptance of directorship in 6 more public companies,
he can not accept any other directorship in any other private limited or public limited company,
as total holding has already reached the maximum permissible 20 companies
(iii) 2 more companies registered under section 8 of the companies Act, 2013. No restriction
on the number of directorship in Sec 8 companies. Thus a person can hold in the companies
registered under section 8 of the Companies Act, 2013.
Q-43 Due to internal problems in the working of M/s Infighting Detergents Ltd., Mr. Satyam and
Mr. Shivam, a Director, have submitted their resignations and decided to disassociate
themselves with the working of the company. Mr. Sundram, the Managing Director, decides t o
refuse their resignations. Examine whether the Managing Director can compel Mr. Satyam an d
Mr. Shivam to continue as per the provisions of the Companies Act, 2013.
Sol According to this section:

How a director shall resign (Sec 168(1))
• A director may resign from his office by giving a notice in writing to the company.
• The Board shall on receipt of such notice take note of the same.
• The company shall within 30 days from the date of receipt of notice of resignation
from a director, intimate the Registrar in Form DIR-12 and post the information on it s
website, if any.
• The company shall also place the fact of such resignation in the report of directors laid
in the immediately following general meeting by the company.
• Such director may also forward a copy of his resignation along with detailed reasons
for the resignation to the Registrar within thirty days from the date of resignation in
Form DIR-11 along with the prescribed fee.
Section 168(2) states that the resignation of a director shall take effect from the date on wh ich
the notice is received by the company or the date, if any, specified by the director in the notice,
whichever is later.
There is no option provided to the Managing Director or the Company or the Board to reject
the rejection of a director and force him to continue.
Therefore, in the given case, the Managing Director can not compel Mr. Satyam and Mr.
Shivam to continue as directors in view of the above provisions.
Q-44 Mr. Raj, a director of POL Ltd., submitted his resignation from the post of director to the
Board of Directors on 30th June, 2014 and obtained a receipt th erefore on the same day. The
Board of Directors of POL Ltd. neither accepted the resignation nor did it file the required
form with the Registrar of Companies. You are required to state whether Mr. Raj ceases to be
the Director of POL Ltd. and if yes, since when?
Sol Section 168(2) of the Companies Act, 2013 states that 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.
Validity of the resignation of the director is in no way connected to its acceptance by the
Company or the Board nor is it linked to the filing of required form with the Registrar.
Therefore, in the given case, the resignation of Mr. Raj is valid and h e will cease to be a
director of PQL Ltd with effect from the date of notice i.e. 30th June 2014 as he has obtained
the receipt of the notice on the same day.
Q-45 Vijay, a director resigns after giving due notice to the company and he forwards a copy of
resignation in e-form DIR-11 to the Registrar of Companies (ROC) within the prescribed time.
What would be the status of Vijay if the company fails to intimate about the resignation of
Vijay to ROC?
Sol Refer the provisions of Sec 168
In the present case, Vijay, a director resigns after giving due notice to the company and he
forwards a copy of resignation in e-form DIR-11 to the ROC within the prescribed time.
If the company fails to intimate about the resignation of Vijay to ROC, even then the
resignation of Vijay shall take effect from the date on which the notice is received by the
company or the date, if any, specified by Vijay in the notice, whichever is later.
Q-46 A company has in its Articles of Association provided for appointment of not less than two-
thirds of the total number of its directors according to the principle of proportional
representation. Can the directors so appointed be removed by the company in general m eet in g
as per the provisions of the Companies Act, 2013?
Sol According to section 169
Company may, by ordinary resolution, remove a director other than a director appointed by th e
Tribunal under section 242 of the Act, before the expiry of the period of his office after giving
him a reasonable opportunity of being heard.
Provided that the directors appointed on the principle of proportional representation under
section 163 cannot be removed by an ordinary resolution as aforesaid.
Thus removal of director appointed u/s 163 through proportional representation is n ot allowed
u/s 169
Q-47 M/s. Bosch and Lawrence Limited, an unlisted company has a paid-up equity share capital of `
11 crores as on 31st March, 2013. Mr. Robert was appointed as an Independent Director at t h e
Annual General Meeting of the company held on 29 -09- 2015 for a period of one year. Again ,
he was appointed in the subsequent Annual General Meeting held on 28-09-2016 for a period
of two years as his second consecutive term. Examine under the provisions of the Companies
Act, 2013 whether he can be again appointed in the Annual General Meeting to be held in
September 2018 for another period of 2 years to complete his total term of 5 years?
Sol As per Section 149(10) of the Companies Act 2013,

• An Independent Director shall hold office for a term up to five consecutive years on the
Board of a company.
• He shall be eligible for re-appointment on passing of a special resolution by the company.
• As per section 149(11) no independent director shall hold office for more than two
consecutive terms.
• However, such independent director shall be eligible for appointment after the expiration
of three years of ceasing to be an independent director.
• Further under section 149 (11) of the Act, no person holds office of independent director
for more than ‘two consecutives terms. Such a person shall have to vacate office aft er t h e
consecutive terms even if the total number years of his appointment in such two
consecutive terms is less than 10 years.
Conclusion: - Thus Mr. Robert cannot be appointed as an Independent Director at the AGM
proposed to be held in 2018. In such case the person completing ‘consecutive terms of less
than 10 years' shall be eligible for appointment only after the expiry of the requisite cooling-off
period of three years.
Q-48 State the legal positions as to the valid appointment of the directors in the given situations in
the light of the Companies Act, 2013-
(i) Shiksham Ltd. was formed for prompting the girls education with 15 directors in it s Board.
Due to expansion of its objective at large scale, the company increased the strength of its
directors to 20 without passing SR.
(ii) Mr. Kabir was appointed as an alternate director on behalf of Mr. Robert, as Mr. Robert
goes abroad and comes back to India temporarily and leaves country again.
(iii) PQR Ltd., who failed to file a financial statement in 3 previous financial year, appointed
Mr. Khurana as a director in July 2018.
Sol (i) As per section 149(1) of the Companies Act, 2013,
• Every public company must have at least three directors.
• A private limited company should have minimum two directors.
• A one person company (OPC) will have minimum one director.
• Maximum directors can be 15.
• Maximum number of directors can be increased beyond 15 by passing a special resolution.
• However the upper limit of 15 directors is not applicable to section 8 companies.
• Therefore, increase in the strength of directors to 20 in the Shiksham Ltd. withou t passin g
SR is valid.
Assumption- Company has complied provisions of Sec 137 and Sec 92
(ii) As per section 161(2) of the Companies Act, 2013, the alternate director will vacate his
office as soon as the foreign director comes to India.
However, in given case, since Mr. Robert goes abroad and comes back to India temporarily
and leaves country again, thus, becoming unable to transact business, thus alt ern at e direct or
(Mr. Kabir) would continue for such temporary period.
(iii) As per section 164(2) of Companies Act, 2013, since PQR Ltd. is a defaulted company
u/s 164(2) (a) as it failed to filed financial statement in 3 financial year.
Thus any person appointed as director will not be disqualified for first six months after join in g
i.e., from date of his appointment.
Hence the appointment of Mr. Khurana as a director is valid uptil January 2019.
Q-49 ABC Limited is an unlisted public Company having a paid-up equity share capital of ` 20
Crores and a turnover of ` 150 Crores as on 31st March, 2018. The total number of Directors
on the Board is 13.
Referring to the provisions of the Companies Act, 2013 answer the following:
(i) The minimum number of Independent Directors that the Company should appoint.
(ii) How many Independent Directors are to be appointed in case ABC Limited is a listed
Company?
Sol According to Section 149(4) of the Companies Act, 2013, every listed public compan y 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 the Rule 4 of the Companies (Appointment and Qualification of Directors) Ru les,
2014, the following class or classes of companies shall have at least 2 directors as indepen den t
directors:
(a) the Public Companies having paid up share capital of 10 crore rupees or more; or
(b) the Public Companies having turnover of 100 crore rupees or more; or
(c) the Public Companies which have, in aggregate, outstanding loans, debentures and
deposits, exceeding 50 crore rupees.
Thus, in the given cases we may conclude as follow: -
(i) As the paid up share capital of ABC Limited is ` 20 Crore and turnover is ` 150 crore, the
company shall have at least 2 directors as independent directors.
(ii) In case ABC Limited is a listed company, it shall have at least 5 directors as independent
director (1/3rd of the total number of directors: 1/3rd of 13 is 4.33 rounded off as 5).
Q-50 On the ground of the conviction for an offence dealing with related party transaction , Mr. Gap
was disqualified to hold the directorship in XYZ Ltd. His vacancy was filled up by Mr.
Samarth by the Board as a director on 3rd April, 2018 which was subsequently approved by
the members in the immediate next general meeting. Unfortunately Mr. Samarth expired on
15th May, 2018 after working about 40 days as a director. The Board now wishes to fill u p t h e
said vacancy by appointing Mr. Able in the forthcoming meeting of the Board. Advise the
Board on the validity of the following appointments as per the provisions under the Companies
Act, 2013.
(i) Holding of Mr. Samarth in place of Mr. Gap
(ii) Appointment of Mr. Able in place of Mr. Samarth
Sol As per Section 161(4) of the Companies Act, 2013

If the office of any director appointed by the company in general meeting is vacated before h is
term of office expires in the normal course, the resulting casual vacancy may, in default of an d
subject to any regulations in the articles of the company, be filled by the Board of Direct ors 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.
(i) In view of the above provisions, in the given case, the appointment of Mr. Samarth in place
of the disqualified director Mr. Gap was in order.
(ii) Since, Mr. Samarth expired on 15th May, 2018 and again a vacancy has arisen in the office
of director owing to death of Mr. Samarth who was appointed by the board and approved
by members to fill up the casual vacancy resulting from disqualification of Mr. Gap.
Vacancy arising on the Board due to vacation of office by the director appointed to fill a casu al
vacancy in the first place, does not create another casual vacancy as section 161 (4)
Thus the Board cannot fill in the vacancy arising from the death of Mr. Samarth. So
appointment of Mr. Able in the office of Mr. Samarth is not valid.
The Board may however appoint Mr. Able as an additional director under section 161 (1) of
the Companies Act, 2013 provided the articles of association authorises the board to do so, in
which case Mr. Able will hold the 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.
Q-51 Considering the regulatory provisions of the Companies Act, 2013 and the rules thereof
regarding the appointment of independent directors on a company's Board, state whether Z
Limited, a listed public company is required to appoint Independent Directors. Also state
whether appointment of Independent Director is required in the following cases:
(i) The public company has a paid-up share capital of ` 10 crores
(ii) What shall be your answer in case the company's paid up share capital is only ` 2 crores.
(iii) Whether a person who holds the position of a Key Managerial Personnel in the same
company can be appointed as an Independent Director?
(iv) In relation to mandatory women directors as required under the Companies Act, 2013
should such directors al so be Independent Directors?
Sol According to section 149(4) of the Companies Act, 2013, every listed public company shall
have at least one-third of the total number of directors as independent directors.
Hence, Z limited, being a listed public company, shall have at least one-third of the total
number of directors as independent directors.
(i) According to the Rule 4 of the Companies (Appointment and Qualification of Direct ors)
Rules, 2014, the Public Companies having paid up share capital of 10 crore rupees or
more, shall have at least 2 directors as independent directors.
Thus, if the paid- up share capital of the public company is ` 10 crore, the com pan y sh all
have at least 2 directors as independent directors.
(ii) If the paid- up share capital of the public company is ` 2 crore, the company is not
required to have independent directors.
(iii) According to section 149(6), a person in order to be appointed as an independent direct or
shall neither himself nor any of his relatives—
hold or has held the position of a key managerial personnel or is or has been em ployee of
the company or its holding, subsidiary or associate company in any of the 3 financial
years immediately preceding the financial year in which he is proposed to be appointed.
Thus, a person who holds the position of a Key Managerial Personnel cannot be appointed
as an Independent director.
(iv) Proviso to section 149(1) read with Rule 3 of the Companies (Appointment and
Qualification of Directors) Rules, 2014 states that the following class of companies shall
appoint at least one women director-
(1) Every listed company;
(2) every other public company having -
(A) paid–up share capital of one hundred crore rupees or more; or
(B) turnover of three hundred crore rupees or more.
From the above, it can be concluded that provisions make it mandatory to appoint a woman
director in the condition prescribed above. However, it does not make it mandatory that the
woman director should also be independent.
Q-52 Every listed company need to have a small shareholder Director where an application has
been submitted to it by 1/10th of total number of such small shareholders. Comment
Sol Incorrect Statement

According to Section 151, 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.
Rule-7-The Companies (Appointment and Qualification of directors) Rules, 2014 provides
for the procedure for appointment of Small shareholders’ director according to which:
However, a listed company may opt to have a director representing small shareholders suo
motu
Thus, even if the application is submitted by eligible number of members, still listed
company may or may not appoint small shareholder director
Q-53 Who are the directors to be excluded while computing the total number of Directors u/s
152(6)
Sol Following directors shall not be counted while computing total number of directors’ u/s
152(6)
1. Additional Director
2. Independent Director
3. Small Shareholder Director satisfying the requirement u/s 149(6)
4. Nominee Directors
Q-54 List out the documents to be submitted along with submitting an application for DIN
Sol As per Rule-9 of The Companies (Appointment and Qualification of Directors) Rules, 2014
The applicant shall download Form DIR-3 from the portal, fill in the required particulars
sought therein, verify and sign the form and after attaching copies of the following documen t s,
scan and file the entire set of documents electronically-
(i) photograph;
(ii) proof of identity;
(iii) proof of residence;
(iiia) board resolution proposing his appointment as director in an existing company
(iv) Specimen signature duly verified.
Q-55 Define the procedure for making changes in DIN
Sol As per Rule 12 of The Companies (Appointment and Qualification of Directors) Rules, 2014
(1) Every individual who has been allotted a Director Identification Number under t h ese ru les
shall, in the event of any change in his particulars as stated in Form DIR-3, intimate such
change(s) to the Central Government within a period of 30 days of such change(s) in Form
DIR-6 in the following manner, namely; -
(i) The applicant shall download Form DIR-6 from the portal, fill in the relevant changes,
verify the Form and attach duly scanned copy of the proof of the changed part icu lar s an d
submit electronically
(ii) the form shall be digitally signed by a chartered accountant in practice or a company
secretary in practice or a cost accountant in practice
(iii) the applicant shall submit the Form DIR-6
(2) The Central Government, after verification shall incorporate the said changes and inform
the applicant by way of a letter by post or electronically or in any other mode confirming the
effect of such change in the electronic database maintained by the Ministry.
(3) The DIN cell of the Ministry shall also intimate the change(s) in the particulars of the
director submitted to it in Form DIR-6 to the concerned Registrar(s) under whose jurisdiction
the registered office of the company(s) in which such individual is a director is situated.
(4) The concerned individual shall also intimate the change(s) in his particulars to the compan y
or companies in which he is a director within 15 days of such change.
Q-56 Two (2) out of Ten (10) directors on the board of XYZ Limited have retired by rotation at an
May- Annual General Meeting. These two (2) vacancies or place of retiring directors is not filled
2019 up and the meeting has also not expressly resolved ‘not to fill the vacancy’. Since the AGM
could not complete its business, it is adjourned to a later date. Neither place of retiring
directors could be filled up at this adjourned meeting nor did the meeting expressly resolve
'not to fill the vacancy'.
Analyse & apply relevant provisions of the Companies Act, 2013 and decide:
(i) Whether in such a situation the retiring directors shall be deemed to have been
reappointed at the adjourned meeting?
(ii) What will be your answer in case at the adjourned meeting, the resolutions for
reappointment of these directors were lost?
Whether such directors can continue in case the directors do not call the Annual General
Meeting?
Sol (a) In accordance with the provision of the Companies Act, 2013, as contained in section
152(7)(a) 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 same day in the next week, at the same t im e an d
place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at
the same time and place.
Section 152(7)(b) further provides that if at the adjourned meeting also, the place of the retiring
is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the
retiring director shall be deemed to have been re-appointed at the adjourned meeting, un less at
the adjourned meeting or at the previous meeting a resolution for the reappointment of such
directors was put and lost or he has given a notice in writing addressed to the company and t h e
Board of Directors expressing his desire not to be re- elected or he is disqualified.
Therefore, in the given circumstances answer to the questions as asked shall be:
(i) In the first case, applying the above provisions, the retiring directors shall be deemed to
have been re-appointed.
(ii) In the second case, where the resolutions for the reappointment of the retiring directors
were lost, the retiring directors shall not be deemed to have been re- appointed.
(iii) Section 152(6)(c) states that 1/3rd of the rotational directors shall retire at every AGM.
They retire at the AGM and at its conclusion. Hence, they will retire as soon as the AGM is
held. Further, as per section 96 (dealing with annual General Meeting) of the Com pan ies Act ,
2013, every company other than a One Person Company shall in each year hold an Annual
General Meeting. Hence, it is necessary for the company to hold the AGM, whereby these
directors will be liable to retire by rotation.
Further Section 97 states that, if any default is made in holding the annual general meeting of a
company under section 96, the Tribunal may, on the application of any member of the
company, call, or direct the calling of, an annual general meeting of the company. Such general
Meeting shall be deemed to be an annual general meeting of the company under this Act.
Q-57 You are the CFO and in- charge of legal compliance of a large multi-national company in
Nov- India. The Board of Directors of the company are board and comprise of com petent directors
2019 who are Indian as well as Foreign National Mr. ‘X’, who is a Director (Business Development )
on the Board is very often on business tour abroad. He approached you and wants to know
from you the regulatory provisions of the Companies Act, 2013 relating to appointment of
Alternate Directors Analyse the following situations and advise suitably, Mr. X referring to t h e
provisions of the Companies Act, 2013.
(a) To how many directors can a person be appointed as an alternate director and how many
votes does, he have in one Board Meeting?
(b) if the original director joins the Board Meeting through video conferencing without
returning to India, then can the alternate director appointed in his place attend the same
board meeting? if yes, whose presence and vote will be counted?
(c) In case of a private company, where an alternative director is appointed in place of a non-
executive director whose term is indefinite, then, what will be the tenure of such alternative
director, provided the original director does not return to India for a longer period say 3-4
years?
(d) Can an Executive Director/Whole Time Director/Managing Director appoint alternative
directors?
Sol (A) (a) According to Section 161(2) of the Companies Act, 2013, the Board of Directors of a
company may, if so authorised by its articles or by a resolution passed by the company in
general meeting, 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.
According to section 165, no person shall hold office as a director, including any alternate
directorship, in more than twenty companies at the same time. However, the maximum number
of public companies in which a person can be appointed as a director shall not exceed ten.
Hence, in the instant case, a person can be appointed as an alternate director for only one
director in the same company but maximum twenty different companies.
An alternate director will have only one vote as he can hold alternate directorship for one
director only in the same company.
(b) The office of alternate director is separate from the attendance of the original director in the
Board Meeting and as per section 161(2) of the Companies Act, 2013, an alternate director is
appointed to hold the office of original director during his absence from India. Accordingly, as
far as attendance in Board Meeting by the original director is concerned, an alternate director
may continue to hold office even if the original director joins the meeting by video
conferencing, but the original director will be deemed to have joined only as a in vit ee an d t h e
attendance of the alternate director shall be counted for the purpose of the Board Meeting. Th is
is specific only with respect to matters which shall not be dealt with through video
conferencing. In such matters where video conferencing is allowed, voting of original dire ct or
will be counted.
(c) According to second proviso to section 161(2), an alternate director shall not hold office for
a period longer than that permissible to the director in whose place he has been appoin t ed an d
shall vacate the office if and when the director in whose place he has been appointed return s t o
India.
Third proviso says that if the term of office of the original director is determined before he so
returns to India, any provision for the automatic re-appointment of retiring directors in defau lt
of another appointment shall apply to the original, and not to the alternate director.
Hence, in the instant case, the alternate director shall hold office till the time origin al direct or
returns to India, even if the period is as long as 3-4 years.
(d) As per section 161(2), the Board of Directors of a company may, if so authorised by its
articles or by a resolution passed by the company in general meeting, 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.
From the above provision, it is clear that an alternate director can be appointed for any director.
Hence, an alternate director can be appointed for Executive director/ Whole time Directors/
Managing Director however, not by them but by the board of directors.
Q-58 The Articles of Association of M/s DEF Limited (Non-Government Company) restricts the
company to contribute to National Defence Fund in any financial year for a sum not exceedin g
Nov-
Rs. 5 Lakhs. The Articles is silent about contribution to bonafide Charitable Fund and to a
2019
political Party. The Company earned net profit during the last five financial years as under:
Financial Year Net Profit

(Rs. In Lakhs)
2018-19 45
2017-18 25
2016-17 20
2015-16 15
2014-15 10
The Board of Directors proposes to contribute in July 2019 for the first time during the
financial year 2019-20:
(i) Rs. 7 Lakhs to National Defence Fund
(ii) Rs. 3 Lakhs to bona fide Charitable Fund
(iii) Rs. 5 Lakhs to Political Party
The company seeks your advice on the following matters in respects of each of the above
proposals under the provisions of the Companies Act, 2013.
(i) The appropriate approving authority;
(ii) The quantum of contribution that can be made;
(iii) The mode of payment of such contribution.
Sol (a) In case of National Defence Fund: As per section 183(1), the Board of Directors of any
company or any person or authority exercising the powers of the Board of Directors of a
company, or of the company in general meeting, may, contribute such amount as it thinks fit t o
the National Defence Fund or any other Fund approved by the Central Government for the
purpose of national defence.
(b) In case of Bonafide Charitable Fund: As per section 181(1), the Board of Directors of a
company may contribute to bona fide charitable and other funds. However, prior permission of
the company in general meeting shall be required for such contribution in case any amoun t t he
aggregate of which, in any financial year, exceed five per cent of its average net profits for t h e
three immediately preceding financial years.
(c) In case of Political Party: As per section 182(1), a company may contribute any amount
directly or indirectly to any political party. However, no such contribution shall be made by a
company unless a resolution authorising the making of such contribution is passed at a meeting
of the Board of Directors and such resolution shall, subject to the other provisions of this
section, be deemed to be justification in law for the making of the contribution authorised by it.
(ii) Quantum of contribution
a. In case of National Defence Fund: As per section 183, the Board of Directors of any
company or any person or authority exercising the powers of the Board of Directors of a
company, or of the company in general meeting, may, notwithstanding anythin g con t ained in
sections 180, 181 and 182 or any other provision of this Act or in the memorandum, articles or
any other instrument relating to the company, contribute such amount as it thinks fit to t he
National Defence Fund or any other Fund approved by the Central Government for the purpose
of national defence.
Hence, the company can contribute ` 7 Lakhs to National Defence Fund inspite of restriction
by the company to contribute in any financial year for a sum not exceeding ` 5 lakhs as the
Section 183 prevails over Articles of the company and there is no limit on such contribution.
b. Bonafide Charitable Fund: According to section 181, the Board of Directors of a company
may contribute to bona fide charitable and other funds. However, prior permission of the
company in general meeting shall be required for such contribution in case any amount the
aggregate of which, in any financial year, exceed five per cent of its average net profits for t h e
three immediately preceding financial years. Average Net profit: ` 30 Lakhs [(45+25+20)/3]
5% of average net profit: ` 1.5 Lakhs Since, the amount of contribution exceeds five per cent of
its average net profits for the three immediately preceding financial years, hence it requires
prior permission of the company in general meeting for contributing ` 3 Lakhs to a bonafide
Charitable Fund.
c. Political party: Section 182 specifies that a company other than a Government compan y an d
a company which has been in existence for less than three financial years, may con t ribu t e an y
amount directly or indirectly to any political party.
Hence, the company can contribute ` 5 Lakhs to a political party.
Mode of payment of such contribution:
(a) National Defence fund: No mode of payment is provided under section 183.
(b) Bonafide Charitable Fund: No mode of payment is provided under section 181.
(c) Political Party: According to Section 182(3A), notwithstanding anything contained in
sub-section (1), the contribution under this section shall not be made except by an
account payee cheque drawn on a bank or an account payee bank draft or use of
electronic clearing system through a bank account. However, a company may make
contribution through any instrument, issued pursuant to any scheme n ot ified u n der an y
law for the time being in force, for contribution to the political parties.
Q-59 Mr. ‘K’ is a small shareholder director in M/s KGP Types Limited from 1 st April 2018 and in
Nov- M/s VSR Cotton Mills Limited from 1st April 2019, in compliance with the relevant provision s
2019 of the Companies Act, 2013. M/s KGP Types Limited has not paid interest on the public
deposits due from 1st July 2018. In the light of the information given above, examine the
following under the provisions of the Companies Act 2013?
(i) whether the office of Mr. ‘K’, small shareholder director, shall become vacant in M/s
KGP Types Limited and M/s VSR cotton Mills Limited?
(ii) if yes, state the period from which the office of the directorship shall become vacant.
Sol According to Rule - 7, Companies (Appointment and Qualification of Directors) Rules, 2014, a
person shall not be appointed as small shareholders' director of a company, if the person is n ot
eligible for appointment in terms of section 164.
Also, a person appointed as small shareholders' director shall vacate the office if the director
incurs any of the disqualifications specified in section 164.
According to Section 167(1)(a), the office of a director shall become vacant in case he incurs
any of the disqualification specified in section 164. Provided that when he incurs
disqualification under section 164(2), the office of the director shall become vacant in all
companies, other than the company which is in defau lt under that sub section [inserted by
Companies (Amendment) Act, 2017, w.e.f. 07-05-2018]
According to proviso of section 164(2) of the Companies Act, 2013, where a person is
appointed as a director of a company which is in default of clause (a) or clause (b), he shall n ot
incur the disqualification for a period of six months from the date of his appointment.
In the instant case, M/s KGP Tyres Limited has not paid interest on the public deposits due
from 1st July, 2018 and disqualification under section 164(2)(b) of the Companies Act, 2013
occurs on a person who is or has been a director of a company which has failed to repay the
deposits accepted by it or pay interest thereon and such failure to pay or redeem con t in u es for
one year or more. Accordingly, following are the answers:
(i) Yes, the office of Mr. K shall become vacant in M/s VSR Cotton Mills Limited as he has
become disqualified under section 164(2)(b) from 1st July 2019 but not in M/s KGP Tyres
Limited.
(ii) Mr. K’s office of the directorship shall become vacant from 1st July, 2019.
Q-60 Excel Limited is a listed Company with a turnover of Rs. 60 crores in the FY 2016-17. The
Dec 2020 Company appoints Ms. R as the women director on 1st March, 2017. Ms. R is already a
director in twelve companies including ten public companies. Also Ms. R, is a Director in
Supreme Ltd. where she is acting in a professional capacity. Since lots of proposal for the
holding of directorship in various companies are lined up before Ms. R, so in order to retain
her, the Remuneration an Nomination Committee Proposed to enhance the remuneration of
Ms. R from 4 Lacs per month to 6 Lacs per month. However, Supreme Limited was running in
losses in the last 2 years
Evaluate in the light of the given facts, the following with reference to the provisions of the
(i) The validity of appointment of Mr. R in Excrl Limited
(ii) Analyse the proposition of enhancement of remuneration of Ms. R in Supreme Ltd.
Solution 1. According to Section 165 (1), a person shall not hold office as director, including any
alternate directorship, in more than 20 companies at the same time.
Further, out of the above limit of 20 companies, the maximum number of public com pan ies in
which a person can be appointed as a director shall not exceed 10.
In the instant case, since the directorship held by Ms. R is already 10 in public companies, so
her appointment in Excel Limited is not valid.
2. As per SECTION II OF PART II OF SCHEDULE V, Where in any financial year during

the currency of tenure of a managerial person, a company has no profits or its profits are
inadequate, it may pay remuneration to the managerial person not exceeding the limits under
(A) and (B) provided in it.
In case of a managerial person who is functioning in a professional capacity,
remuneration as per item (A) may be paid, if such managerial person possesses graduate level
qualification with expertise and specialised knowledge in the field in which the company
operates.
Applicable conditions for payment of remuneration: The limits specified under items (A) and
(B) specified in the mentioned Schedule shall apply, if payment of remuneration is approved
by a resolution passed by the Board and, in the case of a company covered under Section 178
(1), also by the Nomination and Remuneration Committee.
Since Ms. R is a Chartered Accountant in practice and acting in a professional capacity in
Supreme Ltd. So, here as per the above provision, proposal to enhance the remuneration can be
done by resolution passed by the Board. Hence the said proposal of enhancement of
remuneration of Ms. R by Nomination and Remuneration Committee in Supreme Ltd. which is
a listed company is valid. Moreover, it also does not require approval of the Central
Government.
Note: Assumption taken that company is a listed company
Q-61 Evaluate the following cases of appointment of Director(s), with reference to the relevant
Dec 2020 provisions of the Companies Act, 2013
(i) Ms. Nisha was appointed as director of LMN Limited on 10th October, 2020 in place of Ms.
Rachana, who resigned from her office on 31st May, 2020 six months before expiry of tern of
her office. LMN Limited had its Board meeting on 31st July 2020. Whether appointment of Ms.
Nisha is valid?
(ii) The Board of Directors of a Company appointed Mr. Sarvesh as an additional directors on
30th July, 2020. Mr. Sarvesh continued to hold his office till 15th October, 2020 which should
have held on 30th September, 2020. Whether Mr. Sarvesh can hold office till 15th October,
2020?
Solution (i) As per Rule 3 of the Companies (Appointment and Qualification of Directors) Rules,
2014 along with Second proviso to section 149(1), any intermittent vacancy of a woman
director shall be filled-up by the Board at the earliest but not later than immediat e n ext Board
meeting or three months from the date of such vacancy whichever is later.
In the given case, Ms. Rachna has resigned on 31st May 2020 and the immediate board
meeting of LMN Ltd. was held on 31stJuly, 2020. Ms. Nisha was appointed on 10th October
2020. The intermittent vacancy of women director shall be filled by 31stJuly, 2020 (immediat e
Board meeting) or by 1st September, 2020 (three months from the date of vacancy of Ms.
Rachna) whichever is later.
Hence, appointment of Ms. Nisha is not valid.
(ii) As per section 161(1) of the Companies Act, 2013, Additional director shall hold office u p
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 the instant case, Mr. Sarvesh, the additional director shall hold office upto next AGM i.e.
30th October 2020 or the last date on which the AGM should have been held i.e. 30th
September, whichever is earlier. But Mr. Sarvesh continued to hold office till 15th October,
2020 which is not valid. He should hold office till 30th September, 2020.
Q-62 Evaluate the following cases of appointment of Director(s), with reference to the relevant
Dec 2020 provisions of the Companies Act, 2013:
(i) Ms. Nisha was appointed a director of LMN Limited on 10th October, 2020 in place of Ms.
Rachna, who resigned from her office on 31st May, 2020 six months before expiry of term of
her office. LMN Limited had its Board meeting on 31st July 2020. Whether appointment of
Ms. Nisha is valid?
(ii) The Board of Directors of a Company appointed Mr. Sarvesh as an additional director on
30th July, 2020. Mr. Sarvesh continued to hold his office till 15th October, 2020. The
Company had its annual general meeting on 15th October, 2020 which should have held on
30th September, 2020, Whether Mr. Sarvesh can hold office till 15th October, 2020?
Solution (i) As per Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014
along with Second proviso to section 149(1), any intermittent vacancy of a woman director
shall be filled-up by the Board at the earliest but not later than immediate next Board m eet in g
or three months from the date of such vacancy whichever is later.
In the given case, Ms. Rachna has resigned on 31st May 2020 and the immediate board
meeting of LMN Ltd. was held on 31stJuly, 2020. Ms. Nisha was appointed on 10th October
2020. The intermittent vacancy of women director shall be filled by 31stJuly, 2020 (immediat e
Board meeting) or by 1st September, 2020 (three months from the date of vacancy of Ms.
Rachna) whichever is later.
Hence, appointment of Ms. Nisha is not valid.
(ii) Give reference of Sec 161(1)

In the instant case, Mr. Sarvesh, the additional director shall hold office upto next AGM i.e.
30th October 2020 or the last date on which the AGM should have been held i.e. 30th
September, whichever is earlier. But Mr. Sarvesh continued to hold office till 15th October,
2020 which is not valid. He should hold office till 30 th September, 2020.
Q-63 Eighty-two shareholders of Perish Limited, a listed Company holding shares of nom in al valu e
Dec 2020 of Rs. 19,000 each proposed Mr. Babulal as a Directors on the Board. The paid-up share
capital of permish Limited is Rs. 6.2 Crores (6,20,000 equity shares of a Rs. 100 each). The
Company has 800 such or less. Examine with reference relevant provisions of the Companies
Act, 2013, whether Mr. Babulal can be appointed as a Directors of Perish Limited?
Solution Mention provisions of Sec 151 read with Rule 7

In the given case, Perish Ltd. has 800 small shareholders out of which 82 small shareholders
proposed Mr. Babulal as a director on the Board. Thus, it fulfills the requirement of on e-t en t h
of the total number of such shareholders (800*1/10: 80).
Conclusion: - Mr. Babulal can be appointed as a director of Perish Ltd.
Q-64 Ms. Jai Shvitha is a qualified Chartered Accountant and is known for her in depth knowledge
Jan 21 of corporate and Economic laws. She is a Woman Director in PQR Ltd. Due to her tight pre-
occupation, she could not attend any Board Meeting of the Company held for a period of 12
months through she has taken leave of absence. Despite the fact that through u nder section
167(1)(b) of the Companies Act, 2013 her office of directorship gets vacated nevertheless, du e
to her professional competency:
(i) The Board of PQR Ltd. wants to keep Ms. Jai Shvitha’s Directorship in the Company and
hence proposes to waive the event of absence and/or condone her absence attending
Board meetings.
(ii) Ms. Jai shvitha also wants to keep the Directorship in PQR Ltd.
In the light of the relevant provisions of the Companies Act, 2013, analyse the above sit u at ion
and advise the Board on the course of action that they can adopt.
Solution Section 167 of the Companies Act, 2013 contains provisions detailing out as to when the office
of a director shall become vacant. As soon as, any such event occurs, the director is required t o
demit the office of director of the company. According to Section 167 (1), the office of a
director shall become vacant in case where he absents himself from all the meetings of the
Board of Directors held during a period of 12 months with or without seeking leave of absen ce
of the Board.
In the light of the stated provision:
(1) Ms. Jai Shvitha is required to vacate the office of director in PQR Limited. The proposal of
Board of PQR Limited to waive the event of absence or condone her absence from attending
meeting is not permissible.
(2) Ms. Jai Shvitha desires to keep the directorship in PQR Limited is also not tenable.
However, the board is advised to co-opt her as an additional director in the subsequent board
meeting as there is no prohibition in the Act for such co-option and reappointment.
Q-65 Mr. Ramakant, the non-independent director of Superb Industries Limited (SIL) is plan n in g t o
MTP- go abroad for 4 months for resolving of some family issues related to her daughter. Th e Board
March- of Directors of SIL proposed to appoint Mr. Subh as an alternate director in the company in
21 place of Mr. Ramakant.
Following were the legal issues in the given situation:
(1) Mr. Subh does not satisfy the eligibility criteria to become Independent Director of SIL as
given under section 149(6) of the Companies Act, 2013.
(2) Mr. Ramakant returned to India within 2 months before the scheduled arrival.
(3) Mr. Subh (in addition to Mr. Ramakant), to be included in the "total number of directors"
used for calculating rotational directors under sec 152(6).
Examine in the given scenario, the aforementioned legal issues in the light of the Companies
Act, 2013.
Solution As per Section 161(2) of the Companies Act, 2013, the Board of Directors of a com pan y m ay,
if so authorised by its articles or by a resolution passed by the company in general meeting,
appoint a person, not being a person holding any alternate directorship for any other director in
the company, to act as an alternate director for a director during his absence for a period of n ot
less than three months from India.
Provided that no person shall be appointed as an alternate director for an independen t direct or
unless he is qualified to be appointed as an independent director under the provisions of this
Act.
Provided further that an alternate director shall not hold office for a period longer than t h at
permissible to the director in whose place he has been appointed and shall vacate the office if
and when the director in whose place he has been appointed returns to India.
Provided also that if the term of office of the original director is determined before he so
returns to India, any provision for the automatic re-appointment of retiring directors in defau lt
of another appointment shall apply to the original, and not to the alternate director.
Now in given case, we may conclude as follow

1. Even if Mr. Subh does not satisfy the eligibility criteria to become Independent Director of
SIL, it does not affect on his appointment as Alternate Director because Mr. Ramakant, the
original director is also not an Independent Director.
2. Since Mr. Ramakant has returned to India within 2 months before his scheduled arrival,
Mr. Subh shall vacate the office on return of Mr. Ramakant (Original Director) to India.
3. The alternate director, Mr. Subh, shall not be included in the “total number of directors” for
the purpose of section 152(6), as alternate director is holding alternate directorship in place of
the original director.
Q-66 The Petitioners were directors in NPP Limited. Due to default in NPP Limited under section
MTP- 164(2)(a) of the Companies Act, 2013 on the account of non-filing of financial st at em en ts for
May-21 continuous period of three financial years, the said Petitioners were disqualified to be as
director in one or the other companies.
They came for the legal counselling against their holding of disqualifications as directors in
order to challenge before the Tribunal. Following were the position of the petitioners: One of
the petitioner, Mr. X, was also holding directorship in GPS Ltd. and CDM Ltd. Whereas the
petitioner, Mr. Y was appointed one month before in NPP Ltd.. Whereas Petitioner, Mr. Z, was
within a year of commission of default, offered directorship by RSM Ltd.
Advise, in the light of the given facts, the following legal issues:
(a) On the validity of attracting of disqualification of Petitioners in NPP Ltd. and vacation of
their directorship.
(b) What will be consequences of default caused in NPP Ltd. on the holding of Mr. X’s
directorship in GPS Ltd. and CDM Ltd.
(c) On the validity of offered directorship to Mr. Z by RSM Ltd.
(d) Legal position of Mr. Y who was appointed one month before, in NPP Ltd.
Solution As per the section 164 (2) of the Companies Act, 2013, no person who is or has been a direct or
of a company which—
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 continues 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.
clause (a) or clause (b), he shall not incur the disqualification for a period of six months from
the date of his appointment.
Further section 167 (1) of the Companies Act, 2013 states that the office of a director shall
become vacant in case he incurs any of the disqualifications specified in section 164.
default.
Accordingly we may conclude as follow:-
(a) Petitioners have incurred disqualification under sub-section (2) of section 164, and falling
under section 167, whereby the office of the directors shall become vacant in all the
companies, except in the defaulted company i.e. NPP Ltd
(b) As per section 167(1), Mr. X has to vacate directorship in GPS Ltd. and CDM Ltd.
(c) Offer of directorship to Mr. Z by RSM Ltd. is not valid. As per section 164(2), disqualified
director shall not be eligible to be appointed in other company for a period of five years from
the date on which the said company committed the default.
(d) Since, Mr. Y was appointed one month before in NPP Ltd. which is in default, he sh all n ot
incur the disqualification for a period of six months from the date of his appointment.
Q-67 GSTL Ltd., a listed company, has total number of 20 directors on its board. Following is the
MTP- composition given as under:
May-21 6 directors are independent directors as per the provisions of the Companies Act, 2013,
3 directors are nominee directors appointed by State Bank of India (the financial institution
from whom GSTL has taken financial assistance) and
2 directors are nominee directors appointed by Finance Limited to represent its interest (a
financial institution with whom the company has long-term lease agreement of land).
Advise Board of Director as to computation of total number of directors who are rotational
directors and total number of directors who are liable to retire by rotation.
Solution Mention about Sec 152(6)

Explanation— For the purposes of this sub-section, “total number of directors” shall not
include independent directors, whether appointed under this Act or any other law for t h e t im e
being in force, on the Board of a company.
Any person appointed as a nominee director being nominated by any institution in pursuance
of the provisions of any law or any agreement (financial institution that has been created by the
Act of Parliament) cannot be considered as a director liable to retire by rotation.
In the above question, Total number of Directors = 20 – 6 (Independent Directors) – 3
(Nominee Directors appointed by State Bank of India) = 11
The nominee directors appointed by Finance Limited to represent its interest (a financial
institution with whom the company has long-term lease agreement of land) are not deducted
from total number of directors because Finance Limited is not the financial institution set
up under the Act of Parliament.
Total number of directors who are rotational directors = 11*2/3 = 7.33= 8 (not less than 2/3rd)
Total number of directors to retire by rotation = 8*1/3 = 2.6=3 (nearest to 1/3rd)
Therefore, the total number of directors who are rotational directors and total number of
directors who are liable to retire by rotation are 8 and 3 respectively.
Q-68 The Board of Directors of the UN Ltd., which is an MNC, comprising of directors who are
MTP- Indian as well as Foreign Nationals. Mr. X, who is a Director on the Board, is very often on
May-21 business tour abroad. He approached you, being legal expert of the Company Act, 2013
relating to appointment of Alternate Directors.
Examine the following situation and advise, Mr. X suitably as per the provisions of the
(i) Number of directors for which a person, say Mr. Y can be appointed as an Alternate
Director.
(ii) If Mr. Y is appointed as an alternate director in place of a director whose term is indefinit e,
then, what will be the tenure of Mr. Y?
Solution Sec 161(2):- Alternate Director

❖ The Board of Directors of a company may, if so authorised by its articles or by a
resolution passed by the company in general meeting,
❖ appoint a person to act as an alternate director in place of another director (original
director) during his absence for a period of not less than three months from
India.
❖ A person who is holding any alternate directorship for any other director in the
company or holding directorship in the same company cannot be considered for
appointment as above.
❖ No person shall be appointed as an alternate director for an independent director unless
he is qualified to be appointed as an independent director under the provisions of this
Act.
❖ Holding of office by Alternate Director
I. Till the original Director came back to India, or
II. Till the retirement of original Director
(Whichever is earlier)
If the term of office of the original director is determined before he so returns to India, any
provision for the automatic re-appointment of retiring directors in default of another
appointment shall apply to the original, and not to the alternate director
Further, section 165 provides that no person shall hold office as a director, including any
alternate directorship, in more than twenty companies at the same time. However, the
maximum number of public companies in which a person can be appointed as a director shall
not exceed ten.
Conclusion:- Thus, in the given case, Mr. Y can be appointed as an alternate director for only
one director in the same company but shall not hold office as a director, including alternate
directorship in maximum twenty different companies.
Q-69 Due to internal problems in the working of M/s ID Ltd., Mr. Satyam has submitted his
resignations and decided to disassociate with the working of the company.
Mr. Sundram, the Managing Director, decides to accept his resignations. Company has
submitted intimation of this resignation to ROC as well in required form i.e. DIR-12
within 30 days.
In general meeting of members, 1 member when asked about reason for such
resignation, Managing Director ignored the same stating that this is out of the agenda
of general meeting
However company secretary of company is still of the view that company is guilty of
non-compliance of Sec 168, decide
Solution Contention of CS of company is right, since as per section 168, upon resignation by
Director, company has to ensure that
1. It intimate the Registrar in such manner, within such time and in such form as may
be prescribed
2. It shall also place the fact of such resignation in the report of directors laid in the
immediately following general meeting by the company
3. Company shall also Post it on its website (if any)
Conclusion- In view of above, contention of CS seems correct as company has not
1. Company need to place the fact of such resignation in the report of directors laid in
the immediately following general meeting by the company
2. Posted the same on its website (if any)
Q-70 As on 31-3-2021, Mr. K Muthusamy is holding directorship in 4 listed Companies, 4 unlisted

Public Companies and 4 Private Limited Companies. He has obtained two Director
MTP-
Identification Number (DINs) allotted to him inadvertently. Out of the 12 directorships, he
May-21
holds 10 with the DIN allotted to him first and the rest with the DIN allot t ed t o h im lat er. He
wants to surrender one of his DINs, but to keep all his 12 Directorships. In the light of the
relevant provisions of the Companies Act, 2013, examine the following:
1. Which DIN sourced by Mr. K. Muthusamy by surrendered?
2. What procedure he needs to follow and what actions will be done by the Central
Government in this regards?
3. In what way can he keep all his 12 Directorships with on DIN?
Solution 1. According to Section 155, no individual, who has already been allotted a DIN under sect ion
154, shall apply for, obtain or possess another DIN.
Mr. K. Muthusamy can hold the DIN which was allotted to him first and he can su rren der t h e
DIN which was allotted to him subsequently.
2. Rule 11 Cancellation or Surrender or Deactivation of DIN

(1) 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 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 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.
3. In compliance with Rule 11 by Mr. K Muthusamy, on surrender of 2nd DIN, data relat ed t o
both the DINs shall be merged with the valid DIN. Thereby all 12 directorships shall migrate
with DIN 1.
Q-71 ABC Ltd. is incorporated in December, 2010 under the Companies Act, 1956. For
RTP- the year ended on 31st March, 2020 and 31st March, 2021, the financial and other
Aug-21 relevant information of the company were as under:
(` in crores)
Particulars 31.03.2020 31.03.2021
(a) Paid-up capital 8 18#
(b) Reserves 16 6
(c) Turnover 75 98
(d) Borrowings from Banks /FIs 50 45
(The sanctioned limit is 60 crores rupees)
(e) No. of directors 10 10
# Part amount of the Reserves was capitalised, by issue of Bonus shares during the
FY 2020-21
The Company Secretary apprised the Board, of requirement of appointment of

Independent Director (ID). Few candidates were shortlisted, out of which 2
candidate were nominated and got approval of the shareholders in the General
Meeting. The appointment of both the IDs were approved for a tenure of one year
only.
Enumerate in the given situation, the following issues in the light of the
1. Whether ABC Ltd. was required to appoint Independent Director (ID) based on
the information as on 31st March, 2020.
2. In the given case, the tenure of the appointment of both the IDs is for one year
only. Comment upon the validity of the term of appointment of the Independent
Directors.
Solution 1. Given case is based on provisions of Section 149 read with the Rule 4 of the
Companies (Appointment and Qualifications of Directors) Rules, 2014,
As per said provisions, 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”.
Here, the words used in the law is ‘exceeding 50 crore rupees’, whereas the banks
borrowings in the given case is only ` 50 crore and not exceeding ` 50 crore. Hence,
no need to appoint ID on the basis of information as on 31 st March, 2020.
Further, the words used in the said Rule is ‘Outstanding Loans’ and not the
‘Sanctioned limit’. The limit is ` 60 crore, but the outstanding loans is only ` 50
crore.
Therefore, in line with the stated legal provision, there is no need to appoint
Independent Directors as on 31/3/2020.
2. As per Section 149(10) ‘Subject to the provisions of section 152, an independent

director shall hold office for a term up to five consecutive years on the Board of a
company, and shall be eligible for re-appointment on passing of a special resolution by
the company and disclosure of such appointment in the Board's report.
As per MCA Circular , as appointment of an ID for a term of less than five years would
be permissible, appointment for any term (whether for five years or less) is to be
treated as a one term under section 149(10).
Therefore, the tenure of the appointment of both the IDs for one year only, will be
considered as valid.
Q-72 Anusuya is a political person and holds the position of Chairperson in Nagar Nigam.
Recently, she was involved in taking bribe in connection with passing of pending bills
MTP-
of a contractor and was caught red handed by the Anti-corruption Bureau (ACB). A
Apr-22
charge sheet was filed in the competent court and the matter was sub-judice in the
court of law.
Vikrant Cosmetics Ltd. (VCL) is a listed entity having 15 directors in its Board. One
woman director in the Board resigned from the company due to personal reasons on
June 30, 2021. The intermittent vacancy of woman director is to be filled and the name
of Anusuya was placed before the Board of the company.
There are 3 independent directors in the Board. The company wants to increase the
number of directors in the Board from 15 to 17. The Board meeting of the
company was held on 17th September, 2021 to consider the following agenda items:
a. Anusuya to be inducted in the Board of the company, as woman director.
b. Increase the number of directors from 15 to 17.
c. Since Anusuya is not having any pecuniary relations with the company or with its
promoters, hence she may be put in the category on Independent-Woman Director.
d. The independent directors opposed to the proposal for the appointment of
Anusuya as Woman / Independent Director.
Based on the stated facts, answer the following questions in terms of the Companies
Act, 2013:
(i) How and within what period the intermittent casual vacancy of a woman director
can be filled up?
(ii) The Companies Act, 2013 provides the maximum number of directors as 15. Is it
possible to increase the number from 15 to 17?
(iii) Whether Anusuya can be inducted in the Board of the Company, being a political
persons and that too charged by the ACB?
(iv) The Companies Act, 2013 have provisions to have at least one woman director in
the Board by every listed company. If an office of a woman director is coloured as
Independent Director, whether the office of woman director shall be treated as vacant?
Solution (i) The second proviso to Rule 3 of the Companies (Appointment and Qualification of
Directors) Rules, 2014, provides that any intermittent vacancy of a woman director
shall be filled-up by the Board at the earliest but not later than immediate next Board
meeting or three months from the date of such vacancy whichever is later.
As per the facts, the intermittent vacancy of a woman director was caused on June 30,
2021. The Board meeting of the company was held on 17th September, 2021.
Therefore, vacancy of woman director can be filled up latest by 30th September 2021
i.e, three months from the date of such vacancy.
(ii) Section 149(1)(b) of the Companies Act, 2013 provides that every company shall
have a Board of Directors consisting of individuals as directors and shall have a
maximum of 15 directors.
However, the first proviso to this section further provides that a company may appoint
more than 15 directors after passing a special resolution in the general meeting of the
shareholders.
Accordingly, it is possible to increase number of directors from 15 to 17 in the Board
of Directors of Vikrant Cosmetics Ltd.
(iii) Section 164 of the Companies Act, 2013 deals with the disqualifications for
appointment of director. Section 164(1)(d) & (e) provides as under:
(d) he has been convicted by a court of any offence, whether involving moral turpitude
or otherwise, and sentenced in respect thereof to imprisonment for not less than six
months and a period of five years has not elapsed from the date of expiry of the
sentence:
Provided that if a person has been convicted of any offence and sentenced in respect
thereof to imprisonment for a period of seven years or more, he shall not be eligible to
be appointed as a director in any company;
(e) an order disqualifying him for appointment as a director has been passed by a court
or Tribunal and the order is in force.
In the above case, the ACB has only Anusuya who is red handed and charge sheet has
been submitted in the court. The matter is sub-judice with the court and no final order
has been passed yet. So if the provisions of sub-clause (d) and (e) of section 164(1) is
interpreted, Anusuya has not been convicted by the court of any offence, so she may be
treated as eligible for appointment as director.
Further section 178(3) provides that the Nomination and Remuneration Committee
shall formulate the criteria for determining qualifications, positive attributes and
independence of a director and recommend to the Board a policy, relating to the
remuneration for the directors, key managerial personnel and other employees.
Thus, in light of the provisions of section 178(3) the Nomination Committee shall
formulate a policy for inducting any person as director in the Board. If such policy
contains that even if a person has been alleged of any offence (although not ordered by
any court), he is disqualified for appointment as director, then that person should not
be so appointed.
(iv) The second proviso to Section 149(1) read with Rule 3 of the Companies
(Appointment and Qualification of Directors) Rules 2014 provides that every listed
shall have at least one woman director.
Section 149(4) provides that every listed public company shall have at least one-third
of the total number of directors as independent directors and the Central Government
may prescribe the minimum number of independent directors in case of any class or
classes of public companies.
Section 149(8) provides that the company and independent directors shall abide by the
provisions specified in Schedule IV.
No where in the said provisions, it is mentioned that a woman director cannot be an
Independent Director (ID). If a person is fulfilling the criteria of appointment as an
Independent director, whether man or woman, he or she can be appointed so. Further,
if the ID is a woman and the company is required to appoint at least one woman
director, both the purposes are fulfilled.
Here, in this case, Anusuya has been charge sheeted by the ACB and the matter is
under trial / sub-judice with the court of law, however if any Policy is framed by the
Remuneration Committee not to include any such person, against whom, there is any
charge of offence (though not proved by ordered of any court), such person shall not be
entitled to be in the Board.
Quest-73 A conscientious and meticulous person, Anuj Sharma is MBA (Finance) from Indian
MTP- Institute of Foreign Trade (IIFT), New Delhi. Currently, he is holding directorships in
March- four companies, namely Sigma Software Limited (SSL), Singha Medical Instruments
22 Limited (SMIL), Vishwa Stationers (Pvt.) Limited (VSPL) and Simla Locomotives
Limited (SLL). Of the four, he is unable to maintain good relations with the other five
directors of Singha Medical Instruments Limited. As is his nature, he is performing his
duties as Director (Operations) with utmost integrity and honesty but the atmosphere in
the top-rung of this company is not so healthy and co-operative. The other five
directors were not even hesitant of making personal gains at the cost of the company.
Sensing this unhealthy atmosphere, Anuj is contemplating to quit directorship and the
company; and therefore, he revealed his plans to the other parallel directors who, as
was very natural, objected his intention to resign. The directors were quite unhappy
with his decision since they wanted to attain their selfish desires through Anuj by
making him scapegoat. Anuj sent his resignation notice dated 16 th July, 2021 through
registered post which was received by the company on 18 th July, 2021. The other five
directors did not accept his resignation citing that the Registrar of Companies (RoC)
was not informed in advance regarding submission of resignation and therefore, Anuj
shall have to continue with his directorship till the next Annual General Meeting
(AGM).
(i) Analyse the contention of the directors of SMIL regarding non-acceptance of
resignation of Anuj Sharma keeping in view the applicable provisions of the
(ii) Had SMIL been a private company, what would have happened to the resignation
of Anuj Sharma keeping in view his indispensability, as was perceived by the other
directors, in the company?
Solution According to Section 168 (1) a director may resign from his office by giving a notice
in writing to the company and the Board shall on receipt of such notice take note of the
same and the company shall intimate the Registrar in such manner, within such ti me
and in such form as may be prescribed and shall also place the fact of such resignation
in the report of directors laid in the immediately following general meeting by the
company:
Provided that a director may also forward a copy of his resignation along with
detailed reasons for the resignation to the Registrar within thirty days of
resignation in such manner as may be prescribed.
Note (a): Rule 15 requires the company to intimate the Registrar within 30 days
from the date of receipt of notice of resignation from a director in Form DIR-
12 and post the information on its website, if any.
Note (b): Rule 16 states that where a director resigns from his office, he may
within a period of thirty days from the date of resignation, forward to the
Registrar a copy of his resignation along with reasons for the resignation in Form
DIR-11 along with the fee as provided in the Companies (Registration Offices
and Fees) Rules, 2014.
Effective date of resignation: Section 168 (2) states that 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:
Provided that the director who has resigned shall be liable even after his
resignation for the offences which occurred during his tenure.
In view of the above provisions, we can analyse the cited situations as under:
(i) Sub-section (1) of Section 168 permits a director to resign from his office by
giving a notice in writing to the company and the same can be done any time at the
discretion of the director who intends to resign. Neither there is requirement of
acceptance of resignation by the Board or other directors nor the resignation can
be postponed to any other date.
Thus, the directors of SMIL cannot compel Anuj Sharma to continue as director
citing that the Registrar of Companies (RoC) was not informed in advance
regarding submission of resignation.
It is the responsibility of SMIL, after the receipt of resignation from Anuj Sharma
on 18 th July, 2021, to intimate the Registrar in Form DIR-12 within 30 days. In
fact, as per sub-section (2), the effective date of resignation shall be 18th July
since Anuj Sharma has not mentioned any other date in his resignation notice to be
the date from which the resignation will take effect.
Keeping in view provisions of Rule 16, Anuj Sharma may within a period of thirt y
days from the date of resignation, forward to the Registrar a copy of his
resignation notice along with reasons for resigning from the company in Form
DIR-11, duly paying the requisite fee. This Rule, in no way authorises the
company or the Board of Directors not to accept the resignation or postpone its
effectiveness to some other date.
(ii) The provisions of Section 168 of the Companies Act, 2013 [read with Rules 15
and 16 of the Companies (Appointment and Qualification of Directors) Rules,
2014] are equally applicable to a private company. Thus, resignation of Anuj
Sharma would have taken effect from 18 th July 2021 i.e. the date on which
resignation notice was received by SMIL even if it was a private company; and
there would have been no possibility of refusal or postponement of resignation by
the Board of Directors or SMIL just because SMIL was a private company and the
directors could take their own decisions.
Quest-74 Vibhuti Mechanics Limited, having Registered office at Rajendra Place, New
RTP-22 Delhi, was incorporated on 17 February, 2016 with five directors who are
responsible for managing the affairs of the company. Harshit, one of the directors,
looks after the marketing function but his understanding with the other four
directors is dwindling day by day. Other four directors i.e. Nipun, Lakshita,
Shreyas and Vidur are also suspecting that Harshit is involved in some illegal
activities which may cause a huge loss to the company in future. Now they are
contemplating removal of Harshit from the office of directorship before the expiry
of his term.
Analyse the following statements with reasons quoting relevant provisions of
the Companies Act, 2013:
(a) Keeping in view his illegal activities, Nipun, Lakshita, Shreyas and Vidur can
remove Harshit by passing Board Resolution.
(b) Harshit can be removed only by passing a Special Resolution.
(c) Nipun wants to appoint Dishant, an employee of the company but is very close
to him, as director in place of Harshit after his removal as director.
Solution Given case is based on provisions of Section 169 of the Companies Act, 2013:-
(1) Sub-section (1) states 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:
Provided that an independent director re-appointed for second term under sub-
section (10) of section 149 shall be removed by the company only by passing a special
resolution and after giving him a reasonable opportunity of being heard:
Provided further that nothing contained in this sub-section shall apply where the
company has availed itself of the option given to it under section 163 to appoint not
less than two-thirds of the total number of directors according to the principle of
proportional representation.
(2) Sub-section (2) states that a special notice shall be required of any resolution, to
remove a director under this section, or to appoint somebody in place of a director so
removed, at the meeting at which he is removed.
(3) Sub-section (3) requires that on receipt of notice of a resolution to remove a
director under this section, the company shall forthwith send a copy thereof to the
director concerned, and the director, whether or not he is a member of the company,
shall be entitled to be heard on the resolution at the meeting.
(4) According to Sub-section (4), where notice has been given of a resolution to
remove a director under this section and the director concerned makes with respect
thereto 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 director may without prejudice to his
right to be heard orally require that the representation shall be read out at the
meeting:
Provided that copy of the representation need not be sent out and the representation
need not be read out at the meeting if, on the application either of the company or of
any other person who claims to be aggrieved, the Tribunal is satisfied that the rights
conferred by this sub-section are being abused to secure needless publicity for
defamatory matter; and the Tribunal may order the company's costs on the application
to be paid in whole or in part by the director notwithstanding that he is not a party to
it.
(5) A vacancy created by the removal of a director under this section may, if he had
been appointed by the company in general meeting or by the Board, be filled by the
appointment of another director in his place at the meeting at which he is removed,
provided special notice of the intended appointment has been given under sub- section
(2).
(6) A director so appointed shall hold office till the date up to which his predecessor
would have held office if he had not been removed.
In view of the above provisions, the given statements can be analysed as under:
(a) The other directors of Vibhuti Mechanics Limited i.e. Nipun, Lakshita, Shreyas and
Vidur cannot remove Harshit by passing a Board Resolution.
For the purpose of removal of a director from the office of directorship, an ordinary
resolution needs to be passed. In other words, only the shareholders of the company are
empowered to remove a director.
Further, there is requirement of special notice when a director is to be removed. In
case, a notice of a resolution to remove a director is received by the company, a copy
of the notice shall be sent forthwith to the director concerned. In this case, Harshit is
entitled to receive a copy of the special notice. Harshit is also entitled to be heard on
the resolution to be passed for his removal at the meeting.
In case, Harshit makes a representation in writing to the company and requests its
notification to members of the company, the company shall be obliged to do so if the
time permits. In case a copy of the representation cannot be sent due to insufficient
time or for the company's default, the director (i.e. Harshit in this case) may, without
prejudice to his right to be heard orally, require that the representation shall be read out
at the meeting.
There is a cushion for the company in respect of representation if it is suspected that
the rights regarding representation conferred on the ‘director to be removed’ are being
abused to secure needless publicity for defamatory matter. The cushion is in the form
of proviso. Thus, it is provided that there is no need to send a copy of the
representation and also there is no need to read out the representation at the meeting
if, on the application either of the company or of any other person who claims to be
aggrieved, the Tribunal is satisfied that the rights conferred by sub-section (4) are
being abused to secure needless publicity for defamatory matter.
In addition, the Tribunal may order the company's costs on the application to be paid in
whole or in part by the director notwithstanding that he is not a party to it. Thus,
Harshit can be deprived of his right in respect of representation if the Tribunal passes
an order.
(b) The statement that ‘Harshit can be removed only by passing a Special Resolution’
is not correct. As noticed in answer (a) above, an ordinary resolution needs to be
passed for removal of a director and there is no need to pass a special resolution for
this purpose. The procedure as stated in answer (a) is required to be followed for
passing an ordinary resolution for the removal of a director before the expiry of the
period of his office after giving him a reasonable opportunity of being heard.
(c) Yes. Nipun can get appointed Dishant, an employee of the company who is very
close to him, as director in place of Harshit after his removal as director.
As regards appointment of another director, Sub-section (5) stipulates that a vacancy
created by the removal of a director under Section 169 may, if he had been appointed
by the company in general meeting or by the Board, be filled by the appointment of
another director in his place at the meeting at which he is removed, provided special
notice of the intended appointment has been given under sub-section (2).
To get Dishant appointed as director in place of Harshit, Nipun has to ensure that the
company receives a special notice of the intended appointment of Dishant as required
by Sub-section (2).
If Dishant is so appointed, he shall hold office till the date up to which his predecessor
Harshit would have held office if he had not been removed.
Quest-75 XYZ Ltd. is a newly incorporated listed company formed on 01.01.2021. At present
MTP- there are 10 directors and 1500 shareholders. Turnover as on 31.03.2021 is Rupees 320
Nov-22 crores.
(1) There are no women directors as on 31.03.2021 Discuss how far the company can
continue its operation without any women directors on board.
(2) 150 Small shareholders of the company gave the notice to appoint a director
representing them. Can they appoint Mr. A who is already a small shareholders
director in 2 other companies. However those other companies are not in conflict with
the business of XYZ Ltd. Would your answer be different if Mr. A has no other
directorship?
(3) Can XYZ Ltd. appoint another 6 more directors on board? Would your answer be
different if XYZ Ltd. was a company where 52% of the paid up share capital was held
by State Government?
Solution 1. Mention about Rule-3

A company, which has been incorporated under the Act and is covered under
provisions of second proviso to sub-section (1) of section 149 shall comply with such
provisions within a period of six months from the date of its incorporation.
In the given case, XYZ is a listed company and hence has to mandatorily have a
woman director on Board. However, because the period of 6 months from date of
commencement has not expired, it can continue its operation till 30th June, 2021
without a woman Director on board.
(2) Mention Section 151 of the Companies Act, 2013 read with Rule 7 of the
Companies (Appointment and Qualification of Directors) Rules, 2014
Maximum number of directorship held by SSD – No person shall holds the position of
small shareholder’s director in more than 2 companies at the same time. Also, the
second company is which he is appointed should not be in a business which is
conflicting or competing in nature.
In the given case, number of shareholders who served the notice for appointment of
SSD, is 150 (1/10th of 1500).
The fact that other businesses are not in conflict or competing in nature is irrelevant as
the limit of directorship in two companies have already exceeded.
Hence Mr. A is not eligible.
If Mr. A was not a small shareholder’s director in any other company, then Mr. A is
eligible to become small shareholder’s director in XYZ Limited.
(3) Section 149 of the Companies Act, 2013 requires every company to constitute a
Board of Directors.
As per this Section, maximum number of Directors shall be 15 which can be increased
by passing a special resolution.
If XYZ Ltd appoints 6 more directors in the BoD, the maximum limit of 15 directors in
a company will be exceeded. However, by passing a special resolution, XYZ Ltd. can
increase its directors.
However, if 52% of XYZ Ltd. was held by the State Government, it becomes a
Government Company and as the provisions of the Act, a Government Company is
exempted from the application of the Section 149(1)(b) requiring a company to have
maximum fifteen directors. Subject to that, it has not defaulted in filing its Financial
Statements under section 137 or Annual return under section 92 with the registrar.

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1 Directors

(1) Appointment of Mr. PKV as Independent Director.

Sol Retirement by rotation [Section 152(6)]

Sol Refer the provisions of Sec 152(6)

Sol Additional Director [Section 161(1)]

Q-21 Examine the validity of the following:

Sol Casual Vacancy [Section 161(4)]

Sol As per the provisions of Section 160 of companies Act 2013

Q-28 A company has 11 directors on the Board consisting of the following:

Sol Table containing list of Rotational/Non-Rotational/Neither of 2 categories

Sol Alternate Director [Section 161(2)]

Sol Based on the provisions of Section 164, we can conclude as follow:-

Sol Mention provisions of Sec 164(2)

Sol (i) The declaration of Mr. Ramanthan is in order.

Sol According to section 165(1):

Sol Mention provisions of Sec 165(1)

Sol As per sec 167(1)(h) of the Companies Act, 2013,

Sol Refer to the provisions of Sec 165(1) of companies Act 2013

Sol According to this section:

Sol As per Section 149(10) of the Companies Act 2013,

Sol As per Section 161(4) of the Companies Act, 2013

Sol Incorrect Statement

Q-55 Define the procedure for making changes in DIN

Financial Year Net Profit

2. As per SECTION II OF PART II OF SCHEDULE V, Where in any financial year during

(ii) Give reference of Sec 161(1)

Solution Mention provisions of Sec 151 read with Rule 7

Now in given case, we may conclude as follow

Solution Mention about Sec 152(6)

Solution Sec 161(2):- Alternate Director

Q-70 As on 31-3-2021, Mr. K Muthusamy is holding directorship in 4 listed Companies, 4 unlisted

2. Rule 11 Cancellation or Surrender or Deactivation of DIN

The Company Secretary apprised the Board, of requirement of appointment of

2. As per Section 149(10) ‘Subject to the provisions of section 152, an independent

Solution 1. Mention about Rule-3

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