Category Archives: Chapter XI – CA2013

APPOINTMENT AND QUALIFICATIONS OF DIRECTORS

FORM DIR-3-KYC-WEB


To bring 12th Amendment to the Companies (Appointment and Qualification of Directors) Rules, 2014, Ministry of Corporate Affairs on 25th Day of July 2019 notified the Companies (Appointment and Qualification of Directors) Third Amendment Rules, 2019 [Notification No. by GSR528(E)]. This amendment introduced a new Form DIR – 3 – KYC – WEB for annual confirmation of KYC submitted earlier. We, in this post, will discuss new provisions along with the Companies (Registration Offices and Fees) Rules, 2014.

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Director employed elsewhere


A director may be an employee in any organisation and may draw a salary from that other organisation. However, there may be two different situations –

  1. Director is actually an employee of that other organization and nominated by that organisation as a director in this company by virtue of an agreement;
  2. Director is a promoter director of a company but due to some reason join another organisation under a contract of employment. His employer may or may not have knowledge of his directorship in any company.

Indian law does not prohibit outside employment by a director of a company outside its own company. The prospective employer will take a call whether one of its employees should continue to be a director in its own private company.

The prospective employer will pay the employee for his 100% quality working time and 100% quality services. Where prospective employer feels, the employees should not have any other responsibilities except that of employment and of personal life, it may ask the employee to resign from other responsibilities.

The underlying question shall always remain, will that employee be able to honestly devote his time and efforts for its prospective paymaster, the employer.

According to Section 166 of the Companies Act, 2013, a director has certain duties towards the company.

DUTIES OF DIRECTORS (SECTION 166):

  1. A director of a company shall act in accordance with the articles of the company.
  2. A director of a company shall act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of the environment.
  3. A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
  4. A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
  5. A director of a company shall not make or attempt to make any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
  6. A director of a company shall not assign his office and any assignment so made shall be void.

If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

Where a director took employment outside the company, he needs to be careful in the performance of his duties towards the company. He needs to answer the following question to himself:

a. can he exercise his independent judgement in the decision making the process of the company?

b. is there any conflict of interest?

If yes, I do not find any restriction on his gainful employment.

However, a company may by way of Articles of Association restrict its directors from outside employment.

However, one should not sail in two boats unless both boats are compatible.

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Form DIR – 3 – KYC


With all executive overreach, Form DIR – 3 – KYC is present before us this early morning of pleasant rainy monsoon day. I welcome it with all my reservation about working of the ease of doing business with actual ease. Every individual who has a Director Identification Number (DIN); whether using, abusing, not using or disqualified from using; need to fill this form within 49 days time from today 14th July 2018 with an exception of individuals who received their Director Identification Number (DIN) after 31st March 2018. Let us discuss more the rule and the form.

[Update: with the introduction of Form DIR-3-KYC-WEB discussed here, the law stated herein has slightly changed. Please read both posts together.]

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Chairman, Managing Director, CEO, Proprietor – the Difference


Difference between various business positions is quite confusing for the general public. Here, we will discuss, what is the difference between a chairman, a managing director, a CEO, and a proprietor?

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Qualification of Independent Director


The qualification of independent director is among few provisions where the Companies Act, 2013 become stringent after amendments. The Companies Amendment Act, 2017 read with Notification S.O. 1833(E) dated 7th May 2018 amended sub-section (6) of 149.

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To be director democratically – post 9th February 2018


The Companies Amendment Act, 2017 read with notification dated 9th February 2018 amended law related to the right of a person to be appointed as director of a company under Section 160 of the Companies Act, 2013. Section 160, in its original form, as applicable from 1st April 2014 until 8th February 2018. Section 160 is well ignored but the strong pillar of corporate governance and democracy. We shall discuss amended section 160 here along with its limitations and challenges present before it.

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Tracking of Directors


After numerous many leakages of sensitive information on faulty governance and unearthing of scam, Government is facing firework from ruling party and its parent organisations. The friendly government of corporate houses with allegedly better relationship with corny – capitalists business organisations, once again looking towards corporate jungle for next round of its killing hunt. As per primary level media reports, Ministry of Corporate Affairs preparing for additional information from directors to nab them at first sounding of the alarm bell. This is in public domain now; government is going to ask passport information of directors who are a citizen of India. This news is bigger than it appears in earlier newspaper reports.
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