Tag Archives: Independent Director

Designation and Category of Directors

When an applicant files a form for incorporation of a company, we need to select the designation and category of first directors in incorporation Form 32 (popularly called Spice) or wherever company appoints a director. There are four different categories of directors. We will discuss confusion regarding these categories of directors.

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Amendments related to Board matters

Ministry of Corporate Affairs recently amended the Companies (Appointment and Qualification of Directors) Rules, 2014 by notification of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 on 5th July 2017. A related amendment in the Companies (meetings of Board and its Powers) Rules, 2014 was also made by notification of the Companies (meetings of Board and its Powers) Second Amendment Rules, 2017 for which published notification copy is yet not available.

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MCA introduces Limited Purpose Independent Director in private companies

An amendment rules notified by MCA introduces concept of limited purpose independent director in private companies. Government is amending existing Companies (Corporate Social Responsibility Policy) Rules, 2014. These rules are being criticised by various eminent jurist for trying to undermine authority of Section 135 of the Companies Act, 2013. Sub – Section (1) of Section 135 mandate for at least one independent director in every company whether it is private or public company. Existing Rule 5 of CSR rules tries to undermine this provision of Section 135 by saying “an unlisted public company or a private company covered under sub-section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committee without such director”. A rule being subordinate legislation has no constitutional authority to change a provision of the Act.

Amended Clause (i) of Sub – Rule (1) of Rule 5 reads, “an unlisted public company or a private company covered under sub-section (1) of section 135 shall have an independent director for being member of its CSR Committee and such independent director shall have no other duty, obligation and responsibility under the Act.” Consequently, Clause (i) of Sub – Rule (1) of Rule 5 also been deleted.

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According to Section 149 of the Act, every listed company shall have at least one-third of total number of directors as Independent directors. The central government may prescribe minimum number of independent directors in other class or classes of public companies. The Act deals with provisions related to independent directors in details as discussed earlier here.

According to Rule 4 companies (Appointment and Qualification of Directors) Rules 2014, the following class or classes of companies shall have at least two directors as independent directors –

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Quotes from Companies Bill debate in Rajya Sabha

UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

For every new law, legislative intent, which show it in debates taken place in Parliament, become important. These debates offer a guide while drafting subordinate legislation. There are many questions about future rules and regulations. I, here, compiled some important quotes from this debates from Rajya Sabha.[i][ii][iii]

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Board Structure in Central Public Sector Enterprises

Central Public Enterprises in India are not simple business enterprises, but fall under definition of “State” under Article 12 of the Constitution of India. They are subject to Writ Jurisdiction. The Right to Information Act, 2005 is applicable to them.

The Law governing Central Public Sector Enterprises are complex mix of Guidelines/instructions issued by Department of Public Enterprises (DPE), the Companies Act, 1956 regulations of Comptroller and Auditor General of India (CAG), Central Vigilance Commission, and administrative Ministry.

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Interests of Director and Related Party Transactions

UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).


Every director shall disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholdings, in such manner as may be prescribed. Such disclosure shall be made on three particular point of time:

(i)           At the first meeting of the Board in which he participates as a director;

(ii)          At the first meeting of the Board in every financial year; and

(iii)         Whenever there is any change in the disclosures already made, then at the first Board meeting held after such change.

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