Tag Archives: Independent Director


[NOTE: The law stated in this post is effective from 12th September 2018. For the law applicable from 1st April 2014 till 11th September 2018, please visit here and here.

In this post, we will discuss managerial remuneration. The managerial remuneration in case of inadequate profit shall be discussed in a future post, soon.

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No Sense Notice!!

This is a very interesting query received recently.

One existing independent director is going to be retired at the conclusion of the upcoming Annual General Meeting of the company. The company (read management) do not want to renew the tenure of independent director. The name of another independent director has already been proposed by the management in the notice of the Annual General Meeting. Now, there is a proposal to call a Board Meeting just after (or next day) the conclusion of Annual General Meeting. As per the law and the articles of the company, there is a requirement of 7 days notice or 48 hours shorter notice for calling the Board Meeting. The outgoing independent director should receive notice of the Board Meeting. Will it really serve any purpose in law?

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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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