Directorship - Complete Details

Directorship refers to members of the company board who control the business affairs. Section 2(34) of the Companies Act, 2013 has defined “director” as appointed to the company’s board. Directorship brings along the responsibility to manage the company's functions and to bear the consequences of contravention of the legal statute in any way.

A director can be a Whole-Time Director (WTD), an Independent Director (ID), a Managing Director (MD), based on the powers and functions assigned to such director. This article will have a close look into the term “Directorship”.

Essentials for Directorship of Company

Number of Directorships (Section 165):

  • In a maximum of twenty companies, a person can hold the directorship (including the alternate director) simultaneously. For purpose of calculating twenty companies, directorship in a dormant company shall be excluded.
  • A person can be a director in a maximum of ten public companies. Directorship in private companies that are holding/subsidiary of a public company is to be included while calculating ten companies

The number of directors on the Board of the company (Section 149):

  • Minimum three (3) Directors in a public company.
  • Minimum two (2) Directors in a private company.
  • One (01) director in a One Person Company.
  • Maximum fifteen (15) Directors can be appointed. A special resolution shall be required where more than fifteen Directors are appointed.
  • Further, the requirement of appointment of a woman Director, independent Director shall be complied with as per the Act. 

Determination of directorship salary (Section 197):

Public companies must follow Section 197 of the Act for payment of remuneration to the directors. The section provides that total managerial remuneration must not exceed 11% of the net profits for that financial year payable to directors (including managing director (MD), whole-time director (WTD), manager). 
Private companies are not covered under the restrictions of Section 197.

Eligibility for directorship (Section 164):

A person shall become non-eligible to hold directorship in the following situations:
  • Such person is of unsound mind and declared by a competent court;
  • Such person has been an undischarged insolvent;
  • The application for adjudication as an insolvent is pending;
  • Been convicted by a court of any offense (involving moral turpitude or otherwise);
  • The court/Tribunal has passed an order disqualifying the person to be appointed as a director, and such order is in force.
  • The calls for shares held by such person (either alone or jointly) are not paid, and six (06) months have passed from the last day for the payment of the call;
  • Section 152 has not complied;
  • Such person is convicted for offense in regards to related party transactions (Section 188), in preceding five years (any time in preceding five years)
  • Section 165 has not complied;

Where directorship check is required, one can do it by visiting the MCA portal. A person can obtain details of an individual director by filling in the necessary details in the required column such as DIN number, name, date of birth, etc.

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