With the notification of the Companies Act, 2013 (“Act”) earlier this year, one of the most notable and much-discussed changes has been the focus on corporate governance. The key tools in this regard are the provisions relating to the composition of the Board of Directors (“Board”) of a company.
The Board of every company must comply with the provisions in Chapter XI of the Act and the Companies (Appointment and Qualification of Directors) Rules, 2014 (“Rules”). Also, the SEBI has the made the provisions of the Act, including those relating to the composition of the Board, applicable to listed companies through amendments to the Equity Listing Agreement. These amendments will come into effect in October 2014.
Let us now take a look at what the Boards of the following kinds of companies would look like if they met the bare minimum requirements in the Act, the Rules, and (where applicable) the Equity Listing Agreement.
One person company
Public unlisted company
Public listed company
Public listed company, where the Chairman is a non-regular, non-executive director or where the Chairman is a regular, non-executive director who is a promoter, or related to the promoter, or occupies a management position at the Board level in the company
Public company with a paid up share capital of Rupees Ten crore or more or with a turnover of Rupees One hundred crore or more
Public company with a paid up share capital of Rupees One hundred crore or more OR with a turnover of Rupees Three hundred crore or more
Public company with outstanding debt (loans, debentures, and deposits) of Rupees Fifty crore or more
Note 1: The charts above show the board having the minimum number of directors permitted for that category. Note that no company can have more than fifteen directors on its Board, unless a special resolution is passed to permit appointment of more directors.
Note 2: Where overlapping roles are shown for a particular director, it does not denote that the same person must necessarily fulfill both requirements (except that independent directors must be non-executive directors).
(Deeksha Singh is part of the faculty on myLaw.net.)