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Section 163 appointment of a nominee director

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Section 163 appointment of a nominee director2019-06-17T06:38:09+05:30

Update as on 6/17/2019 8:31:29 AM

Appointment of a nominee director

What we will learn from this page:

  1. Who is nominee director as per company act, 2013?
  2. Conditions to be fulfilled before the appointment of the Nominee director.
  3. Disqualifications for Appointment of Director.
  4. Number of directorships.
  5. Which type of resolution required for appointing nominee director?

 

i. Who is nominee director as per company act, 2013?

A nominee director is a person who is appointed by any institution under any law for the time in being in force or any agreement or by the Central Government or the State Government by its shareholding in a Government company.

ii. Conditions to be fulfilled before the appointment of the Nominee director:

  1. The person must obtain the DIN (director identification number).
  2. As per the AOA, the company may appoint any person as a director nominated by any institution in pursuance of any law.
  3. The person shall only be appointed as a director if he is not disqualified under section 164.
  4. The person shall not violate the limit of directorship as per section 165.

Section 164

iii. Disqualifications for Appointment of Director:

(1). No person shall be eligible for appointment as a director of any company, if —

(a) he is of unsound mind and stands so declared by a competent court;

(b) he is an undischarged insolvent;

(c) he has applied to be adjudicated as an insolvent, and his application is pending;

(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and five years has not elapsed from the date of expiry of the sentence:

(Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for seven years or more, he shall not be eligible to be appointed as a director in any company)

(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal, and the order is in force;

(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;

(g) he has been convicted of the offence dealing with related party transactions under section 188 (Related party transactions) at any time during the last preceding five years; or

(h) he has not complied with section 152 (3), i.e. he has not allotted the DIN as per section 154.

(i) he has not complied with section 165(1), i.e. he has violated the number of directorships.

(2). No person who is or has been a director of a company which—

(a) has not filed financial statements or annual returns for any continuous period of three financial years; or

(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

(3). A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in above sub-sections (1) and (2) of section 164.

Section 165

iv. Number of directorships:

(1) No person, after the commencement of this Act, shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time:-

Provided that the maximum number of public companies in which a person can be appointed as a director shall not exceed ten.

Note I — For reckoning the limit of public companies in which a person can be appointed as director, the directorship in private companies that are either holding or subsidiary company of a public company shall be included.

Note II — For reckoning the limit of directorships of twenty companies, the directorship in a dormant company shall not be included.]

(2) Subject to the provisions of sub-section (1), the members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

(3) Any person holding office as director in companies more than the limits as specified in sub-section (1), immediately before the commencement of this Act shall, within one year from such commencement,—

(a) choose not more than the specified limit of those companies, as companies in which he wishes to continue to hold the office of director;

(b) resign his office as director in the other remaining companies; and

(c) intimate the choice made by him under clause (a), to each of the companies in which he was holding the office of director before such commencement and to the Registrar having jurisdiction in respect of each such company.

(4) Any resignation made in pursuance of clause (b) of sub-section (3) shall become effective immediately on the despatch thereof to the company concerned.

(5) No such person shall act as director in more than the specified number of companies,—

(a) after dispatching the resignation of his office as director or non-executive director thereof, in pursuance of clause (b) of sub-section (3); or

(b) after the expiry of one year from the commencement of this Act, whichever is earlier.

(6) If a person accepts an appointment as a director in contravention of sub-section (1), he shall be (liable to a penalty of five thousand rupees for each day after the first during which such contravention continues).

v. Which type of resolution required for appointing nominee director?

Board Resolution

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