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Elements of Company Law - II

Board of Directors – Composition

The individuals at the highest level of management are responsible for the functioning of the company. These high-level members of the company are called directors. Collectively, all directors as a group and the supreme acting authority of the company are called ‘board of directors’

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Board of Directors Composition

The board of directors are can be called the brain of the company. They are responsible for taking all the big decisions and making policy changes. These decisions are taken in special meetings members of the board hold together, called ‘Board Meetings’.

Section 149 of the Companies Act states that every company’s board of directors must necessarily have a minimum of three directors if it is a public company. two directors if it is a private company and one director in a one person company.

The maximum number of members a company can assign as directors is fifteen. However, the company can pass a special resolution in a general meeting to allow for assigning more than fifteen members to the board of directors.

The maximum number of companies that an individual can become a director of, is 20 companies.

At least one director, who has lived in India for a minimum of 182 calendar days of the previous year, shall be appointed by every company’s board. It is a mandatory rule.

At least, one woman director must be appointed by the company.

All listed companies must have at least one-third proportion of their board of directors as independent directors.

board of directors

(source – fedindia) 

 

Under LODR for Listed Companies(Listing Obligations and Disclosure Requirements)

The members of the board shall have an optimum combination of executive and non-executive directors and at least one woman director. At least 50% of the board of directors must be non-executive directors.

When the board chairman is a non-executive director, a minimum of one-third directors shall be made up of independent directors. In case of the board chairman being an executive director, a minimum of half of the board of directors shall comprise of independent directors.

However, in case a non-executive chairman is a promoter of the said listed company or directly related to a promoter or a high-level manager, at least half of all directors will comprise of independent directors.

Browse more Topics under Elements Of Company Law Ii

Committees Under the Board of Directors

1. Audit Committee 

The audit committee should have a minimum of 3 members.

A total of two-thirds of the committee comprises of independent directors.

At least one member should have expertise in the field of account and finance and all audit members must be well in finance.

An independent director will be the chairman of the audit committee.

The company secretary shall be the appointed secretary.

2. Nomination and Remuneration Committee.   

The committee shall comprise of at least three directors.

All members must be non-executive directors.

At least 50% of the directors shall be non-executive members.

Director of the committee will be an independent director.

3. Stakeholders Relationship Committee 

The Stakeholders Relationship Committee takes care of all issues related to problems such as grievances of shareholders, debenture holders and other parties of importance. This committee looks into such matters and resolve issues while maintaining a good relationship with shareholders and other parties.

Thus, the chairman of this committee has to be a non-executive member director from among the board of directors.

4. Risk management Committee 

The members of the board will form the risk management committee.

A major portion of the Risk Management Committee shall consist of members of the board.

The chairman of the Risk Management Committee shall be a member of the board.

 

Solved Question for you

Question: What is the maximum number of directors that a company can appoint on the board of directors? 

Answer – The maximum number of members a company can assign as directors is fifteen. However, the company can pass a special resolution in a general meeting to allow for assigning more than fifteen members to the board of directors.

 

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