New Cos Act mandates one woman, two independent directors
28 Mar 2014
Beginning 1 April, most companies will need to have at least one woman and two independent directors on their boards, while listed companies will need to have a separate director to represent the interests of small shareholders, under the Companies Act, 2013.
Under the rules notified by the corporate affairs ministry, every listed company and public sector entities having paid-up share capital of Rs100 crore or more should have at least one woman director on their board. It will be also applicable to entities with a minimum turnover of Rs300 crore.
Such companies will have to make sure that a woman director is appointed to their respective boards before the boards meet next or three months from the date on which it falls vacant.
This is applicable in the case of independent directors as well.
"Any intermittent vacancy of a woman director shall be filled up by the board at the earliest but not later than immediate next board meeting or three months from the date of such vacancy whichever is later," the ministry has said.
Besides, public companies having a minimum paid-up share capital of Rs10 crore and those where their aggregate "outstanding loans, debentures and deposits" exceed Rs50 crore are required to have at least two independent directors on their respective boards, according to the notification issued on Thursday.
A listed company will also be required to have a small shareholders' director, if at least 1,000 or one-tenth of the total number of small shareholders move a notice for appointing such a director. The companies can, however, decide to have such a director on its own.
The small shareholders' director will have a maximum of three years and will not be eligible for re-appointment after that period.
The paid-up share capital and turnover of will be based on the latest audited financial statements of the companies.
A government authorised agency will, meanwhile, maintain a database of "persons willing and eligible to be appointed as independent director," in order to make it choice of independent directors easier for corporates. The data base will be available on the web site of the ministry of corporate affairs. However, companies must carry out due diligence before deciding to choose a person.
These requirements are part of the rules related to the new corporate governance norms under the Companies Act, 2013.
