Appointment of Directors : Changes as per Companies Amendment Act , 2017

1.      Company to have Board of Directors (Section 149)

Section 149(3) has been modified stating that residential status of a Director shall be computed on the number of days (182 days) stayed in India during the financial year not on the basis of previous calendar year. Further in case of newly incorporated company the requirement of 182 days shall apply proportionately at the end of financial year in which it is incorporated.

Various changes have been done U/s 149(6) regarding the eligibility of the independent director.

2.      Appointment of Directors (Section 152)

Necessary changes have been made to provide that in addition to DIN, a director may hold any other identification number as prescribed U/s 153 to be appointed as Director.

3.      Application for allotment of DIN (Section 153)

In order to provide ease of business, Central Government may prescribe any identification number which shall be treated as DIN and in case any individual holds or acquires such identification number, the requirement of this section shall not apply or apply in such manner as may be prescribed.

4.      Right of persons to stand for directorship (Section 160)

A new proviso has been inserted giving out the relaxation by giving away with the requirement of deposit of rupees one lakh with respect to nomination of directors in case of appointment of independent directors or directors nominated by nomination and remuneration committee or a director recommended by the Board of Directors of the Company, in the case of a company not required to constitute Nomination and Remuneration Committee.

5.      Right to directorship (Section 161)

Section 161(2) has been amended by restricting a person to be appointed as an alternate director if he already holds any directorship in the same company.

Further private and public companies may fill the casual vacancy in the Board Meeting which shall be subsequently approved by the members in the ensuing general meeting.

6.      Disqualification for appointment of Director Section 164.

When a Director is appointed in Company which is in default of filling of Financial statement or annual return or repayment of deposits or pay interest or redemption or debentures or payment of interest or redemption of debentures payment of interest thereon or payment of dividend such director shall not incur the disqualification for a period of 6 month from the date of his appointment.

The change has been provided so that the disqualification under section 164(2) is applicable to a director only at the time of non-compliance and in case of a continuing default, the new director shall be granted a period of six months from appointment to make the company compliant.

It is also clarified that disqualification arising due to conviction by court or order passed by court or tribunal or conviction related to section 188, shall continue to exist even if appeal or petition has been filed against the order of conviction or disqualification.

7.      Number of Directorships (Section 165)

The amendment specifies that while reckoning the limits of directorship of twenty companies, directorship in dormant company will be excluded.

8.      Vacancy of Office by director (Section 167)

Section 164(2) talks about the disqualification of directors due to default in filing of financial statements, annual return, payment of dividend etc. It was observed that due to this non-compliance read with the earlier provisons of Section 167(1), the office of all the directors would become vacant, and no new director could be appointed, so in order to come out of this situation, it is held that the disqualified director shall vacate office in all the companies other than the company which is in default. 

Further the directors will not vacate office for 30 days from the date of disqualification/conviction in certain cases where an appeal is preferred.

9.      Resignation of Director (Section 168)

The filing of Form DIR-11 by a director for his resignation is made optional.