PROVISION REGARDING DIRECTOR HOLDING POSITION IN MORE THAN ONE OR TWO COMPANIES

Appointment of director is regulated by section 149 of company act 2013 defining the limit and requirement as such along with Company rules 2014 with respect to appointment and removal. There can be various type of director ranging from independent to executive to other director as discussed by the act.

With respect to our center of discussion, speaking straight away while reading Section 165 as:-

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.

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

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.

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

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

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

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.

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

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.

If a person accepts an appointment as a director in contravention of sub-section (1), he shall be punishable with fine which shall not be less than five thousand rupees but which may extend to twenty-five thousand rupees for every day after the first during which the contravention continues.

It doesn’t discriminate between any types of director and include every type of director in its ambit.

Since as per section 2(51) whole time director is included in same and thus, section 203(3) of companies act into picture which says:-

A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time:

Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board:

Provided further that whole-time key managerial personnel holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel:

Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

CONCLUSION:-

A whole time director or a director can hold up to 20 office at a time in case

private company and at max 10 in case of public company. The only limit is as to fulfillment of certain conditions as per the situation. It should not violate section 203(3) in case of whole time director.

Further, generally it should be disclosed and no misrepresentation should be made. Consent of company plays a vital role and it should function as per their MOA.

A full time director can be non-executive director of another company at same time subject to total of 20 companies in case of private company and he should disclose the same matter to all company he is director of. There is no prohibition rather there is certain criteria and discloser that should be done.

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