SECTION 160 OF COMPANIES ACT, 2013
SECTION 160 OF COMPANIES ACT, 2013
SECTION 160 OF COMPANIES ACT: RIGHT TO DIRECTORSHIP
A person who is not retiring director is also eligible to stand for directorship. Section 160 of the Act and Rule 13 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 contain provisions in this respect. These are discussed as below:
- Requirement of Written Notice:
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Particular |
Explanation |
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(a) Person who applies his candidature as a director: |
A person other than retiring director shall be eligible for appointment as a director in a company at any general meeting (whether in Annual general meeting or Extra ordinary general meeting), if he has given a notice in writing under his hand signifying his candidature as a director at least 14 days before the meeting at the registered office of the company. |
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(b) Member who intends to propose other person for directorship |
Instead of above person, some other member of the company who intends to propose such other person as a director can also give a written notice at the registered office of the company signifying his intention to propose the other person as a candidate for directorship at least 14 days before the meeting. |
- Requirement of Deposit: The written notice needs to be accompanied with the deposit of Rs. 1,00,000 or such higher amount as may be prescribed.
Exceptions: The requirement of deposit shall not apply in the following cases of appointment of directors.
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S.NO |
Particulars |
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(a) |
In case of Independent Directors. |
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(b) |
In case directors are recommended by the Nomination and Remuneration Committee, if any under Section 178(1). |
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(c) |
In case directors are recommended by the Board of Directors, where there is no Nomination and Remuneration Committee. |
- Action by the company: The company shall inform its members regarding the candidature of a person for the office of director in accordance with the manner prescribed in Rule 13 of the Companies (Appointment and Qualifications of Directors) Rules, 2014. The same is stated below:
At least 7 days before the general meeting, the company shall inform its members of such candidature-
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By serving individual notices through electronic mode to such members who have provided their e-mail addresses for communication purposes and in writing to all other members; and |
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By placing notice of such candidature on its website, if any |
When there is no need to serve notice individually: It shall not be necessary for the company to serve individual notices if it advertises such candidature, not less than 7 days before the meeting:
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At least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated and |
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At least once in English language in an English newspaper circulating in that district. |
- Refund of Deposit: The amount of deposit shall be refunded to such person or to the member as the case maybe, if person proposed gets selected as director or gets more than 5% of the total valid votes cast either on show of hands or on poll.
Explanation: No deposit of fees shall be refunded to those candidates who are not appointed as directors or do not get more than 25% of total valid votes in favour of their appointment.
Note 1: For the purpose of Section 160, the expression “retiring director” means a director retiring by rotation.
Note 2: Not all the directors are retiring directors. Therefore, if an additional director or an alternate director or nominee director or a director appointed to fill a casual vacancy, is to be appointed as a regular director at the general meeting, the procedure prescribed by Section 160 is required to be followed. Similarly, where a director retires by rotation but instead of re-appointing him, a new person in his place is proposed to be appointed, provisions of Section 160 are attracted.
CLARIFICATIONS:
- As per Notification No. G.S.R 465(E), dated 5th June 2015, in case of Nidhi’s, the amount of deposits for the purpose of Section 160(1) shall be “ten thousand rupees”. In other words, a person (not a retiring director) proposing his candidature as director in Nidhi’s or some other member proposing such person’s candidature shall be required to deposit Rs. 10,000 along with the written notice.
- The MCA vide General Circular No. 38/2014, dated 14th October 2014, has clarified that in case of Section 8 companies, their board of directors shall decide whether the deposit of Rs. 1,00,000 is to be forfeited or refunded if the person proposed as director fails to secure more than 25% of the valid votes.
EXEMPTIONS:
- In terms of Notification No. 463(E), dated 5th June 2015, as amended by Notification No. 582(E), dated 13th June 2017, Section 160 shall not apply to:
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A Government company in which the entire paid up share capital is held by the Central Government, or by State Government or Governments or by the Central Government and one or more State Governments. |
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A Subsidiary of a Government company, referred to in (a) above, in which the entire paid up share capital is held by the Government Company. |
- In terms of Notification No. 464(E), dated 5th June 2015, as amended by Notification No. 583(E), dated 13th June 2017, similar exemption from Section 160 is applicable to a private company.
- In terms of Notification No. 466(E), dated 5th June 2015, as amended by Notification No. 584(E), dated 13th June 2017, similar exemption from Section 160 is applicable to a Section 8 companies whose articles provide for election of directors by ballot.
Note: In all three cases mentioned above exemption from the application of Section 160 is available only if the concerned company has not committed a default in filing its financial statements under Section 137 or Annual return under Section 92 with the registrar.
