Section 149 of CA 2013 : Section 149: Company To Have Board Of Directors

Explanation using Example

Imagine a scenario where a tech startup, "InnovateX", is transitioning from a private company to a public company due to its rapid growth and the need to raise more capital. As part of this transition, InnovateX is required to comply with the provisions of the Companies Act, 2013, including those related to the composition of its Board of Directors as outlined in Section 149.

Under Section 149(1)(a), InnovateX, now being a public company, must have at least three directors. Initially, as a private company, they had only two directors, so they need to appoint at least one more director.

Furthermore, according to Section 149(1)(b), InnovateX can have a maximum of fifteen directors unless a special resolution is passed to appoint more. The company decides to expand its board to include experts from various fields and therefore passes a special resolution to appoint seventeen directors, including one woman director to comply with the gender diversity requirement.

Section 149(3) mandates that at least one director must be resident in India for at least 182 days in a year. InnovateX's board ensures that one of their directors, who is based in India, meets this criterion.

As a listed public company, per Section 149(4), InnovateX is now required to have at least one-third of its board as independent directors. They calculate this as one-third of seventeen, which is approximately 5.67, and round it off to six independent directors.

One of the newly appointed independent directors, Mr. Sharma, gives a declaration at his first board meeting as per Section 149(7) confirming that he meets the criteria of independence, including not having any pecuniary relationship with the company that could affect his judgment.

Lastly, according to Section 149(10) and (11), Mr. Sharma is appointed for a term of five years and is aware that he may serve for a consecutive term if reappointed by a special resolution, but then must take a three-year break before potentially being reappointed.

This example illustrates how InnovateX complies with Section 149 of the Companies Act, 2013, ensuring proper corporate governance and adherence to legal requirements for its Board of Directors.