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The Tax Publishers Provisions Regarding Appointment and Qualification of Directors vis-a-vis Companies (Amendment) Act, 2017 : Overview Pragya Lalwani This write up bestows the changes made to the provisions regarding Appointment and Qualification of Directors in light of the Companies (Amendment) Act, 2017 and its understanding. 1. Opening Note The enactment of Companies Act, 2013 brought significant changes in the Company Law in India and was one of the major reforms. However, certain difficulties were faced by the stakeholders during its implementation for which circulars and notifications were issued. The Government also invited various representations and when realised that the Act requires to be reviewed, MCA constituted a Company law Committee which after taking into consideration the representations and recommendations made by stakeholders, prepared a report suggesting the amendments to such Act. Such amendments as a Bill when passed by both the Houses of Parliament after various modifications, becomes the Amendment Act and being notified. Recently, Central Government notified Companies (Amendment) Act, 2017 on 3-1-2018. However, the provisions of this Amendment Act would come into effect from different dates as appointed by the Central Government from time to time in the Official Gazette. This Article enlightens the amended provisions regarding appointment and qualification of directors under Companies (Amendment) Act, 2017 which are hereunder: 2. Requirement as to resident director Companies (Amendment) Act, 2017 amends sub-section (3) of section 149 of the Companies Act, 2013 to the effect that every company shall have atleast one director who stays in India for a total period of not less than 182 days during the financial year rather than in previous calendar year as provided under Companies Act, 2013. It further, inserted a proviso to this sub-section according to which in case of a newly incorporated company, the requirement as to the resident director would apply proportionately at the end of the financial year in which it is incorporated. Thus, relaxation to some extent is provided to newly incorporated companies. 3. Pecuniary relationship as regards independent director Section 149(6) of the Companies Act, 2013 defines the term 'Independent Director'. As per clause (c) of section 146(6) the Independent director should not hold any pecuniary relationship with the company(where he would be appointed as such), its holding, subsidiary, associate company or their promoters, directors, during the two immediately preceding financial years or during the current financial year. However, Companies (Amendment) Act, 2017 incorporated that such pecuniary relationship w.r.t. Independent director would not include remuneration as such director or having transaction not exceeding ten per cent of his total income or such amount as may be prescribed. Thus, independent director should not hold only material pecuniary relationships that affect his independence. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Provisions Regarding Appointment and Qualification of Directors vis-a-vis Companies (Amendment) Act, 2017 : Overview

Pragya Lalwani

This write up bestows the changes made to the provisions regarding Appointment and Qualification of Directors in light of the Companies (Amendment) Act, 2017 and its understanding.

1. Opening Note

The enactment of Companies Act, 2013 brought significant changes in the Company Law in India and was one of the major reforms. However, certain difficulties were faced by the stakeholders during its implementation for which circulars and notifications were issued. The Government also invited various representations and when realised that the Act requires to be reviewed, MCA constituted a Company law Committee which after taking into consideration the representations and recommendations made by stakeholders, prepared a report suggesting the amendments to such Act. Such amendments as a Bill when passed by both the Houses of Parliament after various modifications, becomes the Amendment Act and being notified.

Recently, Central Government notified Companies (Amendment) Act, 2017 on 3-1-2018. However, the provisions of this Amendment Act would come into effect from different dates as appointed by the Central Government from time to time in the Official Gazette.

This Article enlightens the amended provisions regarding appointment and qualification of directors under Companies (Amendment) Act, 2017 which are hereunder:

2. Requirement as to resident director

Companies (Amendment) Act, 2017 amends sub-section (3) of section 149 of the Companies Act, 2013 to the effect that every company shall have atleast one director who stays in India for a total period of not less than 182 days during the financial year rather than in previous calendar year as provided under Companies Act, 2013.

It further, inserted a proviso to this sub-section according to which in case of a newly incorporated company, the requirement as to the resident director would apply proportionately at the end of the financial year in which it is incorporated. Thus, relaxation to some extent is provided to newly incorporated companies.

3. Pecuniary relationship as regards independent director

Section 149(6) of the Companies Act, 2013 defines the term 'Independent Director'. As per clause (c) of section 146(6) the Independent director should not hold any pecuniary relationship with the company(where he would be appointed as such), its holding, subsidiary, associate company or their promoters, directors, during the two immediately preceding financial years or during the current financial year. However, Companies (Amendment) Act, 2017 incorporated that such pecuniary relationship w.r.t. Independent director would not include remuneration as such director or having transaction not exceeding ten per cent of his total income or such amount as may be prescribed. Thus, independent director should not hold only material pecuniary relationships that affect his independence.