An individual can be director in a maximum of 15 companies as per the reduction made in the companies (Amendment) act 2000. Directorship in the following companies cannot be counted for the above purpose :
(a) A private limited company which is not a secondary / holding company of a public company.
(b) An unlisted company
(c) An organization is not carrying on business for profit
(d) If he is an secondary director in another company
Maximum number of directorship in companies
If a director in a private limited company is appointed a director in a public company or a private company subsidiary of a public company.
Penalty
Any person who holds office as director in more than 15 companies in contravention of the provisions will be punishable with a fine of Rs.50,000.
Automatic vacation as director
- A person will cease to be a director in a public limited or private limited company if
- he fails to obtain qualification shares if any, within two months of appointment (this does not arise in a pure private limited company).
- It has been found of unsound mind.
- applies to be declared as an insolvent.
- It has been adjudged an insolvent.
- he fails to give disclosure in terms of section 299
- It is disqualified under section 203
- he is removed under section 284
- A firm in which he is partner or a private limited company obtains a loan from the company which as a director (this is not applicable in a pure private limited company).
Removal of directors
Applicable to private and public companies
The provisions of section 284 are applicable to private and public limited companies. In the case of a private limited company any person manage the company for life on 1-4-1952 will not be affected by the section.
All directors are subject to removal
All directors can be removed or not in a public limited company. The directors who are not affected by the section are the following :
(a) a director appointed by the central government
(b) nominate a person as a director
(c) a director in a private limited company holding office for life on 1st April 1952.
Action to be taken by the company
When a special notice of resolution is properly served on a company registration, a copy thereof shall forthwith be sent to the director concerned.
Representation by the director
The director concerned shall be entitled to be heard on the resolution at the meeting, where the director makes a representation in writing of the same to the members as reasonable length. If as stated in the section it is not possible for the company to do so the director may require that the same be read at the meeting.
Reasons for removal to be given in the special notice to the company
The director concerned shall be entitled to be heard on the meeting. Where the director makes a representation of the same to the members as reasonable length.
Appointment of foreign nationals as directors in Indian companies
The reserve bank of India has clarified that appointment of a foreign national as director in Indian companies does not require their prior approval. They have also stated that they have granted general powers to an Indian Company to make payment in rupees towards sitting fees or commission or remuneration and travel expenses.
In response to queries on the above subject, it is clarified that under Foreign Exchange Management Act, 1999, appointment of a foreign national as a director.