Directors Related Querry

This query is : Resolved

GOPAL KUMAR AGRAWAL (Querist)
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26 October 2010 Dear Sir,

1. One of our director is holding directorship in “2 public limited” companies and it has “12 subsidiary companies”, and also is a director in “2 one step down” Subsidiary Company. Please if you can advice us how can we proceed with such a situation and what are the consequences of the same.

2. If a director is holding director ship in more then 15 Public Limited companies and he wants to be director in further more companies so what will be the action to be taken for this and how can we follow the compliance's pertaining to the following situation. Can he be appointed as a director in more Public companies? What can be the case if he gets appointed without knowing that he is a director in more then 15 company? What are the fine to be paid for the same?

Please if you can advise us on the above at the earliest.

udit sharma

udit sharma (Expert)
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02 November 2010 Hi....

As per the provisions of section 277 of the Companies Act, 1956 no person can hold the office as Director in more than 15 Companies after the Commencement of Companies (Amendment) Act, 1956.

1. If a person already appointed as Director in 15 Companies is appointed as a Director in any other Company, then his new appointment will not take effect unless within 15 days from the date of his appointment in the new Company, he has resigned as Director from any of the earlier Companies, making the total number of Companies in which he is a Director 15.

2. However, if he fails to tender his resignation within the period of 15 days as above, then his new appointment shall become void after the expiry of 15 days from the date of his new appointment.

However, as per the provisions of section 278 of the Companies Act, 1956 in reckoning the limit of 15 Companies, the following shall be excluded:

a. any private Company which is not a subsidiary nor a holding Company of any Public Limited,

b. an unlimited Company,

c. an association carrying on business not for profit or which prohibits payment of dividend, and

d. any company in which such person is appointed as an Alternate Director.

As per the provisions of section 279 of the Companies Act, 1956 if the Director continues to bea Director in more than 15 Companies, he shall bepunishable with a fine which may extend to Rs. 50,000 in respect of each of the Companies after the first 15.

This is my opinion and understanding of the provisions of the Companies Act, 1956. Views of other eminent experts are welcome:-)