10 October 2014
Minimum/Maximum Number of Directors in a Company- Section 149(1) Section 149(1) of the Companies Act, 2013 requires that every company shall have a minimum number of 3 directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company. A company can appoint maximum 15 fifteen directors. A company may appoint more than fifteen directors after passing a special resolution in general meeting and approval of Central Government is not required.
A period of one year has been provided to enable the companies to comply with this requirement.
03 August 2024
Under the Companies Act, 2013, maintaining the minimum number of directors is crucial for compliance. Here’s a detailed look at the consequences and requirements if a company falls below the statutory limit for directors:
### 1. **Consequences of Falling Below Statutory Limit**
For a Public Limited Company (Unlisted), the statutory requirements regarding the number of directors are:
- **Minimum Number of Directors:** - A public company must have at least **three** directors.
**Consequences if the Number of Directors Falls Below the Statutory Limit:**
- **Non-Compliance with Act:** - The company will be in violation of Section 149(1) of the Companies Act, 2013, which mandates the minimum number of directors for different types of companies.
- **Board Powers:** - If the company does not meet the minimum number of directors, the board may not be able to exercise its powers and responsibilities effectively. Some resolutions and decisions may require a quorum which might not be met.
- **Impact on Company Operations:** - Failure to comply with the minimum director requirements can affect the company's ability to conduct meetings, approve resolutions, and maintain proper governance.
### 2. **Consequences of Not Filling the Vacancy**
If you are not planning to fill the vacancy for another six months:
- **Legal Consequences:** - **Section 167(1)(b)** of the Companies Act, 2013, provides that if the number of directors falls below the minimum limit required by the Act, then: - The remaining directors shall act only for the purpose of increasing the number of directors to that minimum number or to summon a general meeting of the company.
- **Section 168** mandates that if the company does not fill the vacancy, the company may be penalized under the relevant provisions of the Companies Act.
- **Penalty for Non-Compliance:** - The company may be liable for penalties as specified in the Act. For example: - **Section 450** states that if there is a failure to comply with the provisions of the Act, the company and its officers may face penalties. - **Section 173** requires board meetings to be held at least once in every 120 days. Falling below the minimum number of directors might make it challenging to hold meetings or approve resolutions.
- **Quorum Issues:** - If the number of directors falls below the statutory limit, it may affect the quorum required for board meetings, impacting decision-making and governance.
### **Steps to Take:**
1. **Immediate Action:** - Ensure the number of directors is brought back to the statutory minimum as soon as possible. You may need to call an extraordinary general meeting (EGM) to appoint additional directors.
2. **Regular Compliance:** - Regularly review and ensure compliance with statutory requirements to avoid such issues.
3. **Legal Advice:** - Consult with a legal advisor or company secretary to understand the implications specific to your company and to assist in addressing non-compliance issues.
4. **Document Actions:** - Keep proper records of actions taken to comply with the statutory requirements and any communications with regulatory bodies.
### Summary
Non-compliance with the minimum director requirements can have significant legal and operational consequences. It is advisable to act promptly to address the situation to avoid penalties and ensure smooth functioning of the company.
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