SECTION 165 OF COMPANIES ACT, 2013

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RACHANA DAGA (Querist)
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27 January 2024 Whether the limits of Directorship of Director as per section 165 of companies act, 2013 includes LLP also?

Asha Kanta Sharma online

Asha Kanta Sharma

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11 July 2024 Yes, the limits of directorship as per Section 165 of the Companies Act, 2013 apply to both companies and LLPs (Limited Liability Partnerships). Section 165 specifies the maximum number of companies in which a person can hold the position of director. Here are the key provisions:

1. **Limits on Directorship:**
- **Maximum Number of Companies:** A person cannot hold directorship in more than 20 companies at the same time, including both public and private companies.
- **Exclusions:** This limit excludes:
- Directorship in dormant companies (companies under Section 455 of the Companies Act).
- Directorship in a company incorporated under Section 8 of the Companies Act (non-profit companies).

2. **Calculation of Limits for LLPs:**
- For LLPs, Section 165 of the Companies Act does not explicitly mention LLPs. However, the Ministry of Corporate Affairs (MCA) and legal interpretations generally consider LLPs under the purview of Section 165 due to the overall intent of the law to regulate directorships and prevent over-extension of directors' responsibilities.
- Therefore, if a person is a director in multiple LLPs and companies, they must ensure compliance with the overall limit of 20 companies (excluding exempt categories) as per Section 165.

3. **Consequences of Non-Compliance:**
- If a person exceeds the prescribed limit of directorships, they may face disqualification from being appointed or continuing as a director in any company or LLP.
- It's essential for individuals holding directorships in multiple entities to periodically review their positions and ensure compliance with Section 165 to avoid any potential penalties or disqualifications.

In summary, while the Companies Act, 2013 explicitly mentions companies, the principles of directorship limits apply broadly to prevent over-extension of responsibilities, including directorships in LLPs. Therefore, individuals holding directorships in both companies and LLPs need to ensure compliance with the prescribed limits under Section 165 of the Act.