What does Section 160 of the Companies Act, 2013 say?

This section basically deals with the rights of person other than retiring director under Section 152 of the Companies Act, 2013

INTENTION BEHIND THIS PROVISION?

Section 160 provides for right of any person (including Member or Non-Member of the company) to stand for the position of a director in a general meeting of the company.

The intent of the section is to deter frivolous proposals for candidature because of which the law include deposit of Rs. 1,00,000. But if the company itself proposes the candidature, there seems no reason to apply section 160.

For Example: If Mr. Gaurav, a common man wants to become director of XYZ Limited. Can he do so? Yes, as per the provision of this section any person is eligible to stand for the position of directorship in the company.

WHO ARE ELIGIBLE TO GIVE NOTICE UNDER SECTION 160?

1. Any Individual Member of the Company can give Notice for himself
2. A Non-Member of the Company can give Notice for himself
3. Any member (including Body Corporate) who intends to propose a member or non- member as a director can give notice for them.

WHEN AND WHERE THE NOTICE AND DEPOSIT IS TO BE GIVEN?

As per Section 160 notice along with the Deposit of Rs. One Lakhs is required to be given at least 14 days before the general meeting at the Registered Office of the Company

For Example: If Mr. Gaurav intends to propose himself as a director in the General Meeting of XYZ Limited which is to be held on 25th May, 2019, then Mr. Gaurav needs to give Notice in writing under his signature of his intention to become a Director in XYZ Limited at the Registered Office of the Company on or before 11th May, 2019.

WHO WILL PAY THE DEPOSIT AMOUNT?

The amount of Deposit (which is Rs. One Lakhs) will be paid by the person who gives notice to the company i.e.

1. If Individual Member (for Ex: Ms. Megha) of the Company give Notice for himself?

Ans: Ms. Megha will Deposit the amount along with the Notice.

2. Non-Member of the Company (for Ex: Mr. Gaurav) give Notice for himself?

Ans: Mr. Gaurav will Deposit the amount along with the Notice.

3. Any member (For Ex: Ms. Neha) intends to propose (Mr. Gaurav) as a director?

Ans: Ms. Neha will pay the deposit amount along with the Notice.

IS THERE ANY EXCEPTION REGARDING THE DEPOSIT AMOUNT?

Yes,

The below mentioned are not required to pay the Deposit Amount:

1. Independent Director
2. Director recommended by Nomination & Remuneration Committee if any constituted under section 178(1)
3. Director recommended by Board of Director of the company

IS THE DEPOSIT AMOUNT REFUNDABLE?

The Deposit amount will be refundable if:

1. If the proposed person gets elected i.e. he gets more than 50% of Voting in his favor or
2. If he gets more than 25% votes cast in his favor

For Example: If total votes casted is 100 and out of it Mr. Gaurav gets 26 votes in his favor, though Mr. Gaurav does not get the majority votes but he gets more than the 25% votes. So, the amount of Deposit will be refunded to him.

WHAT WILL COMPANY DO ONE IT GETS THE NOTICE UNDER SECTION 160?

The companies shall inform its member of the candidature of a person for the office of a director. The Company cannot deny to intimate such notice to the members of the company. If it does so, it will be non-compliance on the part of the company.

BY WHAT TIME THE COMPANY CAN INTIMATE THE NOTICE TO ITS MEMBERS AND HOW?

The company shall inform its members at least 7 days before the general meeting.

The company can either serve individual notice to the member either through registered email address or through post.

However, it will be sufficient if the company chooses to advertise the notice in a Newspaper instead of serving the individual notice.

Provided the Notice should be published in atleast two newspaper one in vernacular newspaper in the principal vernacular language and one in an English newspaper in the English language both circulating in the district in which the registered office of the company is situated.

And the company needs to place such notice on the website of the company, if any

IMPORTANT POINTS:

1. The amount of deposit in the case of Nidhi Company shall be Rs. 10,000 instead of Rs. 1,00,000.
2. In the case of section 8 companies, the Board of directors shall decide whether the deposit to be forfeited or refunded if the proposed director fails to secure more than 25% of the valid votes.
3. The Ordinary Resolution will be passed in the General Meeting (either AGM or EGM).
4. Notice under this section is different from Special Notice provided under section 115 of the Companies Act, 2013
5. In case of Specified IFSC Public Company - Section 160 shall apply as per the articles framed by the company.
6. A person right to give the notice to stand for directorship is not affected by any contrary provision in the articles.

EXEMPTION OR NON-APPLICABILITY OF SECTION 160

1. Private Company
2. Section 8 Companies whose articles provide an election of directors by ballot.
3. a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments;
4. a subsidiary of a Government company, referred to in (c) above, in which the entire paid up share capital is held by that Government company.

In all the above cases, exemption will be available if the company has not committed a default in filing of financial statement as per section 137 or annual return as per section 92 with the Registrar.

In case of Specified IFSC Public Company - Section 160 shall apply as per the articles framed by the company.

FORMAT OF NOTICE UNDER SECTION 160

1. If a person intends to propose himself for the Office of Director

Date: ------------

To

The Board of Director/Company Secretary
Name of the Company
Address of the Company
Subject: Notice u/s 160 of the Companies Act, 2013

Dear Sir,

I, Mr./Ms. (Name of the Person), do hereby give notice under section 160 of the Companies Act, 2013, signifying my intention to propose my candidature for the office of Director of (Name of the Company), in the ensuing Annual/Extra Ordinary General Meeting of the company or any adjournment thereof.

Please find enclosed (mode of payment along with the date) for Rs. 1,00,000/-(One Lakh Only) being the Deposit alongwith this Notice pursuant to the aforesaid provision.

Kindly acknowledge the receipt.

Thanking You,
Yours Sincerely
(Signature)
Name of the Person

Enclosure: Description of the Banking Channel through which the amount is Deposited

2. If a Corporate member proposing the candidature of a person for getting appointed as director of the company

Date: ------------

To

The Board of Director/Company Secretary
ABC Limited
Address of the Company
Subject: Notice u/s 160 of the Companies Act, 2013

Dear Sir,

We, XYZ Limited, having our registered address at---------------- member of the Company, hereby give Notice under section 160 of the Companies Act, 2013, signifying the candidature of (Name & Address of the person to be appointed as director), for appointment as a Director of the Company in the ensuing Annual/Extra Ordinary General Meeting of the company or any adjournment thereof.

Please find enclosed (mode of payment along with the date) for Rs. 1,00,000/-(One Lakh Only) being the Deposit along with this Notice pursuant to the aforesaid provision.

Kindly acknowledge the receipt.

Thanking You,
Yours Sincerely
For, XYZ Limited
(Signature)
(Name of the Authorized Person)
(Designation in the Company)

Enclosure:--------------------------------------------------------------

3. If a member of the Company proposes the candidature of a person for his/her appointment as Director of the Company.

Date: ------------

To

The Board of Director/Company Secretary
ABC Limited
Address of the Company
Subject: Notice u/s 160 of the Companies Act, 2013

Dear Sir,

I, (Name of the Member), holder of --------Equity Shares of Rs. ---/- each fully paid-up in the company , do hereby give Notice under section 160 of the Companies Act, 2013, signifying my intention to propose the candidature of (Name & Address of the person to be appointed as director), for the office of Director of ABC Limited as director in the ensuing Annual/Extra Ordinary General Meeting of the company or any adjournment thereof.

Please find enclosed (mode of payment alongvwith the date) for Rs. 1,00,000/-(One Lakh Only) being the Deposit along with this Notice pursuant to the aforesaid provision.

Kindly acknowledge the receipt.

Thanking You,
Yours Sincerely
(Signature)
(Name of the Member)
Folio No. --------/DP ID----------------Client ID-------------
No. of Shares held
Enclosure:-------------------------------

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