Significance of Section 160 for Appointment of Director other than retiring director under Companies Act, 2013

Affluence Advisory , Last updated: 11 January 2025  
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Appointment of Director Other than Retiring Director

The appointment of directors is a critical aspect of corporate governance, ensuring that Companies have competent leadership to guide their operations. Section 160 of the Companies Act, 2013, provides the framework for appointing directors other than retiring directors, ensuring transparency and fairness in the process. This article explores the key provisions, procedural requirements, and practical implications of Section 160.In accordance with the explanation provided under Section 152 of the Companies Act, 2013, the term "retiring director" refers to a director who retires by rotation. Consequently, an individual who is not a director retiring by rotation may exercise the right to stand for directorship in a company, subject to the applicable provisions of the Act.

Significance of Section 160 for Appointment of Director other than retiring director under Companies Act, 2013

Legal Framework under Section 160

Section 160 of the Companies Act, 2013, allows any person (other than a retiring director) to be appointed as a director in a general meeting, provided specific procedural requirements are met. This provision ensures that shareholders have the opportunity to nominate and elect directors, fostering democratic participation in corporate management.

Appointment of the following person for which candidature has been received, the provision of section 160 would apply:

  • appointment of an independent director
  • appointment of alternate director and nominee director
  • appointment of director to fill casual vacancy appointment of director in GM who was appointed as an additional director by BOD under section 161(1) of the companies Act 2013; and
  • any other person seeking appointment as director at general meeting of the company

Key Provisions of Section 160

  1. Eligibility to Propose a Candidate:
    • A member of the company may propose the appointment of a person as a director.
    • The candidate must provide consent to act as a director if appointed.
  2. Eligibility of a Candidate to be appointed as a director:
    • The proposed director must not fall under any disqualifications listed under Section 164 of the Companies Act.
    • They should meet the qualifications specified in the Articles of Association (AOA) of the company, if applicable.
    • The individual must possess a valid DIN issued by the Ministry of Corporate Affairs (MCA).
  3. Notice of Candidature:
    • The proposing member must submit a written notice of candidature to the company's registered office at least 14 days before the meeting.
    • The notice should include the name and address of the candidate and the proposing member.
  4. Verification and Confirmation:
    • The company verifies the eligibility and consent of the candidate.
    • The candidature is included in the agenda of the general meeting.
  5. Deposit Requirement:
    • The notice must be accompanied by a deposit of INR 1,00,000 (or such higher amount as prescribed).
    • This deposit is refunded if the proposed candidate secures more than 25% of the valid votes cast during the meeting.
  6. Disclosure to Members:
    • The company is required to inform its members of the candidature at least seven days before the general meeting. This may be done through:
    • by serving individual notices, on the members through electronic mode to such members who have provided their email addresses to the company for communication purposes, and in writing to all other members; and.

The company need not serve individual notices to members if it advertises the candidature or intention at least seven days before the meeting in a vernacular newspaper (in the principal language of the district where the registered office is located) and in an English newspaper circulating in that district

  • Publishing the notice of candidature on the company's website (if any).
 

Procedure for Appointment under Section 160

The Procedure for the appointment of a Director under section 160 shall be as same as per section 152 of the Companies Act, 2013

  1. Check Articles of Association (AOA): Verify that the company's AOA permits the appointment of a director other than a retiring director. If required, amend the AOA through a special resolution.
  2. Board Resolution: The Board of Directors must approve the inclusion of the resolution for the director's appointment in the notice of the general meeting.
  3. Issue Notice of General Meeting: A notice of the general meeting, including the resolution for the appointment, must be sent to all members, directors, and auditors in accordance with Section 101. The notice should provide details about the proposed director, including their qualifications, experience, and any interest in the company.
  4. Approval by Shareholders: Voting in General Meeting:
    • Members vote on the appointment of the proposed candidate during the general meeting.
    • The appointment is confirmed if the candidate secures the requisite majority i.e 25% of the total valid votes cast.
  5. Intimation to Registrar of Companies (RoC): File Form DIR-12 with the Registrar of Companies within 30 days of the appointment. The form must include necessary documents such as the board resolution, consent letter, and notice of candidature.

Exceptions and Exemptions

Section 160 - Right of Persons Other than retiring Directors to stand for Directorship does not apply to the mentioned companies:

  1. Private Company
  2. Section 8 Company (whose articles provide for the election of Directors by ballot)
  3. Government Company

Additional Considerations

  • Independent Directors: If the appointee is an independent director, compliance with Section 149(6) and Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, is required.
  • Fit and Proper Criteria: For companies in regulated sectors such as NBFCs or SEBI-registered entities, the director's appointment must align with the regulator's "fit and proper" criteria.

Post-Appointment Compliance

  • Update the statutory registers, including the Register of Directors and Key Managerial Personnel.
  • Update the company's website, letterhead, and other official records with the new director's details, if applicable.
 

Conclusion

Section 160 of the Companies Act, 2013, plays a vital role in strengthening corporate governance by enabling shareholders to propose and elect directors outside the traditional rotation framework. While the provision ensures transparency and democratic participation, companies and stakeholders must diligently adhere to its procedural requirements to avoid disputes or non-compliance issues. Proper implementation of Section 160 fosters a culture of inclusivity and accountability in corporate management

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Affluence Advisory
(corporates )
Category Corporate Law   Report

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