Regime Appointment Of Women Director In India 2023

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Every business must have a minimum number of directors as stipulated in the Companies Act, 2013 ('Act'). Directors play an important function in the administration of the business. The Act established the idea of appointing two directors who are new, i.e. woman director and independent directors for the Board of Directors ('Board') of a particular category of companies.

The Section 149 in the Companies Act, 2013 and the Companies (Appointment and Qualifications of Directors) Rules, 2014 ('Rules') deal with the rules pertaining to women director on its board.

Applicability of Appointment of Women Director

The second provision of section 149(1) of the Act stipulates that a specific group of companies (as defined by the Rules) must at a minimum include one woman directors on their board. Rule 3 of the Rules states that at least one Appointment Of Women Director in the following group of companies:

Each listed company.

OR

Every other public company with:

1. Paid-up capital for shares in the amount of Rs.100 crores or higher or
2. Turnover of Rs. 300 crores or more.

If a company meets the two above requirements that it has to select a woman director for the board within 6 months from the date of fulfillment of the condition. The paid-up share capital or turnover is determined as of the date for the last audited financial statements.

Procedure of Appointment of Women Director

The procedure for appointing woman director is as the following:

The woman director candidate must signify her agreement to serve as director of the company using the prescribed form DIR-2 as well as provide an explanation of her disqualification on Form DIR-8 to the company.

The company must hold a general meeting while appointment of women director, and get the approval of shareholders to nominate the woman director by passing a resolution.

If listed companies, they have to mention the general meeting's proceedings at the time of the exchange prior to 24 hours after the conclusion of the general meeting and put it on its website within 2 working days.

According to the appointment of woman director companies act, 2013 by following the process of approving a resolution at the annual meeting of the company, company must submit the following forms to the ROC:

• Form MGT-14 within 30 days from the date of the resolution for appointment in the General Meeting.
• Form DIR-12 describing the specifics for the appointment of the woman director, within thirty days after the date of the appointment.
• The company must make all the entries required on the key managerial personnel register as well as the contract register in which the woman director is interested on the Form MBP-4.

In case of casual vacancy of woman director, the board of directors of the company should fill any vacancies of a woman director within three months from the date of the vacancy or until the next board meeting, whichever comes first. A woman director could become a non-executive director or the executive director.

Tenure of Female Directors

The term of appointment of women director lasts until next annual General Meeting (AGM) starting from the date of her appointment. She is entitled to renewal at the general meeting. However, the term of a woman director susceptible to retire by rotation in accordance with section 152(6) of the Act that applies to all other directors. She can also quit at any time on notice to the company.

Penalty for non-compliance with appointment of Woman Director

There is no specific penalty under the Act in the event of the non-appointment to women director. This is why the penalty prescribed under Section 172 of the Act applies to non-compliance regarding the appointment of woman director. The Section 172 Act states that the company and each person who is in breach will be penalized with an amount that cannot lower than Rs.50,000 but could go up to Rs. 5,00,000.

Applicability of Independent Directors

In Section 149(6) in the Act introduces the notion for independent directors. Rule 4(1) provides that the following organizations must include at least two directors that are independent directors:

Every public company that has:

• Turnover more than Rs.100 crore or
• Paid-up Share capital of more than Rs.10 crore or
• In total, outstanding loans, borrowings or deposits may exceed Rs.50 crore or more.
• If a business has to appoint higher number of directors who are independent as a result or the structure of its audit committee the more number of independent directors is required. The turnover, the paid-up share capital, outstanding loans, debentures and deposits are to be taken into consideration as of the date of the most recent financial statements.

Process of Appointment Of Independent Directors

The process of appointing independent directors is as follows:

The company must send a notice of its general meeting to all shareholders along with an explanatory statement attached to the notice of general meeting to discuss the appointment of women director and provide the reasons for selecting the person who will be appointed independent director of the company.

The company has to hold a general meeting, and then pass a resolution to appoint of independent directors.

If companies that are listed, they must release the general meeting's proceedings on the market before 24 hours from the end of the general meeting. It must put it on its website within 2 working days.

Following the appointment of women director through an act in an general meeting, company must submit the following forms to the ROC:

• Form MGT-14 within 30 days after passing of the resolution for appointment in the general meeting.
• Form DIR-12 describing the specifics regarding the nomination of an independent director within the first 30 days from the date of appointment.

The board must fill any vacancies that are intermittent to an independent director within three months after the date of the vacancy or until the next board meeting, whichever comes first.

Exemption from appointment of independent directors

Rules 4(2) of the Rules disqualifies certain unlisted public companies from having an independent director who fulfills the requirements specified in the Rule 4(1) and Rule 4(1) Rules. The following classes of unlisted public companies do not have to be appoint independent directors:

• A joint venture.
• A 100%-owned subsidiary.
• Dormant companies are defined in Section 455 in the Act.

Tenure of independent directors

According to Sections 149(10) and 149(11) of the Act the independent director may be appointed for a period up to five years. An independent appointment of women director can be appointed for a second five-year period after the passing of a special resolution at the annual meeting. However, this re-appointment will occur only after the complete board has completed the performance assessment.

An independent director cannot be in the director's post for longer than two consecutive years. But an independent director is able to be reappointed within the same organization after completing 3 years of completing 2 consecutive terms. However, any appointment lasting five or less than five years is considered to be a single term.

Penalties for non-compliance with the appointment of Independent Directors

No penalty specific is defined under the Act to prevent the appointment of women director. Therefore, the penalty in Section 172 of the Act is applicable in the event of non-compliance regarding the appointment for an independent director. In Section 172, the Act states that the company and each person who fails to comply is punished with a fine that will never be lower than Rs.50,000 but could go up to Rs.5,00,000

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