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yedhash (n/a)     30 September 2007

Companies Act

Is there any restriction on the number of companies in which a person can be a director?


Learning

 1 Replies

Prakash Yedhula (Lawyer)     30 September 2007

[align=justify][font=""trebuchet ms""][color=black]Yes. A person cannot be a director of more than twenty companies. The relevant provision in the Indian Companies Act is extracted below:[/color]

[color=black]""Section 275. [/color]
[color=black]No person to be a director of more than Twenty companies[/color]

[color=black]After the commencement of this Act, no person shall, save as otherwise provided in section 276, hold office at the same time as director in more than twenty companies.""[/color]

[color=black]{Earlier it was 15 companies and w.e.f. 13-12-2000 it became 20 companies}[/color]

[color=black]It is also worthy to take note of the folowing provisions of the Act with regard to your question:[/color]

Section 276
Choice to be made by Director of more that twenty companies at commencement of Act.

(1) Any person holding office as director in more than twenty companies immediately before the commencement of this Act shall, within two months from such commencement, -
[/font][/align]
[align=justify][font=""trebuchet ms""](a) choose not more than twenty of those companies, as companies in which he wishes to continue to hold the office of director;[/font][/align]
[align=justify][font=""trebuchet ms""](b) resign his office as director in the other companies; and[/font][/align]
[align=justify][font=""trebuchet ms""](c) intimate the choice made by him under clause (a) to each of the companies in which he was holding the office of director before such commencement, to the Registrar having jurisdiction in respect of each such company, and also to the Central Government.[/font][/align]
[align=justify][font=""trebuchet ms""](2) Any resignation made in pursuance of clause (b) of sub-section (1) shall become effective immediately on the dispatch thereof to the company concerned.[/font][/align]
[align=justify][font=""trebuchet ms""](3) No such person shall act as director -
 
(a) in more than twenty companies, after the expiry of two months from the commencement of this Act; or
[/font][/align]
[align=justify][font=""trebuchet ms""](b) of any company after dispatching the resignation of his office as director thereof, in pursuance of clause (b) of sub-section (1).

Section 277
Choice by person becoming Director of more than twenty companies after commencement of Act

(1) Where a person already holding the office of director in twenty companies is appointed, after the commencement of this Act, as a director of any other company, the appointment - 

(a) shall not take effect unless such person has, within fifteen days thereof, effectively vacated his office as director in any of the companies in which he was already a director; and

(b) shall become void immediately on the expiry of the fifteen days if he has not, before such expiry, effectively vacated his office as director in any of the other companies aforesaid. 

(2) Where a person already holding the office of director in nineteen companies or less is appointed, after the commencement of this act, as a director of other companies, making the total number of his directorships more than twenty, he shall choose the directorships which he wishes to continue to hold or to accept, so however that the total number of the  directorships, old and new, held by him shall not exceed twenty. None of the new appointments of director shall take effect until such choice is made; and all the new appointments shall become void if the choice is not made within fifteen days of the day on which the last of them was made.

Section 278
Exclusion of Certain Directorships for the purposes of Section 275, 276
and 277
.

(1) In calculating, for the purposes of section 275, 276 and 277, the number of companies of which a person may be a director, the following companies shall be excluded, namely :-
[/font][/align]
[align=justify][font=""trebuchet ms""](a) a private company which is neither a subsidiary nor a holding company of a public company;

(b) an unlimited company;

(c) an association not carrying on business for profit or which prohibits the payment of a dividend;

(d) a company in which such person is only an alternate director, that is to say, a director who is only qualified to act as such during the absence or incapacity of some other director.

(2) In making the calculation aforesaid, any company referred to in clauses (a), (b) and (c) of subsection (1) shall be excluded for a period of three months from the date on which the company cases to fall within the purview of those clauses.

Section 279
Penalty.

Any person who holds office, or acts, as a director of more than twenty companies in contravention of the foregoing provisions shall be punishable with fine which may extend to five thousand rupees in respect of each of those companies after the first twenty.

 
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