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Pramod Kumar (Chief Manager (Law))     10 June 2010

Whether Qualification shares are necessary for a Director

Dear Sir,

I put following points for your kind consideration and reply:

1. Whether it is necessary to hold qualification shares by a Director in a company under The Companies Act 1956? If not,

2.  whether Articles can be amended to delete such provision, If  it is provided by Articles to hold such qualification shares by a Director?

The issue is urgent and I soloicit your kind guidance at the earliest,

with Regards,

 

PRAMOD KUMAR



Learning

 5 Replies

Ankur Garg (Company secretary)     10 June 2010

Dear Sir,

 

Provisions related to qualification shares are governed by section 270 of the companies act, 1956. A director of public company is also not required to hold qualification share unless required by articles u/s 270.

Further Section 270 and 272 does not apply to Private Company by virtue of Section 273 of the Act. However, the Articles of a Private Company may provide that the directors are required to obtain shares as qualification shares.

If your articles contain the requirement to hold qualification shares then by passing special resolution in the general meeting you can amend your articles and remove that clause from article.

Within 30 days of passing special resolution file form 23 with ROC.

Regards

1 Like

CS Pooja (Company Secretary)     11 June 2010

I agree with Mr. Garg.

Shaurya (CS)     28 July 2010

If the AOA of a Pvt. Comapny provides that Tble "A" shall apply, so far as it is applicable to private Companies; in that case whether directors of the company are required to hold qualification shares (Regu. 66 of Table A) or we can take protection of Section 273?

If Regu. 66 will apply then we need to amend the AOA to get rid of such provision; but what will be position of Directors as they are holding their positions since Incorporation ( for more thhan 2 months and they need to vacate u/s 283).

sajjan (CS)     23 August 2010

whatever said by mr.garg is rite

Mohan Shandilya (Senior Managing Partner)     25 July 2016

Sorry, with due respect I do not agree with Mr Garg. Qualification shares means minimum no. of shares required to become the director of a company. Companies Act, 1956 does not impose any compulsion regarding qualification shares. But if AOA of a company provides so, than section 270 provides the provisions regarding that. According to section 270:   (1) It shall be the duty of every director (who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect), to obtain his qualification within two months after his appointment as director. (2) Any provision in the articles of the company shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such. (3) The nominal value of the qualification shares shall not exceed five thousand rupees or the value of one share where the nominal value of one share exceeds five thousand rupees. (4) For the purpose of this section, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant. According to section 272, if, after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270, he shall be punishable with fine which may extend to Rs. 50,000 for every day between such expiry and the last day on which he acted as a director.


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