Introduction
Corporate governance thrives on transparency and inclusivity. The Companies Act, 2013, through Section 160, empowers individuals other than retiring directors to contest for a directorship, ensuring that companies remain open to fresh leadership and diverse perspectives. Complementing this, Rule 13 of the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribes how companies must notify members about such candidatures. This article demystifies these provisions for students, professionals, directors, shareholders, and management teams.
What Does Section 160 Say?
Section 160 of the Companies Act, 2013 grants any person who is not a retiring director the right to stand for directorship at a company’s general meeting, provided certain conditions are met:
- Eligibility:
- The candidate must not be disqualified under Section 164.
- Must hold a valid Director Identification Number (DIN).
- Consent to act as a director if appointed.
- Notice of Candidature:
- A written notice must be submitted to the company’s registered office at least 14 days before the meeting, signed by the candidate or a member proposing them.
- The notice should include the candidate’s name, address, and intention to stand for directorship.
- Deposit Requirement:
- A deposit of ₹1,00,000 (or higher as prescribed) accompanies the notice.
- Refundable if the candidate gets elected or secures 25% of valid votes.
- Exemptions: No deposit for independent directors or those recommended by the Nomination and Remuneration Committee or the Board.
- Applicability:
- Not applicable to private companies, Section 8 companies, Nidhi companies, and certain government companies.
Rule 13: Notice to Members
Rule 13 of Companies (Appointment and Qualification of Directors) Rules, 2014 ensures transparency by mandating companies to inform members about such candidatures:
- Timeline: At least 7 days before the general meeting.
- Modes of Communication:
1. Individual Notices:
-
- Through email (for members who have shared email IDs).
- In writing for others.
2. Website Disclosure: If the company has a website.
3. Newspaper Advertisement:
-
- One in a vernacular newspaper of the district where the registered office is located.
- One in an English newspaper circulating in that district.
**if the company has advertises the candidature not less than 7 days before the meeting in one vernacular newspaper and in one English newspaper than it will not be necessary to serve individual notices**
This dual approach ensures that shareholders are well-informed and can exercise their voting rights effectively.
Why Is This Important?
- For Professionals: Essential for compliance and advisory roles.
- For Directors & Shareholders: Promotes democratic participation and transparency.
- For Management: Helps in planning board composition and avoiding legal pitfalls.
Practical Insights
- Companies should maintain a checklist for Section 160 compliance during AGM preparations.
- Candidates must ensure timely submission of notice and deposit to avoid disqualification.
- Digital communication and newspaper ads are not mere formalities—they safeguard shareholder rights
FAQ
1) Does this section apply to Additional Directors who will be regularized in the ensuing General Meeting?
Ans: Yes, as this section says, “who is not retiring” and additional directors are not covered under section 152 for retire by rotation.
2) Is there any format for candidature, which is being prescribed under the act?
Ans: No, there’s no such format of candidature prescribed (however a sample draft is annexed at the end of this article).
3) A private company which is a subsidiary or wholly owned subsidiary of a public company needs to comply with these sections and its rules even when such a subsidiary continues to be a private company in its articles?
Ans: Yes, as the exemption is available to private company and this scenario attracts the concept of Deemed Public Company as per section 2(71) of the Companies Act, 2013
Draft of Notice of Candidature
Sample 1 (by the member of the Company)
NOTICE UNDER SECTION 160 OF THE COMPANIES ACT, 2013 FOR PROPOSING THE CANDIDATURE OF A PERSON AS DIRECTOR OF THE COMPANY
Date: ——–
To,
The Board of Directors
————————— Private Limited / Limited
(address)
Subject: Notice under Section 160 of the Companies Act, 2013 for proposing the Candidature of Mr. /Ms. ———-(DIN: ———) for his/her re-appointment as Director / Managing Director / Independent Director of the Company.
I, —————— , being shareholder of the company, holding —- % of shares in the company do hereby give notice under Section 160 of the Companies Act, 2013 proposing the Candidature of Mr. /Ms. ———- (DIN: ———) for his/her re-appointment as Director / Managing Director / Independent Director of the Company at the ensuing Annual General Meeting of the Company.
You may note that, the requirement of deposit of Rs. 1,00,000 shall not be applicable since his appointment has been recommended by the Board of Directors of the Company.
I hereby request to consider the proposal.
Thanking You,
Your’s Truly
__________
(name of the shareholder)
Sample 2 (by the Director himself)
Date: ——–
To,
The Board of Directors
————————— Private Limited / Limited
[Address]
Subject: Notice under Section 160 of the Companies Act, 2013 for proposing the Candidature of Mr. /Ms. ———- (DIN: ———) for re-appointment as [Director / Managing Director / Independent Director]
I, —————-, Director of the Company (DIN: ———-), hereby submit this notice under Section 160 of the Companies Act, 2013, proposing my candidature for re-appointment as Director / Managing Director / Independent Director at the forthcoming Annual General Meeting of the Company.
Please note that the requirement of a deposit of ₹1,00,000 is not applicable in this case, as my re-appointment has been recommended by the Board of Directors.
I kindly request the Board to consider and approve this proposal.
Thank you for your attention and support.
Yours faithfully,
_____________
(Name of the Director)
DIN: ———–
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