1. DIN Mandatory:

As Directors, we are sure you have your Director Identification Number (DIN) in place. Any person, who is proposed to be appointed as Director in any Company, is required to have a DIN. {Section 1531.

Every director having DIN in the event of any change in his particulars as stated in Form DIR-3 (For example – Changes in permanent residential address, residential address, Nationality etc.) intimate such change(s) to the Central Government within a period of 30 days of such change(s) in Form DIR-6 (section 157);

2. Document to be submitted before appointment as director

Before your appointment as Director, you will need to submit the following documents to the Company :

a) Form DIR-2 : Consent to act as Director (along with photograph, address and identity proof)

b) Form DIR-8 i.e. to declare that you are not disqualified from being appointed as a Director and (Section 164)

c) If sought to be appointed as Independent Director- Declaration of Independence.

d) If sought to be appointed as Director of Listed Company- Affirmation that you are not debarred from holding the office of Director by virtue of any SEBI order or any other such authority.

3. At First Board Meeting in which you participate as a Director, you need to submit Form MBP 1. {Section 184(1)1 for disclosure of Interest: stating names of other Companies wherein you are a Director/ member. (Section 184).

In case of Listed Company Directorship- You will also need to submit Initial disclosure of your shareholding in that Company under SEBI (Prohibition of Insider Trading Regulations).

4. Annual Disclosure of Interest :

Following shall form part of your Annual Disclosures:

i. MBP1 – Disclosure of Interest

ii. DIR 8 – confirming non-disqualification

iii. Declaration on compliance with Company’s Code of Conduct

iv. Annual Declaration of Independence ( In case you are an independent Director)

v. Confirmation that you are not debarred from accessing the capital markets or restrained from holding the position of Director in any listed Company by virtue of any order of the Securities and Exchange Board of India or any other such authority

vi. Confirm compliance with Company’s Code of Conduct on Prevention of Insider Trading and

vii. Annual disclosure of shareholding under Code of Conduct on Prevention of Insider Trading

5. Ongoing Disclosure requirements :

i. In the event of change (appointment/ Cessation) in your directorships/ Committees/ any change in disclosures already made to the Company, you will be required to disclose the same in Form MBP-1 in all Companies where you are Director, at the 1stBoard meeting held after such change or within 30 days of such change, whichever is earlier. {Section 184(1) read with Section 189(2)1.

ii. Details of shareholding in the Company/ Holding Company/ Subsidiary Company/ Fellow subsidiaries/ Associate Company, if any, and changes therein need to be disclosed to the Company. Company would be entering the details in their Register of Directors and KMP {Section 170(1) read with Rule 17 of Companies (Appointment and Qualification of Directors) Rules 2014)1.

In case you are an Independent Director you also need to disclose any change in the circumstances which may affect your status as an independent director during the year. {Section 149(7)1

6. Duty of specific Disclosure of Interest {Section 184(2)}:

If the Company in which you are a Director is entering into any contract or arrangement with another Body Corporate;

a) In which you or you along with any other Director hold more than 2% shareholding of that body corporate OR

b) You are a Promoter/ Manager/ CEO of that Body Corporate OR

c) Company in which you are a Director is entering into any contract with any firm or other entity in which you are a partner, owner or member

You need to disclose your concern or interest at the meeting of Board at which contract or arrangement is being discussed and shall not participate in such meeting. You may please recuse yourself at the time of discussion on such proposal and not vote on the said proposal.

In case you are not interested at the time of entering into contract but become interested subsequently, please disclose your interest forthwith or at 1st Board meeting held after you become interested.

Companies shall be entering details of such contracts in Register of Contracts maintained under section 189, which would be signed by all the Directors present at the meeting.

Your office shall become vacant in case you fail to disclose your concern or interest in any contract {Section 167}

As per Amendment in SS1 w.e.f. 1 Oct 2017- If the transaction is a related party transaction, then Director shall not be present at the meeting, whether physically or through Electronic Mode, during discussions and voting on such item, shall not vote and shall not be reckoned for the purpose of quorum.

As per MCA notification dated 5 June 2015- In case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest.

7. Disqualification for appointment of Director {Section 164}

If you are or have been a Director of a Company which has not filed

a) Financial Statements or annual returns for any continuous period of 3 financial years or

b) Failed to repay deposits/ Redeem Debentures or interest thereon or fails to Pay any Dividend declared and such failure continues for 1 year or more.

You would not be eligible to be re-appointed as Director of defaulting Company or appointed in other Company for a period of 5 years from the date on which said Company fails to do so. Further, you will get disqualified from being a Director.

Hence, every year, we will request you to provide a certificate / confirmation that all the Companies in which you are a Director have not defaulted in respect of above. 

We will provide compliance certificate for our Company for the same. You may in turn obtain back to back certificate/ confirmation from each of the respective Companies, where you are a Director.

8. Attendance at Board Meetings :

a) Your office as a Director shall become vacant in case you absent yourself from all the Meetings of the Board held during a period of twelve months with or without seeking leave of absence of the Board. {Section 167 (1) (b)1. Hence please ensure that you attend at least 1 Board meeting in a period of 12 months either in person or through Video Conference.

Director may participate through video conferencing in such meeting where restricted items ( e.g. annual financial statements, Board’s report, prospectus and matters relating to amalgamation, merger, demerger, acquisition and takeover etc.), are being considered , provided there is quorum in a meeting through physical presence of directors.{Section 173(2)1

b) Leave of absence shall be granted to you onlywhen a request for such leave has been received by the Company Secretary or by the Chairman. {Clause 4.2 of SS11. Please drop a line/ communicate in case you need to seek leave of absence.

9. Limit of no. of Directorships you can hold :

You will not be able to hold Directorship in more than 20 Companies of which not more than 10 shall be public Companies. Hence, please ensure that limit is never exceeded.

As per The Companies (Amendment) Ordinance, 2018 effective 2nd November 2018, on crossing the above threshold:

  • A director not complying with provisions of section 165(1) of the Act i.e. maximum number of directorships in which a person can act as a Director (20 companies of which maximum 10 companies can be Public) will be disqualified to be appointed as a Director.
  • The director will also vacate office on account of section 167, entailing vacation of office of a Director in case of any disqualification under section 164.

10. Procedure on Resignation as Director

You will have to provide your resignation letter in writing to the Company from which you are resigning to enable the Company to take the same on record and file DIR 12.

On your resignation from any of the Company you need to intimate all the other Companies wherein you are a Director of your resignation.

E-Form DIR-11 was hitherto required to be filed by Director after his resignation for giving notice of resignation of director to the Registrar pursuant to Section 168 (1) of the Companies Act, 2013 and Rule 16 of Companies (Appointment and Qualification of Directors) Rules, 2014.

However, MCA vide its notification dated 07.05.2018, have made Filling of DIR-11 optional in the hands of the Resigning director.

11. Performance Evaluation :

If you are a Director in any Listed Company or public company with a paid up share capital of Rs. 25 crores or more, you will be required to evaluate the performance of the Board, your own performance, committees and individual directors [This activity shall take place in April every year] {section 134(3)(p)1.

12. Additional Provisions for Independent Directors :

Declaration of Independence:

If you are an independent director then at the first meeting of the Board in every financial year or whenever there is any change which may affect the status of independence you will have to give a declaration that you meet the criteria of independence {Section 149(7)}.

Separate Meeting of Independent Directors:

Pursuant to Clause VII of the Schedule IV of the Companies Act, 2013 the independent Directors of the Company are required to hold at least one meeting in a year without the attendance of non-independent directors and members of management. All the Independent Directors of the Company shall strive to be present at such meeting. The Independent Directors in the meeting shall, inter-alia review:

i. The performance of non-independent directors and the Board as a whole;

ii. The performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;

iii. Assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

13. MANDATORY ANNUAL KYC OF DIRECTORS VIA E-FORM -DIR-3-KYC

(MCA vide notification dated 5 July 2018 had amended Companies (Appointment and Qualification of Directors) Rules, 2014, further by Rules called Companies (Appointment and Qualification of Directors) fourth Amendment Rules, 2018. They came into force w.e.f. 10 July 2018)

Every individual who has been allotted a Director Identification Number (DIN) as on 31st March of a financial year as per these rules shall, mandatorily submit e-form DIR-3-KYC to the Central Government on or before 30th April of immediate next financial year. (Annual Requirement for Directors to submit their KYC).

While filing the form, the Unique Personal Mobile Number and Personal Email ID would have to be mandatorily indicated and would be duly verified by One Time Password (OTP). The form should be filed by every Director using his own DSC (Digital Signature) and should be duly certified by a practicing professional (CA/CS/CMA).

14. INSIDER TRADING PROVISIONS (Applicable to Directors of Listed Companies)

Directors are ‘Designated Persons’ and need to abide by the respective Code(s) of Conduct on prevention of Insider Trading. Further, you shall not trade when you are in possession of Unpublished Price Sensitive Information (“UPSI”) about the Company and you shall not communicate or procure UPSI.

Basic compliances in relation to insider trading are as under:

(a) Trading Window:

During the closure of Trading Window, trading in securities of the Company is prohibited for designated persons and their immediate relatives.

(b) Pre-clearance:

Designated Person and their immediate relatives who intend to Trade in the equity shares, where the aggregate value of the Securities to be traded during a calendar month exceed the threshold  specified by the Company in a calendar month should pre-clear / seek prior approval for the proposed transaction by making an application to the Compliance Officer in the prescribed Form

(c) Reporting Requirements:

Initial Disclosure
Every person on appointment as a key managerial personnel or a Director of the company or upon becoming a promoter shall disclose his holding of securities of the company as on the date of appointment or becoming a promoter, to the company within seven days of such appointment or becoming a promoter.
Continual Disclosure
Every promoter, employee and Director of every company shall disclose to the company the number of such securities acquired or disposed of within two trading days of such transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of ten lakh rupees or such other value as may be specified;
Additional Annual Disclosure
SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018 – 31.12.2018

Directors are included in the definition of ‘Designated Persons’ and need to abide by the respective Code(s) of Conduct on prevention of Insider Trading.

Designated persons (“DP”) are required to provide disclosures on annual basis. In addition to the current applicable disclosures, the DP are now required to provide the following additional disclosures:

1. Directors/ DP shall disclose names, PAN, cell number etc. of the Immediate Relative & persons with whom such DP shares a material financial relationship to the company on an annual basis and also as and when it changes.

The term “material financial relationship” shall mean a relationship in which one person is a recipient of any kind of payment such as by way of a loan or gift during the immediately preceding twelve months, equivalent to at least 25% of such payer’s annual income but shall exclude relationships in which the payment is based on arm’s length transactions.

2. DP shall also disclose names of the educational institutions from which they have graduated and names of their past employers shall also be disclosed on a one time basis.

15. GENERAL

a. Directors shall disclose to the board of directors whether they, directly, indirectly, or on behalf of third parties, have a material interest in any transaction or matter directly affecting the listed entity (for listed companies – principle f of Listing Regulations);

b. Independent directors shall not be entitled to any stock options of the Company [Section 149(9)];

For more details on above provisions , you please refer Sections under Companies Act dealing with provisions pertaining to Directors including Section 153, 164, 165, 166, 167, 168, 177, 178, 184 read with related rules, 149 read with Schedule IV, SEBI Listing Regulations, SEBI (Prohibition of Insider Trading Regulations) etc.

Dated: 15 February 2019

Prepared and updated by : Brijbala Batwal and Iram Shaikh.

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