There is growing talk of gender diversity in boardroom. This change is already underway with the enactment of Companies Act, 2013 (the Act). The Companies Act, 2013 requires the appointment of at least one-woman director on the board. Regulation 17(1)(a) of the Securities and Exchange Board India (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires all listed entities to appoint at least one-woman director. The purpose behind such requirement is to ensure woman’s participation in boardroom and to promote gender diversity in decision making. However, the objective of law is being defeated by appointing women from within the company’s own family, often with no relevant skill set. Companies are appointing female directors merely for compliance’s sake. As most of these entities are family managed with large public stake. The Law is being followed in letter but not in spirit. To curb this practice, the SEBI(LODR) Regulation, 2018 provides that the top 1000 listed entities by market capitalization shall appoint at least one independent woman director. The requirement is for one woman director on the Board. However, there can be more women director on the Board of the company. Such woman director can an executive director or a non-executive director.
The second proviso to Section 149(1) of the Companies Act, 2013, read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rule, 2014 makes it mandatory to the appoint a woman director on the Board. The situations can be categorically captured as follow.
(i) Listed Company: Every listed company shall appoint at least one-woman director on its Board.
(ii) Other Public Company: Every other public company having paid-up share capital of ₹100 crore or more or turnover of ₹300 crore or more as on the lats date of the latest audited financial Statement, shall also appoint at least one-woman director on its board.
(iii) Newly incorporated Company: A company newly incorporated under the companies Act, 2013 and covered under the second proviso to section 149(1) shall be required to appoint at least one-woman director within a period of six months from the date of its incorporation.
(iv) Private Company: A private company, which is a subsidiary of a public company, shall be deemed to be a public company in accordance with section 2(71) of the companies Act, 2013. However, that private company continues to be a private company in its Article but for compliance purpose shall be considered as a public company. Therefore, a private company which is subsidiary of a public company under section 2(71) of the companies Act, 2013 read with Rule 3 thereon, is mandatorily required to appoint a woman director.
The paid-up share capital or turnover, as the case may be, as on last date of latest audited financial statement shall be taken into account.
Paid-up share capital for this purpose means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of share issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called.
Turnover for this purpose means the gross amount of revenue recognised in the profit and loss account from the sale, supply or distribution of goods or on account of services rendered, or both, by a company during a financial year.
Intermittent Vacancy: Any intermittent vacancy of woman director shall be filed up by the Board at the earliest but not later than immediate next Board Meeting or three months from the date of such vacancy whichever is later.
Penalty for Contravention: If a company is in default in complying with the any of the provisions of Chapter XI and for which no specific penalty or punishment is not provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand, and in case of a continuing failure, with a further penalty of five hundred rupees for each day during such failure continues, subject to a maximum of three lakhs in case of a company and one lakh rupees in case of an officer in who is in default.
A general penalty, as provided under section 172, will be attracted when a company defaults in complying with the provisions of section 149, as a specific penalty for failure is not provided under section 149.
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