Unlocking Equality through Women Director:
“Equal Opportunity, Equal Representation”
The changes in the recent past in the regulatory environment on corporate governance have enhanced the role of directors and have made them trustees of good governance. MCA and SEBI recognize the importance of having women on the Board of directors to promote good corporate governance, accountability, and credibility. To ensure gender equality in top management positions, they have made it mandatory for certain classes of companies to have at least one female director. This not only improves corporate credibility and governance standards, but also boosts economic productivity and makes institutions more representative.
♦ Section 149 of the Companies Act 2013 and Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014, the following class of companies shall appoint at least one woman director-
(i) every listed company;
(ii) every other public company having-
a. paid-up share capital of one 100 crore rupees or more; or
b. turnover of 300 crore rupees or more
Provided that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:
Provided further that any intermittent vacancy of a woman director shall be filled-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.
Explanation– For the purposes of this rule, it is hereby clarified that the paid-up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.
♦ Also, Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 states that,
(1) The composition of board of directors of the listed entity shall be as follows:
a. board of directors shall have an optimum combination of executive and non-executive directors with at least one woman director and not less than fifty per cent of the board of directors shall comprise of non-executive directors:
Provided that the Board of directors of the top 500 listed entities shall have at least one independent woman director by April 1, 2019 and the Board of directors of the top 1000 listed entities shall have at least one independent woman director by April 1, 2020.
Explanation– The top 500 and 1000 entities shall be determined on the basis of market capitalization, as at the end of the immediate previous financial year;
Intermittent Vacancy: In accordance with Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014, any intermittent vacancy of a woman director must be filled up by the board of directors within 3 months from the date of vacancy or at the immediate next board meeting, whichever is later.
♦ Reporting requirements under Companies Act, 2013 w.r.t Woman Director:
1. Disclosure in the Board report of all the companies:
All companies are required to disclose in its annual return details of Penalties/ Punishment / Compounding of offences and the information would be required to be furnished separately for each of the following:
a. In respect of the company
b. In respect of the company’s directors
c. In respect of other defaulting officers
and the company’s reputation and image would be negatively impacted by the non-compliance disclosed in the annual report and this would result in a decrease in trust and confidence of all the stakeholders of the company.
2. Reporting by Public companies covered under Secretarial Audit
Pursuant to section 204(1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the secretarial audit report must confirm that the company has complied with the laws and regulations relevant to them, including the Companies Act, 2013. It must also state that the board of directors is properly constituted with a balance of Executive, Non-Executive, Woman and Independent Directors. The report should also highlight any non- compliances.
3. Reporting by Listed companies in the Corporate Governance report
The Board report on Corporate Governance & Management Discussion & Analysis, required by listed companies pursuant to Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations And Disclosure Requirements) Regulations 2015, includes a section on Corporate Governance with a Certificate from the practicing company secretary.
This report provides details of the board composition, including any non-appointments of women directors. In cases of non-appointment of a woman director, the certificate issued by the practicing company secretary will qualify this non-compliance.
♦ Procedure to appoint a Woman Director:
Same as appointing a regular director
♦ Non- Compliance: Penalty u/s 172.
Any company or officer that is in default of any provision of Chapter XI and for which no specified penalty is provided, shall be liable to a penalty of Rupees 50,000 and, for continuing failure, an additional penalty of Rupees 500 per day, up to a maximum of :
- 3,00,000/- for a company and
- 1,00,000/- for an officer
♦ As per section 205(1)(b)of the Companies Act, 2013 company secretary must ensure that the company complies with the applicable secretarial standards as issued by the Institute of Company Secretaries of India under section 3 of the Company Secretaries Act, 1980.
♦ Special attention: As per Section 2(71) of the Companies Act 2013, a private company which is a subsidiary of a public company, even when it continues to be a private company in its articles, shall be deemed to be a public company and hence, such subsidiary companies are mandated to appoint a woman director.
♦ Conclusion:
Women directors bring a unique perspective to the boardroom, helping to create an environment of gender equality and inclusivity. They can enhance effectiveness, bring new ideas to the table, and improve corporate governance. Women directors also bridge the gap between executive leadership and the workforce, ensuring better communication and understanding. This can lead to better decisions and improved business outcomes, as well as a more positive work environment for all employees. Ultimately, the appointment of women directors can help create an equitable and inclusive corporate culture.
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