New Delhi, March 28: The new Companies Act has made it mandatory for companies to appoint at least one woman and two independent directors. Further, listed entities will need to have a director to represent the interests of small shareholders, if they demand.
Under the rules notified by the corporate affairs ministry and taking effect from next month, listed companies and public entities with a paid-up share capital of Rs 100 crore or more should have at least one woman director on their boards. It will also be applicable to entities with a minimum turnover of Rs 300 crore.
“Any intermittent vacancy of a woman director shall be filled up by the board at the earliest but not later than the immediate next board meeting or three months from the date of such vacancy, whichever is later,” the rules said.
Sai Venkateshwaran, partner and head of accounting advisory services of KPMG in India, said, “Corporates will get little time to understand the ramifications. One does hope the rules contain some additional transitional provisions that would provide companies reasonable time to comply with the new requirements.”
Besides, certain classes of corporates are required to have at least two independent directors on their boards. The rule would apply to public companies having minimum paid-up share capital of Rs 10 crore and those whose aggregate “outstanding loans, debentures and deposits” exceed Rs 50 crore.
Also, a listed company will be required to have a small shareholders’ director. The rule will be enforced if at least 1,000 shareholders, or one-tenth of their total number, move a notice for appointing such a director. The companies can, however, have such a director of their own accord. The tenure of a small shareholders’ director will be for a maximum of three years. They will not be eligible for re-appointment after that period.
To prevent the routing of money through shell entities, companies are required to compulsory maintain an official register having details of indirect investments along with reasons for not holding them in their own names.