Restrictions on Appointment of Director

A person shall not be capable of being appointed director of a company by the articles and shall not be named as director of a company in a prospectus issued by the country or in a statement in lieu of prospectus filed with the Registrar by the company unless, he has by himself or by his agent authorized in writing before the registration of the articles and before the publication of the prospects or the filing of the statement in Lieu of the prospectus –

1) signed and filed with the registrar a consent writing to act as such director; and
2) either:
3) signed the memorandum for shares not being less in number or value than that of his qualification shares if any or
4) taken his qualification shares, if any from the company and paid or agreed to pay for them or
5) signed and filed with the Registrar an undertaking in writing to take from the company his qualification shares, of any, and pay of them or
6) Made and filed with the registrar an affidavit to the effect that shares, not being less in number or value than that of his qualifications shares if any are registered in his name.

The above provisions shall not apply to

1) A company not having a share capital
2) Private company
3) A company which was private company before becoming a public company.
4) A prospectus issued by or on behalf of a company after the expiry of one year from the date on which the company has entitled to commence business.

Number of directorships:

No person shall hold office the same time as director in more than 15 companies.

Any person holding office as director in more than 15 companies shall within two months from 13.12.2000,
1) choose not more than 15 of those companies in which he wishes to continue to hold the office of director;
2) resign his office as director in other companies and
3) Intimate to each of the companies to the Registrar and to the Central Government the choices made by him.

Any resignation shall becomes effective immediately on the dispatch thereof to the company concerned

Where a person already holding the office of director in 15 companies is appointed as a director of any other company, the appointment shall not take effect unless such person has within 15 days thereof effectively vacated his office as director in any of the companies in which he was already a director. His appointment shall become void immoderately on the expiry of 15 days if he was not before such expiry effectively vacated his office as director in any of the other companies.

Where a person already holding the office of director in fourteen companies or less, is appointed as a director of other company, that is making the total number of his directorships more than fifteen, he shall choose the directorships which he wishes to continue to hold or to accept, so however that the total number of the directorships old and new held by him shall not exceed fifteen. None of the new appointment of directors shall take effect until such a choice is made. All the new appointments shall become void if the choice is not made within 15 days within days of the day on which the last of them was made.

Exclusions in calculating the number of companies of which a person may be a director the following companies shall be excluded:

1) A private company which is neither a subsidiary nor a holding company. ‘
2) An unlimited company
3) An association not carrying on business for profit or which prohibits the payment of a dividend or
4) A company in which such a person is only an alternate director.
Any person who holds office, or acts as a director in more than fifteen companies shall be punishable with fine which may extend to Rs 50,000 in respect of each of those companies after the first fifteen.
Source: Business Law

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