LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Section 160 of co.act-2013

RACHANA DAGA (CS) (555 Points)

17 April 2014

Dear Madam/Sir,

Whether Section 160 is applicable for both companies?
Candidature for Director can deposit Rs.1, 00,000/- by way of Cash? Or he has to deposit money only by way of cheque /demand draft.
Whether Additional Director have to deposit Rs. 1, 00,000/- to the company ?

Please help.

Thanking you,

Regards,

Cs.Rachana Daga

Reply
Follow
Share

12 Replies

The Company Law Desk (CA Practice ) (103 Points)
Replied 19 April 2014

Madam

After referring to Section 160 & Section 161 of the Companies Act 2013 our opinion in respect to the above queries are as under:

1) Earlier such provision on appointmnet of director was applicable for Public Company. But now section 160 is applicable on both private and public companies.

2) The mode of deposit of money has nowhere been defined in the act and the rules. But in our opinion the same has to be in other than cash otherwise the purpose of the section will be defeated as reliability of cash transactions is very less and the same can be manipulated.

3) In our view there is no requirement to deposit the security in case of an addition director as per section 161.

Hope your query is addressed properly.

For further queries & clarifications visit www.thecompanydesk.webatu.com

Or write us at thecompanydesk @ gmail.com

The Company Law Desk

The Company Law Desk (CA Practice ) (103 Points)
Replied 19 April 2014

Madam

After referring to Section 160 & Section 161 of the Companies Act 2013 our opinion in respect to the above queries are as under:

1) Earlier such provision on appointmnet of director was applicable for Public Company. But now section 160 is applicable on both private and public companies.

3) In our view there is no requirement to deposit the security in case of an addition director as per section 161.

Hope your query is addressed properly.

For further queries & clarifications visit www.thecompanydesk.webatu.com

Or write us at thecompanydesk @ gmail.com

The Company Law Desk

1 Like

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 19 April 2014

When an additional director is to be appointed as regular director in general meeting, Sec.160(1) will apply and deposit of Rs.1 lac will have to be given since he is not a retiring director at the general meeting as providing in the Section.

1 Like

The Company Law Desk (CA Practice ) (103 Points)
Replied 19 April 2014

Sir you are correctly saying that an Additional Director is not a retiring director. But the is not a fresh appointee he is a replacement needs to be considered. Also as per Section 160, the Rs 1 Lac deposit is required in cases where the director is appointed in the General Meeting. And the additional director as per Section 161 is appointed by the Board of Directors and not in a General Meeting. However we respect your view, but in our opinion and interpretation of Sections 160 & 161 it is clear that additional director is not required to bring in any security.

1 Like

gnanagurusasmy (ca) (55 Points)
Replied 26 April 2014

I do agree with the views of Mr P C Agrawal. The Appointment of addl director is valid only till the next AGM. There is no other section other than sec 160 to appoint the Addl director as a Regular Director.

Ekta (Practicing CS) (423 Points)
Replied 26 April 2014

In Sec.160, it is prescribed that "................along with deposit of rupees one lakh or such higher amount as may be prescribed which shall be refunded to such person or , as the case may be, to the member, if the person proposed gets elected as a Director or gets more than twenty five percent of total valid votes ........."

Now my query is if the proposed person does not get elected in GM or does not get more than 25% valid votes, then will the deposit amount be forfieted by the Company??

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 26 April 2014

Yes please.

Priyank (Assistant Manager) (70 Points)
Replied 20 May 2014

Dear Sir,

How we ll accout for this amount and what are the disclosure for the same?

Whether copmpany have to open seprate ledger code for the same and accounted separately or can be treated like a vendor?

Thanks & Regards,

Priyank Jain

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 20 May 2014

There is no doubt about the fact that for regularization of additional director, we have to follow the procedure given in section 160 in totality which includes deposit of money as desired by Section 160. This is an old practice keeping in view old circular of DCA.

It is advisable to deposit security money through cheque only to ensure transparency of transaction.

Thanks

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 20 May 2014

More clarification w.r.t. Section 160

Is the process of section 160 (Section 257 in CA 1956) applicable to appointment of Independent Directors?

Section 160 talks about the procedural requirements for any person to be eligible to stand for directorship, other than a retiring Director.

Making sense of the provision

Section 160 corresponds to section 257 of the 1956, Act. The section requires a deposit of Rs. 100,000/-, where a member or the Director himself, proposes a non-retiring director.

Now the question arises, where the proposed appointee is being proposed by the Board itself is there any scope for application of the section? The section predicates intimation to be given by the proponent to the company (special notice), and information to be circulated by the company to members.

All this is irrelevant where the company itself is proposing the Director. Section 178 and Para IV of Schedule IV require the Board to propose the Independent Director. This seems completely incompatible with the provisions of section 160, which is applicable where a member or the Director himself is proposing the candidature.

Long time back, the Department took a view that the section would be applicable to an additional Director who comes for regularisation - this is also not a case of a contesting Director.

The Independent Director is being brought in as a benefactor, by the company itself. His name may have been selected by the company from the database mentioned in section 150. So, the obvious question arises why would the proposed appointee put up a deposit?

Of course, the intent of the section is to deter frivolous proposals for candidature. But if the company itself proposes the candidature, there seems no reason to apply section 160.

So, it can be fairly summarised that the appointment of Independent Directors should not be subjected to the mere compliance of section 160, as their appointments would be proposed directly by the Board to members.

I would like to thank Mr. Vinod Kothari ji for sharing his knowledge in this regard with professional fraternity.

Thanks

CS Ankur Garg