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Right from being the first citizen of country with the most populous democracy in the world or being the Speaker of the House of People of the world’s second largest populated country or being the Chairman & CEO of the world’s leading food and beverage Company or being the Managing Director & CEO of India’s second largest bank and so on, the Indian women have shown their power and dominance everywhere. The list is endless.

The Ministry of Corporate realizing the importance of Indian women, with their efficient leadership and managerial skills has reserved a mandatory position of women in the Board of Directors of companies in the recently notified Companies Act, 2013, which is being applicable from 01st April, 2014. With this mandatory provision for representation of women on the Boards, India Inc is likely to have more talented women on the Boards of their companies.

Statutory provisions

A. Mandatory presence of Woman Director in the Board

The 2nd proviso to Sub section 1 of Section 149 of Act prescribes that such class or classes of companies as may be prescribed, shall have at least one woman director.

B. Applicability of provisions

This requirement is not applicable for all companies. According to 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 100 crore rupees or more; or

(b) turnover of 300 crore rupees or more:

Explanation: The paid up share capital or turnover, as the case may be, appearing in the last date of latest audited financial statements shall be taken into account. (Explanation to Rule 3 of The Companies (Appointment and Qualification of Directors) Rules, 2014.

C. Time Limit of Compliance

According to 1st proviso to Rule 3 of The Companies (Appointment and Qualification of Directors) Rules, 2014, the new companies which will be incorporated under Companies Act, 2013 and are covered in class of companies as provided in Rule 3 shall comply with such provisions within a period of six months from the date of incorporation.

D. Transitional Period of 1 year 

Sub section 2 of Section 149 provided that every company existing on or before the date of commencement of this Act shall within one year from such commencement comply with the requirements of the provisions. This means that class of companies covered in Section 149(1) and which are existing before 01.04.2014 shall comply with the minimum requirement of keeping one woman director in the Board before 31.03.2015. The new Companies Act, 2013 prescribes a minimum of 3 directors in case of public company and 2 directors in case of private companies with the maximum of 15 directors in the Board. Any increase in number of directors beyond 15 requires passing of special resolution.

E. Time limit for filling the vacancy

According to 2nd proviso to Rule 3 of The Companies (Appointment and Qualification of Directors) Rules, 2014 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. This means that the company has to fill the vacancy of woman director with another woman director before the immediate next Board meeting, subject to the maximum time period of 3 months.

What next?

The corporate sector in India now needs to gear-up the presence of women in their Board. The companies covered under this requirement will have to search for good women directors within the time frame allowed. The importance given by the new Act is certainly going to help in improving the representation of women directors on the Board. Although, only selected number of companies are covered under this requirement, but anyhow, it will make people realize “Behind every successful company, there is a Woman”.

Reference to Act means Companies Act, 2013 unless stated otherwise.

Views are personal and may not be relied as an opinion on any statutory act, section or rule.

Thanks for reading!!

Check out my other articles at CAclubindia:-

Companies Act - 2013: Internal Audit

Companies Act - 2013: Rotation of Auditors

CA. Amit G. Chandani

ACA, ACMA, Lic. ICSI, B.Com

(@) amitgchandani@icai.org

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Category Corporate Law, Other Articles by - CA. Amit G. Chandani 



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