Qualification Shares

thanks nitin........

My Pleasure Kapil

Share Qualification of Director:

      The companies Act does not prescribe any qualification for Directorship either as to age, education, experience or otherwise, except to provide that he must be an individual (Section-253 ).

      Nor does it prescribe any share qualification for director, unless the Articles provides otherwise.

      The Articles of a company may require a director to hold a certain number of shares in the company as share qualification.

      The Companies Act does not make it obligatory for a director to hold a certain number of shares, unless Articles provide, otherwise a director need not necessarily be a shareholder of the company.

      It is however natural that the directors who are entrusted with the entire management of the company must have something stake in the company. Otherwise, they may not be in the ordinary course take sufficient interest in the efficient management of the company. That is why the Articles of most companies provide share qualification for directors.

      Regulation 66 of Table A provides that the qualification of director shall be holding of atleast one share in the company, that is he must be a shareholder.

Dear Mr. Vannan

As per question he is asking abt Shareholding Details if AOA says that and u r clarifying abt sec 270

Pls clarify abt the nominal amount...

Regards

Dear Nitin Grover!

Q is: Is it compulsory for all the directors to get qualification shares?

Your illustration about nominal value of qualification shares is appropriate. In addition to my earlier reply, now I am added some few points about qualification shares as per Companies Act.

QUALIFICATION SHARES

Qualification shares means minimum no. of shares required to become the director of a company. Companies Act, 1956 does not impose any compulsion regarding qualification shares. But if AOA of a company provides so, than section 270 provides the provisions regarding that. According to section 270: 

(1) It shall be the duty of every director (who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect), to obtain his qualification within two months after his appointment as director.

 (2) Any provision in the articles of the company shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such.

(3) The nominal value of the qualification shares shall not exceed five thousand rupees or the value of one share where the nominal value of one share exceeds five thousand rupees.

(4) For the purpose of this section, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant. According to section 272, if, after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270, he shall be punishable with fine which may extend to Rs. 50,000 for every day between such expiry and the last day on which he acted as a director.

According to section 273, section 270 and 272 shall not apply to a private company, unless it is a subsidiary of a public company. Non-applicability of provisions of Qualification shares.

1. Section 270 and 272 shall not apply to a private company, unless it is a subsidiary of a public company

2. A director appointed by CG u/s 408 need not to hold qualification shares.

3. Nominee directors appointed by financial institutions are not required to hold qualification shares.

4. Those directors who are not required by AOA of the company to hold qualification shares are not required to hold qualification shares.

Thanks Mr. Mani Vannan.

Dear Mr. Vannan

I have shown this if AOA allows only then

and thats the same thing i said u r posting Sec 270 here and i have tried to expand it in simple lang.

and i have also shown abt 5000 Rs and its only for Public Companies

and one more imp thing is its only for qualification it does not mean that director cant purchase more shares or say more than of rs 5000.

As per Section 270 max value for Compulsory Acquisition is Rs 5000/- or a one share which must be fulfilled within 2 months otherwise Director have to Vacate his Office if he does not vacate than Panelty if of Rs. 500/- per day for continuation of default

Regards

what if articles of a public company require a director to hold qualification shares within 3 months or say  6 months (period longer than 2 months) of his appointments as a director? Sec 270(2) prohibits a time period SHORTER than 2 months not LONGER.