This article has been written by Ishika rawat , a student studying LLB from Asian law college , Noida. The author is 1st year law student.

MEANING OF OFFICER IN DEFAULT UNDER THE COMPANY ACT 2013

Section 2(60)   :- officer who is in default‖, for the purpose of any provision in this Act which enacts that an  officer of the company who is in default shall be liable to any penalty or punishment by way of  imprisonment, fine or otherwise, means any of the following officers of a company, namely:— 

(i) whole-time director; 

(ii) key managerial personnel; 

(iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified; 

(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default; 

(v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity; 

(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance; 

(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer; 

 

With the realtion of section 149(12) Notwithstanding anything contained in this Act,— 

(i) an independent director; 

(ii) a non-executive director not being promoter or key managerial personnel, 

shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently. 

 

ASCERTAIN THE OFFICER IN DEFAULT 

First the nature of officer of default is decided by the registrar and secondly the if the proceeding  initiated then the proceeding  and decision taken by the board of director should be done if the sufficient evidence is present against them. Then if thus initiated then such proceeding can be done after receiving the due sactions from MCA .

 

TYPES OF DIRECTORS

There are various kinds of directors in a company:-

1. Resident directors : – section 149(3) of the companies act 2013 states that every company shall have one director who stayed in India for a total period of not less than 100 and 82  days in previous calender.
2.  Independent directors :- section 149(4) of the companies act 2013 states that in the public company shall have atleast of 1/3 of the  total number of directors as independent directors and the central government may prescribe the limit.
3. Small shareholder director :- according to the section 151 of the companies act 2013 , small shareholder director means a shareholder who is holding shares of nominal value of not more than 20 thousand rupees or such other sum as prescribed.
4. Right of other person to stand for directorship :- a person who is not a retiring director is eligible to be appointed as director if he or any member gives  a notice proposing him to be appointed as director .
5. Alternate director :- alternate director shall be appointed as a director for a period of 3 months or more from India of absence.
6. Nominee director :- section 149(7) explanation define the nominee director as director nominee nominated by the financial institution which was as per the law in force or of any agreement or appointed by any government or interested person .

INDEPENDENT DIRECTOR

According to the companies act 2013 , section 149(6) states that independent director is the director who is not a

1. Managing director 
2. Whole time director
3. Nominee director

But the independent director is the :-

1. He/she is a person of integrity and possesses expertise and experience.
2. Who is /was not a promoter or director of the company or its holding , subsidiary or associate company.
3. Who has  or had no pecuniary relationship with the company , or during the 2 immediately preceding or during the current financial year.
4. Whose relatives must not have or had pecuniary relationship with the company or holding , subsidiary or associate company or their promoter or director amounting to 2 per cent or more of its gross turnover or total income of 50 lakh rupees or higher.
5. Who neither himself nor his relatives :- 

1. Hold or has held the position of a key managerial personnel.
2. Is or has been an employee or proprietor or a partner in any of the three financial year immediately preceding to the financial year .
3. Who along with his relatives hold the 2 percent or more of voting power .
4. Who is a chief executive or director of NPO which receive 25 per cent or more of its receipts or who hold 2 per cent or more of the total voting power of the company .

1. Who has qualification prescribed.

• APPOINTMENT OF DIRECTOR 

 

Under the section 152 of The companies act 2013 , when no provision of the company articles is mentioned regarding the appointment of director then :- (1) .

1. The subscriber to the memorandum who are individual shall be the first director of the company until the director are duly appointed.
2. In case of the one person company , an individual would be first director until the director are duly appointed in accordance with provision of law.

1. Every director of the company  shall be appointed in general meeting .
2. Must have director identification number under section 154.
3. Every person proposed to be appointed as the director shall furnish his director identification number and a declaration  that he is not disqualified to become a director under the act.
4. Must not act as a director unless he give his consent to hold the office as director and such consent must be filed with the registrar within 30 days of his appointment. But in case of independent director , an explanatory statement along with the fulfillment of the condition is a must.
5.  A . Unless and until the article provide for the retirement of all the director at every general meeting , not less than the 2/3rd of the total number shall :- 

1. Period of office is liable to determination by retirement of director by rotation.
2. Be appointed by the company in general meeting .

B   The remaining director of the company shall be appointed by the company in general meeting .

C  At the first annual general meeting of the public company and at every subsequent annual general meeting , 1/3rd of such director shall retire by rotation or the number must be three or multiple of 3 or the number nearest to 1/3rd shall retire.

D  the director who shall retire by rotation at every general meeting shall be those of the longest in office since their last appointment but they remain between person who become director on the same day shall retire as per agreement between themselves by determining a lot.

E   A general meeting in which director retire , the company may fill the vacancy by appointing the retiring director .

1.  A. If the vacancy has not filled up or the meeting has not resolved then meeting will be adjourned till the same day in the next week or if that day is national holiday ,then till the next succeeding day which is not the holiday.

B  If at the adjourned meeting also the vacancy has not filled up for the director then the retiring director shall be deemed to be reappointed at the adjourned meeting if :- 

• At the current meeting or the previous meeting a resolution for the re appointed of such director has been put to the meeting and lost.

• The retiring director has expressed his unwillingness to be reappointed provided in writing .

• He is not qualified or is disqualified for reappointed .

• A resolution whether special or ordinary for appointment or reappointment by virtue of provision of an act.

• Section 162 is applicable .

• KEY MANAGERIAL PERSON

 

 Key managerial person plays a very important role in the working of the operation of the company . It is because of their contribution that every company work efficiently and effectively .

 Section 203 of the companies act 2013 provide that every company has certain class of people who work as the whole time key managerial personnel which are :- 

• The chief executive officer or the managerial director or the manager;
• The company secretary ;
• The whole time director;
• The chief financial officer; and 
• And even an individual can both chair person and managing director or chief executive officer at the same time after the commencement of this act unless the article of such company provide or the company has multiple business .

 

• CERTAIN FEATURE OF KMP 

 

1. KMP must be appointed by resolution which include terms and condition along with remuneration.
2. KMP shall not hold office in more than one company except in subsidiary .
3. If there has been a vacancy in the office of KMP , then such vacancy must be filled within 6 month at the meeting of the board.
4. In case of violation of the provision :- 

1. Company shall be liable to fine of less than 1 lakh and it may extend to 5 lakh
2. Every director or KMP shall be liable to pay fine which may extend to 50,000 and in case of continuing violation shall be liable to pay fine of 1,000 for every day  from such continuing violation day.

FUNCTION OF COMPANY SECRETARY

Section 205 of the companies act 2013 states that :-

APPOINTMENT 

Section 196 of the companies act 2013, states the appointment of the managing director or manager :-

1. A managing director and a manager cannot be appointed at the same time .
2. Cannot re- appoint the managing director , whole time director or manager for 5 year .
3. No company can appoint or continue the employment as managing director or manager etc who :- 

1. Below age of 21 year  or has attained the age of 70 years.
2. Undischarged insolvent 
3. Suspended payment to its creditor or has made composition with them.
4. Convicted by court or sentenced for imprisonment of the term of 6 month.

1. Subject to the provision of section 197 and schedule 5 , appointment and remuneration payable shall be decided in the next general meeting . And return  shall be filed within 60 days of such appointment with the registrar.
2. If the appointment of the managing director , manager or the whole time director has not approved then act done by them before the approval shall be deemed to be invalid.

• BIBLIOGRAPHY

1}  The companies act 2013

2}  Company law and practice by Dr. G.K. Kapoor and Dr. Sanjay Dhamija

3} company law by Avtaar Singh

Aishwarya Says:

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