Board Composition and Independent Directors Under Companies Act 2013

The Companies Act 2013 mandates specific board composition requirements — including the minimum and maximum number of directors, mandatory independent directors, woman directors and a resident director. These requirements vary based on whether the company is listed, public or private. Here is the complete guide.

Minimum and Maximum Directors

• Private company: Minimum 2 directors; Maximum 15 (can be increased by special resolution)
• Public company: Minimum 3 directors; Maximum 15
• One Person Company (OPC): Minimum 1 director; Maximum 15

Mandatory Independent Directors — Section 149(4)

The following companies must have Independent Directors:

• Listed public company: At least 1/3 of total directors must be independent directors (with audit committee requiring minimum 2/3 independent)
• Public company with paid-up capital ≥ ₹10 crore, OR turnover ≥ ₹100 crore, OR outstanding loans/borrowings ≥ ₹50 crore: Minimum 2 independent directors
• Private companies: Generally no independent director requirement — unless it's a subsidiary of a public company that requires them

Who Is an Independent Director?

An independent director under Section 149(6) must satisfy all of:

• Not be a promoter or related to promoters
• Not be a current or recent (past 3 years) KMP or employee
• Not hold (self/family) more than 2% of paid-up share capital
• Not have any material pecuniary relationship with the company (beyond sitting fees)
• Must be registered on the Independent Director Databank maintained by IICA (mandatory from December 1, 2019)
• Must pass the online proficiency test (or be exempt based on prior experience)
• Tenure: 5 years per term; can be re-appointed for one more 5-year term — total 10 years; then 3-year cooling-off period

Woman Director — Section 149(1)

• Listed company: At least one woman director — mandatory
• Public company with paid-up capital ≥ ₹100 crore OR turnover ≥ ₹300 crore: At least one woman director

Resident Director — Section 149(3)

• Every company must have at least one director who has stayed in India for a total period of not less than 182 days during the previous calendar year
• For newly incorporated companies: This requirement applies from the second year onwards

Conclusion

Board composition compliance under Companies Act 2013 is a recurring annual obligation — with specific requirements for listed companies, large public companies and all companies for the resident director condition. SPOTON provides company secretarial services including board composition audit, independent director appointment and MCA filing for companies across Kerala. Contact us for expert secretarial compliance services.