149. Company to have Board of Directors

(1) Every company shall have a Board of Directors consisting of individuals as

directors and shall have—

(a) a minimum number of three directors in the case of a public company, two

directors in the case of a private company, and one director in the case of a One Person

Company; and

(b) a maximum of fifteen directors:

Provided that a company may appoint more than fifteen directors after passing a

special resolution:

Provided further that such class or classes of companies as may be prescribed, shall

have at least one woman director.

(2) 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 of

sub-section (1).

(3) Every company shall have at least one director who has stayed in India for a total

period of not less than one hundred and eighty-two days in the previous calendar year.

(4) Every listed public company shall have at least one-third of the total number of

directors as independent directors and the Central Government may prescribe the minimum

number of independent directors in case of any class or classes of public companies.

Explanation.—For the purposes of this sub-section, any fraction contained in such

one-third number shall be rounded off as one.

(5) Every company existing on or before the date of commencement of this Act shall,

within one year from such commencement or from the date of notification of the rules in

this regard as may be applicable, comply with the requirements of the provisions of

sub-section (4).

(6) An independent director in relation to a company, means a director other than a

managing director or a whole-time director or a nominee director,—

(a) who, in the opinion of the Board, is a person of integrity and possesses

relevant expertise and experience;

(b)           (i) who is or was not a promoter of the company or its holding, subsidiary or

associate company;

(ii) who is not related to promoters or directors in the company, its holding,

subsidiary or associate company;

(c) who has or had no pecuniary relationship with the company, its holding,

subsidiary or associate company, or their promoters, or directors, during the two

immediately preceding financial years or during the current financial year;

(d) none of whose relatives has or had pecuniary relationship or transaction

with the company, its holding, subsidiary or associate company, or their promoters, or

directors, amounting to two per cent. or more of its gross turnover or total income or

fifty lakh rupees or such higher amount as may be prescribed, whichever is lower,

during the two immediately preceding financial years or during the current financial

year;

(e) who, neither himself nor any of his relatives—

(i) holds or has held the position of a key managerial personnel or is or

has been employee of the company or its holding, subsidiary or associate

company in any of the three financial years immediately preceding the financial

year in which he is proposed to be appointed;

(ii) is or has been an employee or proprietor or a partner, in any of the

three financial years immediately preceding the financial year in which he is

proposed to be appointed, of—

(A) a firm of auditors or company secretaries in practice or cost auditors

of the company or its holding, subsidiary or associate company; or

(B) any legal or a consulting firm that has or had any transaction

with the company, its holding, subsidiary or associate company amounting

to ten per cent. or more of the gross turnover of such firm;

(iii) holds together with his relatives two per cent. or more of the total

voting power of the company; or

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit

organisation that receives twenty-five per cent. or more of its receipts from

the company, any of its promoters, directors or its holding, subsidiary or associate

company or that holds two per cent. or more of the total voting power of the

company; or

(f) who possesses such other qualifications as may be prescribed.

(7) Every independent director shall at the first meeting of the Board in which he

participates as a director and thereafter at the first meeting of the Board in every financial

year or whenever there is any change in the circumstances which may affect his status as an

independent director, give a declaration that he meets the criteria of independence as provided

in sub-section (6).

Explanation.—For the purposes of this section, “nominee director” means a director

nominated by any financial institution in pursuance of the provisions of any law for the time

being in force, or of any agreement, or appointed by any Government, or any other person to

represent its interests.

(8) The company and independent directors shall abide by the provisions specified in

Schedule IV.

(9) Notwithstanding anything contained in any other provision of this Act, but subject

to the provisions of sections 197 and 198, an independent director shall not be entitled to any

stock option and may receive remuneration by way of fee provided under sub-section (5) of

section 197, reimbursement of expenses for participation in the Board and other meetings

and profit related commission as may be approved by the members.

(10) Subject to the provisions of section 152, an independent director shall hold office

for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment

on passing of a special resolution by the company and disclosure of such

appointment in the Board's report.

(11) Notwithstanding anything contained in sub-section (10), no independent director

shall hold office for more than two consecutive terms, but such independent director shall be

eligible for appointment after the expiration of three years of ceasing to become an independent

director:

Provided that an independent director shall not, during the said period of three years, be

appointed in or be associated with the company in any other capacity, either directly or indirectly.

Explanation.—For the purposes of sub-sections (10) and (11), any tenure of an

independent director on the date of commencement of this Act shall not be counted as a term

under those sub-sections.

(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.

(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement

of directors by rotation shall not be applicable to appointment of independent directors.