MCA has released General Circular 14/2014 dated June 09, 2014.
It is a clarification on Rules prescribed under Companies Act, 2013 -
Matters relating to appointment and qualification of directors and
Independent Directors reg.
Clarifications have been given on the following matters :
1. Section 149(6)(c) : "pecuniary interest in certain transactions" - In
view of the provisions of Section 188 which take away transactions in the
ordinary course of business at arm's length price, from the purview of
related party transactions, an "ID" will not be said to have a pecuniary
relationship. It also does not include receipt of remuneration, from one or
more companies as sitting fees, reimbursement of expenses for participation
in the Board and other meetings and profit related commission approved by
the members, in accordance with the provisions of the Act.
2. Section 149 : Appointment of IDs - In view of the transitional period
of one year provided under Section 149(5), it has been clarified that it
would be necessary if it is intended to appoint existing IDs under the new
Act, such appointment shall be made expressly under Section 149(10)/(11)
read with Schedule IV within one year from April 01, 2014, subject to
compliance with eligibility and other conditions.
3. Section 149(10)/(11) : Appointment of IDs for less than 5 years -
Section 149(10) provides for a term of "upto five consecutive years" for an
ID and any term of less than five years, shall constitute as one term under
Section 149(10) of the Act. Further, under Section 149(11), no person can
hold office of ID for more than "two consecutive terms", and shall have to
demit office, even if the total number of years in the two consecutive terms
is less than ten years. He shall be eligible for re-appointment only after
the requisite cooling off period of three years.
4. Appointment of IDs through letter of appointment : Para IV(4) of
Schedule IV of the Act - Only Appointment of IDs under the new Act would
need to be finalized through a letter of appointment.
It is a clarification on Rules prescribed under Companies Act, 2013 -
Matters relating to appointment and qualification of directors and
Independent Directors reg.
Clarifications have been given on the following matters :
1. Section 149(6)(c) : "pecuniary interest in certain transactions" - In
view of the provisions of Section 188 which take away transactions in the
ordinary course of business at arm's length price, from the purview of
related party transactions, an "ID" will not be said to have a pecuniary
relationship. It also does not include receipt of remuneration, from one or
more companies as sitting fees, reimbursement of expenses for participation
in the Board and other meetings and profit related commission approved by
the members, in accordance with the provisions of the Act.
2. Section 149 : Appointment of IDs - In view of the transitional period
of one year provided under Section 149(5), it has been clarified that it
would be necessary if it is intended to appoint existing IDs under the new
Act, such appointment shall be made expressly under Section 149(10)/(11)
read with Schedule IV within one year from April 01, 2014, subject to
compliance with eligibility and other conditions.
3. Section 149(10)/(11) : Appointment of IDs for less than 5 years -
Section 149(10) provides for a term of "upto five consecutive years" for an
ID and any term of less than five years, shall constitute as one term under
Section 149(10) of the Act. Further, under Section 149(11), no person can
hold office of ID for more than "two consecutive terms", and shall have to
demit office, even if the total number of years in the two consecutive terms
is less than ten years. He shall be eligible for re-appointment only after
the requisite cooling off period of three years.
4. Appointment of IDs through letter of appointment : Para IV(4) of
Schedule IV of the Act - Only Appointment of IDs under the new Act would
need to be finalized through a letter of appointment.
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