Corporate Governance and Board Constitution
Board composition
The Companies Act, 2013 requires a public company to have at least 3 directors, a private company 2 and an OPC 1; the maximum is 15, and more directors require a special resolution. Every company must have at least one director who stayed in India for at least 182 days during the financial year. A woman director is required for listed companies and prescribed public companies. Independent directors are required for listed companies and prescribed public companies; they must meet the criteria in section 149(6).
Meetings and quorum
The board must meet at least four times a year, with a gap of not more than 120 days between two meetings. The first meeting must be held within 30 days of incorporation. Notice is normally seven days. Board quorum is one-third of the total strength or two directors, whichever is higher; an OPC needs one director. Interested directors are not counted for an interested item.
Committees
A listed company and prescribed classes must constitute an audit committee and a nomination and remuneration committee. CSR committees apply above the section 135 thresholds.
Worked example
A public company holds board meetings on 1 April, 1 August, 1 December and 1 March. It has four meetings, but the gap from 1 April to 1 August is 122 days, exceeding 120 days. The meeting schedule is therefore non-compliant even though the annual count is correct. The fix is to hold the second meeting by 30 July.
Traps that cost marks
Independent director is not another name for non-executive director. A resident director is not the same as a resident Indian shareholder. Do not count interested directors in quorum for the item. Four meetings alone do not cure a gap of more than 120 days.