Section 165: Number of directorships
This section limits the number of companies in which a person can hold a directorship to 20, with a maximum of 10 public companies, and sets penalties for non-compliance.
Penalty
(6) If a person accepts an appointment as a director in violation of this section, he shall be liable to a penalty of two thousand rupees for each day after the first during which such violation continues, subject to a maximum of two lakh rupees.]
The section, clause by clause
What the section says
In plain terms
(1)No person, after the commencement of this Act, shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time:
A person cannot hold directorships in more than 20 companies at the same time, with a maximum of 10 public companies, and for public companies, directorships in private holding or subsidiary companies are included.
provisoProvided that the maximum number of public companies in which a person can be appointed as a director shall not exceed ten.
explanation3[Explanation I ].— For reckoning the limit of public companies in which a person can be appointed as director, directorship in private companies that are either holding or subsidiary company of a public company shall be included.
explanation4[Explanation II.—For reckoning the limit of directorships of twenty companies, the directorship in a dormant company shall not be included.]
(2)Subject to the provisions of sub-section (1), the members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.
Company members can specify a lower number of companies in which a director can hold office through a special resolution.
(3)Any person holding office as director in companies more than the limits as specified in sub- section (1), immediately before the commencement of this Act shall, within a period of one year from such commencement,—
Directors who held office in more companies than allowed before this law started have 1 year to choose which companies to stay with, resign from the rest, and inform those companies and the Registrar.
(3)(a)choose not more than the specified limit of those companies, as companies in which he wishes to continue to hold the office of director;
(3)(b)resign his office as director in the other remaining companies; and
(3)(c)intimate the choice made by him under clause (a), to each of the companies in which he was holding the office of director before such commencement and to the Registrar having jurisdiction in respect of each such company.
(4)Any resignation made in pursuance of clause (b) of sub-section (3) shall become effective immediately on the despatch thereof to the company concerned.
Resignations made to comply with the law become effective as soon as they are sent to the company.
(5)No such person shall act as director in more than the specified number of companies,—
A person cannot act as director in more companies than allowed after resigning or 1 year after the law started, whichever comes first.
(5)(a)after despatching the resignation of his office as director or non-executive director thereof, in pursuance of clause (b) of sub-section (3); or
(5)(b)after the expiry of one year from the commencement of this Act, whichever is earlier.
(6)If a person accepts an appointment as a director in violation of this section, he shall be liable to a penalty of two thousand rupees for each day after the first during which such violation continues, subject to a maximum of two lakh rupees.]
If someone accepts a directorship despite exceeding the limit, they will be penalized 2,000 rupees for each day after the first, up to 2 lakh rupees.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. The proviso ins. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).
- 2. The proviso subs. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).
- 3. The Explanation renumbered as Explanation I thereof by s. 53, ibid. (w.e.f. 9-2-2018).
- 4. Ins. by s. 53, ibid. (w.e.f. 9-2-2018).
- 5. Subs. by Act 29 of 2020, s. 33, for sub-section (6) (w.e.f. 21-12-2020).
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.