Overview
Section 165 of the Companies Act, 2013 prescribes limits on the number of directorships an individual can hold simultaneously in companies in India, including specific provisions and penalties for violation.
Statutory Limitations on Directorships
- No person can be a director, including as an alternate director, in more than twenty companies at the same time.
- Out of these, directorship in public companies cannot exceed ten.
- For the public company limit, directorships in private companies that are holding or subsidiary of a public company are included.
- Dormant company directorships are excluded from the overall limit of twenty.
Company-Specific Restrictions
- By special resolution, members of a company may specify a lower ceiling for their directors than the statutory maximum.
Transition Provision for Existing Directors
- Directors exceeding the limit at the Act’s commencement had one year to choose up to the permitted number of companies to continue as director.
- Such directors must resign from the excess companies and notify all affected companies and registrars of their choices.
- Resignation under these provisions is effective immediately upon dispatch.
- Directors may not act in excess posts after resigning or after one year from the Act’s commencement, whichever is earlier.
Penalties for Non-Compliance
- Accepting directorships in violation of Section 165 results in a penalty of two thousand rupees per day after the first day of violation, up to a maximum of two lakh rupees.
Reference and Amendments
- Section 165 became effective on 01.04.2014.
- Penalty provisions were updated via amendments in 2017, 2019, and 2020.