Board composition is one of the most important determinants of board effectiveness. Beyond the legal requirement of minimum directors, a board should have a judicious mix of internal and independent directors with a variety of experience and core competence. The potential competitive advantage of a Board structure comprising executive directors and independent non-executive directors lies in its combination of–the depth of knowledge of the business of the executives and the breadth of experience of the non- executive/independent director.
| Particulars | Companies Act, 2013 | SEBI (LODR) Regulations, 2015 |
| Size of the Board | Section 149(1) provides every company shall have a Board of Directors consisting of individuals as directors and shall have- • A minimum number of 3 directors in the case of a public company. • Atleast 2 directors in the case of a private company, and • Atleast one director in the case of a One Person Company; and • A maximum of 15 directors provided that a company may appoint more than fifteen directors after passing a special resolution. Note: Maximum directors’ clause is not applicable to Government Company and Section 8 Company | • Regulation17(1) (a) provides that Board of directors shall have an optimum combination of executive and non- executive directors with at least one woman director and not less than fifty percent of the board of directors shall comprise of non executive directors; • The top 500 listed companies shall have atleast one independent woman director by 1 April 2019 and for the top 1000 listed entities by 1 April 2020. • Regulation 17 (1) (c) provides that the board of directors of the top1000 listed entities (with effect from April 1,2019) and the top 2000 listed entities (with effect from April 1, 2020) shall comprise of not less than six directors. Explanation: The top 500, 1000 and 2000 entities shall be determined on the basis of market capitalisation, as at the end of the immediate previous financial year |
| Board Composition | Section 149(4) provides that every public listed company shall have atleast one third of total number of directors as independent directors and Central Government may prescribe the minimum number of independent directors for any class or classes of companies. Note: Not applicable to Government Company and IFSC Public Company Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribes that the following class or classes of companies shall have at least two independent directors: • Public Companies having paid- up share capital of 10 crore rupees or more; or • Public Companies having turnover of 100 crore rupees or more; or •Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding 50 crore rupees. However, the following classes of unlisted public company shall not be required to appoint Independent Directors, namely:- (a) a joint venture; (b) a wholly owned subsidiary; and (c) a dormant company as defined under section 455 of the Act. | Regulation 17 (1) (b) provides that the composition of board of directors of the listed entity shall be as follows: • where the chairperson of the board of directors is a non-executive director, at least one-third of the board of directors shall comprise of independent directors; • where the listed entity does not have a regular non-executive chairperson, at least half of the board of directors shall comprise of independent directors: Provided that where the regular nonexecutive chairperson is a promoter of the listed entity or is related to any promoter or person occupying management positions at the level of board of director or at one level below the board of directors, at least half of the board of directors of the listed entity shall consist of independent directors. Explanation. – For the purpose of this clause, the expression “related to any promoter” shall have the following meaning: (i) if the promoter is a listed entity, its directors other than the independent directors, its employees or its nominees shall be deemed to be related to it; (ii) if the promoter is an unlisted entity, its directors, its employees or its nominees shall be deemed to be related to it. |
