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Limit of Directorship

ROC Limit of Directorship

Directors are a vital part of the company management. Every company needs to appoint directors at the time of incorporation. One person company needs to have at least one director. A private company needs to have at least two directors, and a public company must have at least three directors. A company can have a maximum of 15 directors.

Number Of Directorships Of A Director

Section 165(1) of the Act states that a person can hold the office of director simultaneously in 20 companies. The number of 20 companies includes the office of alternate directorship. A person cannot be a director in more than 20 companies at a given time. However, the maximum number of public companies in which a person can be a director simultaneously is 10.

An individual cannot be appointed as a director in more than 10 public companies at a given time.
For calculating the number of public companies, the directorship in private companies that are either holding or subsidiary of a public company is included. However, the directorship in a dormant company is not included in calculating the limit of directorships of 20 companies.
The purpose of prescribing the number of the office of directorship is that the person who is appointed as a director can give proper and sufficient time to a company. The Act prohibits a person from holding the office of a director in more than 20 companies to provide quality time to the companies in which he is a director and discharge his functions as a director in an efficient manner.

 

Penalty For Non-compliance Of Section 165

 

Section 165(6) of the Act provides a penalty for a person who holds the office of a director in contravention of this Act. If a person accepts an appointment as a director in more than 20 companies, then he will be liable to a penalty of Rs.2,000 for each day during which the violation continues subject to a maximum of Rs.2 lakh. This penalty provision was included in the Act from 21.12.2020 to prevent persons from holding the office of directors in more than 20 companies.