Section by Section: Did You Know? :- Understanding Section 167(1)(b) of the Companies Act, 2013

Have you ever wondered if a director could lose their position simply by not showing up for meetings? Under Section 167(1)(b) of the Companies Act, 2013, that’s exactly what can happen! Let’s break it down.

?? What Does the Law Say?

Section 167(1)(b) of the Companies Act, 2013, states that a director shall vacate their office if they are absent from all meetings of the Board of Directors for a continuous period of 12 months, with or without seeking leave of absence.

?? Key Insight: The 12-month period is counted from the date of the first meeting the director failed to attend, not from the last meeting they attended.

?? Example for Clarity:

• A director last attended a Board meeting on 1st January 2023.
• The next Board meeting was on 15th March 2023, but the director did not attend.
• The director missed all subsequent meetings on 30th June 2023, 15th September 2023, and 15th December 2023.

Result:

• The 12-month countdown starts from 15th March 2023 (the first meeting the director failed to attend).
• If the director remains absent up to 15th March 2024, they automatically vacate their office.

?? Consequences of Non-Compliance:

• Automatic Vacation of Office: The director ceases to hold office without any need for Board resolution or shareholder approval.
• Impact on Quorum & Decision-Making: Persistent absenteeism can disrupt Board functioning and decision-making capacity.
• Statutory Filings: The company must file Form DIR-12 with the Registrar of Companies (ROC) to report the vacancy.

?? Best Practices for Companies:

• Attendance Monitoring: Track directors' attendance to catch long absences early.
• Leave of Absence Policies: Encourage directors to formally request leave of absence when needed.
• Regular Reminders: Send timely reminders to directors about upcoming meetings and their attendance obligations.
• Board Evaluations: Conduct periodic reviews to assess directors' participation and engagement levels.

?? Why This Rule Matters:

This provision ensures directors remain actively involved in company management and discourages passive directorship. It strengthens Board accountability and promotes sound corporate governance.

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