Must a section 8 company appoint an independent director?
A section 8 company is not required to appoint an independent director. The Central Government’s notification of 5 June 2015, as amended on 13 June 2017, takes a section 8 company out of that requirement in the Companies Act. The company may still appoint one.
It applies because the company holds a section 8 licence and the 5 June 2015 notification says so. An income-tax registration is not what switches the requirement off.
Is the appointment compulsory?
Section 149 requires independent directors of a listed public company, and of those unlisted public companies that meet the thresholds in the rules. The notification exempts a section 8 company from that requirement. The exemption is not a consequence of an income-tax registration. Who meets the definition of an independent director is on the independent-director page.
If the company is listed, the listing regulations can still require independent directors. The Companies Act exemption does not switch a listing rule off.
May the company appoint one anyway?
Yes. The notification removes the duty. It does not prohibit the appointment. The person still has to meet section 149, and the appointment still follows the Act. Reappointment of an independent director, where one is in office, is on the reappointment page.
Which exemptions are easy to overstate?
A section 8 company holds at least one board meeting in every six calendar months, and a general meeting may be called on 14 days’ notice. Those points are on the meetings page. Section 118 does not impose the ordinary minutes duty, except where the articles require the minutes to be confirmed by circulation, in which case they are recorded within 30 days. The company is not forbidden to keep minutes.
A private section 8 company still needs at least two directors. A public section 8 company still needs at least three. A person appointed as company secretary is a member of the Institute. The notification does not make that membership optional. Form CSR-1 is filed when the company implements another company’s corporate-social-responsibility projects. It is not an annual form of every section 8 company. How the company is formed is on the section 8 page.
Frequently asked questions
Four questions cover the charitable registration, a voluntary appointment, a company secretary, and Form CSR-1.
Does the exemption apply because the company is charitable?
It applies because the company holds a section 8 licence and the 5 June 2015 notification says so. An income-tax registration is not what switches the requirement off.
Can the articles still provide for one?
Yes. The notification removes the duty to appoint. It does not stop the company from appointing an independent director if the articles and the Act’s definition are met.
Is a company secretary optional as to membership?
No. A person who is the company secretary is a member of the Institute of Company Secretaries of India. The exemption from independent directors is not an exemption from that.
Must every section 8 company file Form CSR-1?
No. CSR-1 is for an entity that implements corporate-social-responsibility projects for other companies. It is not a filing of every section 8 company.
Sources
The exemption from appointing independent directors is the notification of 5 June 2015, as amended on 13 June 2017. Who an independent director is, and how a section 8 company meets, are separate pages.