India: Governing Laws/Bylaw Requirements

Private limited companies:

A private limited company has a minimum of 2 members and can have a maximum of 200. Private companies are prohibited from raising funds from a public issue of securities and ownership of the company is closely held by limiting the number of members. The board must have a minimum of 2 directors, and a maximum of 15 directors.

Public limited companies:

A public company requires a minimum of 7 members and can invite the public to subscribe to its securities. A minimum of 3 directors can be appointed to the board in a public company. Only individuals can be appointed to the board of a company. Employees do not have a right to be represented on the board. However, the Companies Act 2013 provides that minority shareholders can appoint a representative to the board of a listed company. At least one resident director must be appointed on the board of every company (that is, one director who has stayed in India for a period of not less than 182 days in the previous calendar year). Provisions of the Companies Act 2013, read with the Companies (Appointment and Qualification of Directors) Rules 2014, provide that every listed company and every public company having paid-up share capital or turnover above a certain prescribed threshold must appoint at least one female director to their board. For listed companies, the Security Exchange Board of India (SEBI) has the following requirements:

  1. The Board of Directors shall comprise of such number of minimum independent directors, as prescribed.
  2. In case where the Chairman of the Board is a non-executive director, at least one-third of the Board shall comprise of independent directors and where the Chairman of the Board is an executive director, at least half of the Board shall comprise of independent directors.
  3. A relative of a promoter or an executive director shall not be regarded as an independent director.

A report with SEBI recommendations for corporate governance can be found on the SEBI website


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