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Share Qualification of Directors
Provisions under the Companies Act 2013
The new companies act does not specify any provisions for holding qualification shares by directors. Apparently it has been removed in toto.
Provisions under the Companies Act 1956
of Association of a Company mayrequire
the Directors of that Company to hold some minimum shares at the time of his
Appointment within such time limit as prescribed under Section 270 of the
Companies Act, 1956; this holding of minimum shares is known as 'Share
Qualification of Directors'.
as prescribed under Section 270: If the Director already doesn't hold that Share Qualification
at the time of his appointment, then he must acquire them within two months
after his appointment as Director.
Subscribers to the Memorandum, as per the Act are the deemed first directors of
the Company and are not required to hold the Share Qualification unless the
Articles of a Company so requires them to hold such share qualification.
Maximum Value of Share Qualification:The nominal value of the
qualification shares shall not exceed Rs. 5,000, or the nominal value of one
share where it exceeds Rs. 5,000/-.
Warrants shall not be included for the purposes of calculation of share
Not Obtaining the Share Qualification within the time limit – Section 272:If, after the expiry of the
said period of two months, any person acts as a director of the company when he
does not hold the qualification shares referred to in section 270, he shall be
punishable with fine which may extend toRs.
500/-for every day between
such expiry and the last day on which he acted as a director.
of Provisions: The above provisions, both under Sections 270 for share
qualification and Section 272 for penalty for non-compliance, shall not apply
to a Private Company which is not a Subsidiary of a Public Company.
Directors of a Private Company which is not a Subsidiary of a Public Company
are not required to obtain Share Qualification, the Articles of such Private
Company may provide for provisions relating to obtaining Share Qualification by
the Directors, in such a case it will be required to comply with such
provisions. However by way of passing a Special Resolution such provision can