Right to Stand for Directorship: Section 160

The right to stand for directorship under section 160 of the Companies Act, 2013 is the route onto a board for someone the retirement cycle does not already put there. A person who is not a retiring director in terms of section 152 is eligible for appointment as a director at any general meeting, provided he, or a member intending to propose him, leaves a written notice at the registered office not less than fourteen days before the meeting, along with a deposit of one lakh rupees or such higher amount as may be prescribed.

What does the right to stand for directorship require?

Four things, and each is on the face of sub-section (1).

The person must not be a retiring director in terms of section 152. That expression is defined by the Explanation at the end of section 152(7): for the purposes of section 152 and section 160, a retiring director means a director retiring by rotation. So the section is not about the incumbent board, which is handled by retirement of directors by rotation. It is about everyone else.

The notice is in writing under his hand and it is left at the registered office of the company. It may come from the candidate himself, signifying his candidature, or from a member, signifying that member's intention to propose him.

The period is not less than fourteen days before the meeting. It runs to the meeting, not to the notice of the meeting, which is why a candidature can be lodged after the agenda has gone out.

The deposit is one lakh rupees or such higher amount as may be prescribed, and it is refundable on either of two outcomes: the person proposed gets elected as a director, or he gets more than twenty-five per cent of total valid votes cast on that resolution, whether on a show of hands or on a poll.

Who is exempt from the deposit?

A proviso inserted by Act 1 of 2018, section 50, with effect from 9 February 2018 takes the deposit off three categories: the appointment of an independent director, a director recommended by the nomination and remuneration committee constituted under section 178(1), and a director recommended by the Board of Directors where the company is not required to constitute that committee.

Read the proviso against the rest of the section and the design is clear. The deposit is friction on an unsponsored candidature. A candidate the Board or its committee has already recommended keeps the fourteen-day notice requirement and loses the money at risk. A candidate proposed by a member against the Board's wishes keeps both.

Sub-section (2) then puts a duty on the company: it shall inform its members of the candidature of a person for the office of director under sub-section (1), in such manner as may be prescribed. The manner is left to the rules, so this page does not state it.

Why an investor reads section 160

This is one of the few provisions that lets a shareholder change the composition of a board without waiting for the company to propose it. Removal under section 169 takes an incumbent off, which removal of a director under section 169 covers. Section 160 is the other half: it puts a named person onto the ballot at a general meeting.

The economics are deliberately asymmetric. The fourteen-day notice is short enough to be usable in a contested situation, and one lakh rupees is small next to the value of a board seat at a listed company. The twenty-five per cent refund threshold is the real screen, because it is set well below a majority: a candidate can lose the vote decisively and still get the deposit back if a quarter of the valid votes cast support him. That makes the section cheap for a genuine minority slate and expensive only for a candidate with almost no support.

Where a section 160 candidature shows up in a filing

The visible artefacts are the meeting documents. The candidature produces a resolution on the notice of the general meeting, and the voting outcome is published in the results filed after it, which how to track shareholder voting results covers. The percentage of valid votes cast in favour is on the face of those results, which is the same number the refund test in sub-section (1) turns on.

Where this sits in the disclosure picture

• Appointment of directors under section 152 covers the general-meeting appointment this section feeds into.
• Retirement of directors by rotation covers the retiring directors who are outside section 160.
• Removal of a director under section 169 covers the other member-initiated route to changing a board.
• Proportional representation on a board covers the articles-driven alternative to a simple majority election.
• How to track shareholder voting results covers where the vote on a candidature is published.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.