WOMEN DIRECTORS IN INDIAN COMPANIES - UP TO THE MARK?

[Mr. M. GOVINDARAJAN]

Appointment of woman director

Section 149 of the Companies Act, 2013 (‘Act’ for short) provides for the appointment of Directors to the Board of companies and also the minimum number of directors of a company as well as the maximum number of directors.  The second proviso to Section 149(3) of the Act provides that such class or classes of companies as may be prescribed shall have at least one woman director.

Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 provides that the following class of companies shall appoint at least one woman director-

• every listed company;
• every other public company having -

• paid–up share capital of Rs.100 crore  or more; or
• turnover of Rs.300 crore or more.

Vacancy

Any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or 3 months from the date of such vacancy whichever is later.   The paid up share capital or turnover as on the last date of latest audited financial statements shall be taken into account.

Penalty

Section 172 of the Act provides that  if a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of Rs.50000/- , and in case of continuing failure, with a further penalty of Rs.500/-  for each day during which such failure continues, subject to a maximum of Rs.3 lakhs in case of a company and Rs.1 lakh in case of an officer who is in default.  Since there is no specific penalty mention under the provisions of the Act the penalty specified under section 172 is applicable to the company which defaulted in the appointment of woman director.

Present scenario

The appointment of woman director is mandatory for certain companies under the provisions of the Act as well as SEBI (LODR) Regulations.  It is mandatory to appoint  a woman director in a listed company.  The object for this appointment is to ensure company’s ESG score by which the governance norms may be determined.

From the year 2018 - 19 to 2023-2024 nearly 452 companies were penalized for non appointment of woman director as detailed below-

Penalized companies listed with National Stock Exchange

Sl. No.	Year	No. of companies penalized	Penalty amount (in lakhs)
1	2018 - 19	20	77.16
2	2019 - 20	47	106
3	2020 - 21	41	67.2
4	2021 - 22	40	31.04
5	2022 - 23	21	28.95
6	2023 - 24	16	1.96
Total		185	312.31

Penalized companies listed with Bombay Stock Exchange 

Sl. No.	Year	No. of companies penalized	Penalty amount (in lakhs)
1	2018 - 19	40	191.16
2	2019 - 20	64	481.71
3	2020 - 21	57	506.08
4	2021 - 22	62	431.98
5	2022 - 23	24	392.68
6	2023 - 24	20	280.28
Total		267	2283.89

Besides 81 non listed entities, which require appointing woman director but not complied with the same were penalized by SEBI.  The relevant data from the year 2015 - 16 to 2023-24 of penalized companies are shown in the following table-

Sl. No.	Year	No. of penalized companies
1	2015 - 16	3
2	2016 - 17	20
3	2017 - 18	3
4	2018 - 19	3
5	2019 - 20	1
6	2020 - 21	10
7	2021 - 22	12
8	2022 - 23	9
9	2023 - 24	20
Total		81

In total Rs.27 crores was the penalties imposed on the companies for non compliance of appointing woman director to their Boards.  It is expected in future all the companies who are required to appoint woman director for better corporate governance.

Reference:

1. the Hindi Business Line, dated 06.02.2024