Is the Appointment of a Woman Director Optional or Mandatory?

A Board of Directors is a group of people elected to represent a company. It is mandatory for every company to have a Board of Directors, who have the responsibility to manage the company's operations and ensure its success for the benefit of all stakeholders, including the government, society, and shareholders. The structure, responsibilities, and powers of the Board of Directors are governed by the Companies Act, 2013, and the organization's Articles of Association. The Articles of Association determine the number of directors on the Board, how they are appointed, the frequency of their meetings, the minimum number of directors required for a meeting, and their authority.

What’s the need for appointing a women director?

Gender diversity in corporate boards is a highly discussed topic in India. Achieving gender equality is not only a fundamental human right but also crucial for creating a peaceful, prosperous, and sustainable world. The United Nations' Sustainable Development Goals Report 2022 emphasizes the need for commitment and decisive measures to accelerate progress toward gender equality. This includes promoting laws, policies, budgets, and institutions that support gender equality. Here are some important facts and figures highlighted in the report:

In 2019, prior to the pandemic, women constituted 39.4 percent of the global workforce. However, in 2020, women accounted for 45 percent of the total employment losses worldwide.

The representation of women in managerial positions showed a small increase from 27.2 percent to 28.3 percent between 2015 and 2019. However, in 2020, there was no further increase, marking the first year without progress since 2013.

Circumstances in which women need to be appointed as a director of a company

Recognizing the importance of having women directors on corporate boards, regulatory bodies such as the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI) have implemented provisions that make it obligatory for certain categories of companies to appoint at least one woman director on their Board of Directors. As per the second proviso to Section 149(1) of the Companies Act, 2013, and Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014, the following categories of companies are required to have at least one woman director on their Board:

• Each company is listed on the stock exchange.
• Every public company with a paid-up share capital equals or exceeds Rs. 100 crores.
• Every public company with a turnover equals or exceeds Rs. 300 crores.

If a company fails to comply with the provisions mentioned above, resulting in a violation of the Act, both the defaulting company and every officer of the company involved in the default will be subject to penalties outlined below

• Defaulting companies will face a penalty of INR 50,000 (Indian Rupees Fifty Thousand). If the default persists, an additional penalty of INR 500 (Indian Rupees Five Hundred) per day will be imposed for each day the default continues, up to a maximum limit of INR 3,00,000 (Indian Rupees Three Lakh).
• Officers of the defaulting company will be subject to a penalty of INR 50,000 (Indian Rupees Fifty Thousand). If the default persists, an additional penalty of INR 500 (Indian Rupees Five Hundred) per day will be imposed for each day the default continues, up to a maximum limit of INR 1,00,000 (Indian Rupees One Lakh).

Apart from what was mentioned earlier, there is a rule called Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This rule states that a listed company's Board of directors must include at least one woman director. This rule was brought into effect in 2015. 

Additionally, appointing at least one independent woman director was mandated for the Board of Directors of the top 500 listed companies by April 1, 2019. 

The same rules and regulations that apply to directors in general also apply to women directors. This includes the procedures for appointment, removal, resignation, retirement by rotation, and determination of remuneration. 

Companies that fail to comply with the regulatory requirement of having at least one woman director on their Board are now facing scrutiny from authorities. In recent cases, penalties have been imposed by the Registrars of Companies on companies that were required to appoint a woman director but failed to do so.

Summing it up, The appointment of women directors in the corporate world aims to promote gender diversity. However, it is crucial for companies to genuinely embrace this change rather than just treat it as a mere formality. Women play a significant role in various aspects of society, including social, political, economic, cultural, and religious spheres. Their unique ability to multitask and offer fresh perspectives can significantly contribute to decision-making processes. By fostering a gender-diverse workforce, organizations can benefit from diverse viewpoints, ideas, and market insights, ultimately leading to improved problem-solving capabilities.

 

Also Read: Income Tax Rules For Setting off a Long-term Capital Loss From Various Debt Mutual Funds

 

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