Section 165 Companies Act: Number of directorships

Section 165 of Companies Act: Corporate Governance & Statutory Compliance

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

165. Number of directorships .

1. No person, after the commencement of this Act, shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time:

Provided that: the maximum number of public companies in which a person can be appointed as a director shall not exceed ten.

Explanation.- — For reckoning the limit of public companies in which a person can be appointed as director, directorship in private companies that are either holding or subsidiary company of a public company shall be included.

2. Subject to the provisions of sub-section (1 ), the members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

3. Any person holding office as director in companies more than the limits as specified in sub-section (1 ), immediately before the commencement of this Act shall, within a period of one year from such commencement,

a. choose not more than the specified limit of those companies, as companies in which he wishes to continue to hold the office of director;

b. resign his office as director in the other remaining companies; and

c. intimate the choice made by him under clause (a ), to each of the companies in which he was holding the office of director before such commencement and to the Registrar having jurisdiction in respect of each such company.

4. Any resignation made in pursuance of clause (b ) of sub-section (3 ) shall become effective immediately on the despatch thereof to the company concerned.

5. No such person shall act as director in more than the specified number of companies,

a. after despatching the resignation of his office as director or non-executive director thereof, in pursuance of clause (b ) of sub-section (3 ); or

b. after the expiry of one year from the commencement of this Act, whichever is earlier.

6. If a person accepts an appointment as a director in contravention of sub-section (1 ), he shall be punishable with fine which shall not be less than five thousand rupees but which may extend to twenty-five thousand rupees for every day after the first during which the contravention continues.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 165

Section 165 of the Companies Act, 2013 imposes strict statutory ceilings on the maximum number of directorships an individual may simultaneously hold, capping total directorships at twenty and public company directorships at ten, enforceable through civil daily penalties.

Twenty Directorship Overall Ceiling: No person can hold office as a director, including alternate directorships, in more than twenty companies simultaneously.
Ten Public Company Cap and Reckoning Rules: Directorship in public companies cannot exceed ten; for calculating this limit, directorships in private companies that are either holding or subsidiary companies of a public company are treated as public company directorships.
Statutory Exclusions and Company Self-Regulation: Directorships in dormant companies (under Section 455) and non-profit companies (under Section 8) are excluded from the statutory count; additionally, a company may, by special resolution, specify a lower directorship limit for its own directors.
Civil Monetary Daily Penalty under 2020 Amendment: Section 165(6) provides that accepting appointment in contravention of the limits attracts a penalty of two thousand rupees per day for continuing default, subject to a maximum ceiling of two lakh rupees.

Key Landmark Precedents:

Aruna Oswal v. Pankaj Oswal, (2020) 8 SCC 79: The Supreme Court emphasized that statutory limits on directorships are designed to preserve corporate governance integrity and ensure that directors can dedicate sufficient fiduciary attention and oversight to each corporate entity.
S.B. Shankar v. Union of India, 2019 SCC OnLine Del 8931: The Delhi High Court held that the directorship cap under Section 165 is strict and mandatory, and exceeding the threshold triggers statutory liabilities and disqualification under Section 167(1)(a).
Sunita Aggarwal v. Registrar of Companies, 2019 SCC OnLine NCLAT 872: The NCLAT affirmed that only Section 8 and dormant companies are exempt from Section 165 calculation, and alternate directorships must be included in calculating the statutory limits.

Courtroom Practice & Strategic Litigation Guidance:

Before issuing DIR-2 consent for any proposed director, secretarial counsel must run an exhaustive MCA portal check on the individual's existing directorships. Ensure that private companies that are subsidiaries of public companies are counted within the 10-public company threshold. If a candidate is near or exceeds the threshold, require them to execute Form DIR-11/DIR-12 resigning from excess boards prior to appointment to prevent penalty proceedings under Section 165(6) and disqualification under Section 167(1)(a).

Section 165: Number of directorships

Section 165 of Companies Act: Corporate Governance & Statutory Compliance

Legal Commentary & Landmark Judgments: Section 165