Section 149 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 149 is where a board legally comes into existence. It fixes how many directors you need, who must be among them, and — from sub-section (6) onwards — everything about independent directors: who qualifies, how long they serve, what they're paid and when they're liable.
Thirteen sub-sections, and most people only ever read one of them.
Private: 2 directors. Public: 3. OPC: 1. Maximum 15, more only by special resolution. At least one director must have stayed in India 182 days. Listed public companies need one-third independent. Then (6) defines independence, (7) requires an annual declaration, (8) binds you to Schedule IV, (9) blocks stock options, (10) and (11) set the five-year, two-term, three-year cooling-off structure, (12) limits liability, and (13) exempts independent directors from retirement by rotation.
Sub-sections (1) to (5): who has to be on the board
149(1) — size. Every company must have a board. Minimum three directors for a public company, two for a private company, one for a one person company. Maximum fifteen — and a company can appoint more only by passing a special resolution.
The proviso to 149(1) requires a prescribed class of companies to have at least one woman director. Under Rule 3, that's every listed company, and every other public company with paid-up share capital of ₹100 crore or more or turnover of ₹300 crore or more.
149(3) — the resident director. Every company must have at least one director who has stayed in India for a total of not less than 182 days during the financial year. For a newly incorporated company, the period is applied proportionately.
This is a small requirement with disproportionate consequences. Foreign-owned subsidiaries lose compliance the moment their only India-resident director relocates, and it isn't something the ROC flags for you.
149(4) — independent directors. Every listed public company must have at least one-third of its total number of directors as independent directors. Any fraction is rounded up to the next whole number.
The same sub-section empowers the Central Government to prescribe a minimum number of independent directors for other classes of public companies — which is what Rule 4 does, requiring two independent directors for unlisted public companies with paid-up capital of ₹10 crore or more, turnover of ₹100 crore or more, or outstanding loans, debentures and deposits above ₹50 crore.
Rule 4 also exempts a joint venture, a wholly owned subsidiary and a dormant company from that requirement.
Sub-sections (2) and (5) were transitional provisions for companies existing when the Act came into force. They're spent.
Sub-sections (6) to (9): what independence means and what it pays
149(6) — the definition. An independent director is a director other than a managing director, whole-time director or nominee director, who satisfies a series of relationship tests: no promoter connection, no pecuniary relationship with the group in the current or two preceding financial years beyond prescribed limits, relatives inside hard financial caps, and a three-year employment look-back covering the group, its auditors and its major consultants.
149(7) — the declaration. An independent director must give a declaration of independence at the first board meeting they attend, and at the first board meeting of every financial year — and again whenever circumstances change that affect their independence.
149(8) — Schedule IV. The company and its independent directors must abide by the Code for Independent Directors in Schedule IV. This is what converts a schedule into a binding obligation on both sides.
149(9) — remuneration. An independent director is not entitled to any stock option. They may receive sitting fees under Section 197(5), reimbursement of expenses for participating in board and other meetings, and profit-related commission approved by the members.
A proviso added by the Companies (Amendment) Act, 2020 — in force from March 2021 — allows a company with no profits or inadequate profits to pay its independent and non-executive directors remuneration in accordance with Schedule V. Before that change, a loss-making company had almost nothing to offer serious candidates, which is exactly the wrong incentive.
Sub-sections (10) to (13): tenure, liability and rotation
149(10) — term. An independent director holds office for a term of up to five consecutive years, and is eligible for re-appointment on passing a special resolution — with the re-appointment disclosed in the Board's report.
149(11) — the ceiling. No more than two consecutive terms. After that, a three-year cooling-off, during which the person must not be appointed to or associated with the company in any other capacity, directly or indirectly.
That final phrase is the one that matters. A consultancy, an advisory retainer, or work routed through a firm you're a partner in all defeat the cooling-off.
149(12) — the liability shield. An independent director — and a non-executive director who isn't a promoter or KMP — is liable only for acts of the company that occurred with their knowledge, attributable through board processes, and with their consent or connivance, or where they had not acted diligently.
It reads like protection and it is, but the last limb stands alone. Failing to act diligently is enough on its own, without knowledge or consent.
149(13) — no rotation. The retirement-by-rotation provisions in Sections 152(6) and (7) don't apply to independent directors. Their continuation is a scheduled decision rather than an annual formality — and for listed companies, Regulation 17(1D) now requires shareholder approval of every director at least once every five years.
Key takeaways
- 2 / 3 / 1 directors for private, public and OPC; maximum 15 without a special resolution.
- One resident director, 182 days in India, every financial year.
- One-third independent for listed public companies; two for unlisted public companies crossing the Rule 4 thresholds.
- Declaration of independence at the first board meeting of every financial year.
- No stock options, ever. But loss-making companies can now pay under Schedule V.
- Five years, two terms, three years out, with no association during the cooling-off.
- 149(12) is a diligence test, and the diligence limb operates independently.
Read next
- Independent Director in India: The Complete Guide
- Which Companies Must Appoint Independent Directors
- Independent Director Tenure: Two Terms and the 3-Year Cooling-Off
- Independent Director Remuneration: Sitting Fees, Commission, No ESOPs
Law stated as on 5 September 2026. The Corporate Laws (Amendment) Bill, 2026 proposes changes touching director eligibility and disqualification. It is before a Joint Parliamentary Committee and is not in force.