Two statutory counts must pass at the same time
Section 165 of the Companies Act, 2013 generally limits a person to twenty company directorships at the same time, including alternate directorships, with a separate ceiling of ten public-company directorships. For the public-company test, include private companies that are holding or subsidiary companies of a public company. The dormant-company exclusion is expressly attached to the twenty-company count; it should not be copied automatically into the separate public-company calculation.
The statutory text is available on the Government’s Companies Act section 165 page. This is section 165 of the Companies Act, not an income-tax provision despite that official site hosting the text. The analysis below concerns ordinary Indian-company portfolios under section 165. Section 8 exemptions, foreign-company offices, listed-entity restrictions and sector-specific requirements need their own applicable legal analysis and are not assumed away by these examples.
Build one inventory and two count columns
A title such as executive, non-executive or alternate is not a reason to omit an actual directorship. Start with the legal entity and effective appointment or cessation, then establish whether it is public, ordinary private, or a private holding/subsidiary company of a public company. A director’s personal list and a group chart should be reconciled; neither is a substitute for effective-status evidence.
| Office or company status | Twenty-company calculation | Ten-public-company calculation |
|---|---|---|
| Ordinary active public company | Include | Include |
| Ordinary active private company with no relevant public-company relationship | Include | Do not include merely because it is a company |
| Active private company holding or subsidiary of a public company | Include | Include under Explanation I |
| Statutorily dormant ordinary private company with no relevant public-company relationship | Exclude under Explanation II | No public-company inclusion on these facts |
| Dormant public company | Exclude from the twenty-company calculation | Retain in the public-company calculation; Explanation II is limited to twenty |
Use the word dormant as a legally established status, supported by current records. A company with no turnover, an old closed office or a promoter describing it as inactive is not adequate evidence for claiming the statutory exclusion. If evidence is incomplete, resolve the status before certifying capacity.
Private-company relationships can exhaust public-company capacity
Explanation I looks at holding/subsidiary relationships with a public company. Simply sorting the register by the words Private Limited misses this rule. A private company that qualifies under the explanation contributes to both the ordinary total and the public-company total, subject to any independently applicable exemption. Maintain the relationship as of the date being tested, not only as of the last annual return.
A group reorganisation can change this analysis without a new board seat. When a private company becomes a subsidiary of a public company, re-test the director’s public-company count. Conversely, do not remove a relationship merely because management intends a future sale. Use the effective transaction and company-status records.
Alternate offices and simultaneous changes
The main limit expressly includes alternate directorships. A portfolio that appears to have spare capacity after excluding alternates can therefore fail. Record commencement and cessation of the alternate office and examine the complete portfolio at the proposed appointment time. The illustrations treat each office as being in a different company; they do not resolve unusual multiple-capacity questions within the same entity.
Capacity must exist when the appointment is accepted and while the relevant offices are held. A proposed resignation does not create capacity until it becomes legally effective. Where an appointment and cessation occur near each other, document their effective sequence. An annual declaration obtained after year-end cannot retrospectively establish that no excess existed during the year.
Members can impose a lower limit
Section 165(2) allows members, by special resolution and subject to subsection (1), to specify a lesser number of companies in which their director may act. Review such a resolution before concluding that the statutory twenty/ten ceilings are sufficient. Read the actual resolution, its continuing applicability and its scope; an informal policy or draft resolution should not be described as an operative statutory restriction.
Also test other applicable appointment and governance restrictions independently. Passing section 165 is not a certificate that a person may accept any listed-company, independent-director or regulated-entity role. These regimes can have their own population and conditions; importing an unrelated numerical limit without checking its source creates a different error.
The old transitional period is not a fresh appointment grace period
Subsections (3)–(5) addressed persons already over the limits immediately before commencement of the Act and the associated one-year transition. They do not give every new appointment a recurring year in which to cure an excessive portfolio. Before accepting another office, identify the effective cessation needed and complete the applicable legal process. Section 165(6) separately provides consequences for accepting an appointment in violation; this article focuses on preventing the breach rather than estimating a penalty from incomplete facts.
A useful compliance worksheet therefore records company identity, office type, public/private status, public-company relationships, dormant-status evidence, effective dates and any lower special-resolution limit. Include both the current count and the count immediately after the proposed event. Re-run it when company relationships or dormant status change, as well as on appointments and resignations.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: Exactly twenty overall and eight public
A director holds offices in eight active public companies and twelve ordinary active private companies, none linked to a public company in the specified way. The overall count is 8 + 12 = 20 and the public count is 8. Both statutory ceilings are met, assuming no lower or separate applicable limit.
Illustrative example 2: Twenty overall can still breach ten public
The portfolio contains eleven active public companies and nine ordinary private companies. The overall count is 11 + 9 = 20, but the public count is 11, exceeding ten by one. A spare slot under another interpretation of the overall count would not fix this public-company breach.
Illustrative example 3: Private subsidiaries change the result
There are nine active public companies and eleven active private companies. Two of the private companies are subsidiaries of a public company. Overall count: 9 + 11 = 20. Public-company count: 9 + 2 = 11. Treating all eleven private companies as outside the public count would miss the excess of one.
Illustrative example 4: Dormant private offices and the overall count
The portfolio has eight active public companies, twelve ordinary active private companies and three statutorily dormant private companies with no relevant public-company relationship. Recorded company offices are 8 + 12 + 3 = 23. The section 165 twenty-company count is 23 − 3 = 20, and the public count is 8. Verified dormant status is essential to that result.
Illustrative example 5: Alternate directorships use capacity
A person has nine active public-company offices, ten ordinary active private-company offices and two alternate offices in other ordinary active private companies. The overall count is 9 + 10 + 2 = 21, exceeding twenty by one. The public count is 9. Excluding the alternates would incorrectly report 19.
Illustrative example 6: Dormant public companies expose the two-count distinction
There are nine active public companies, two dormant public companies and nine ordinary active private companies. The recorded portfolio is 20. Excluding the two dormant companies gives an overall statutory count of 18, but the public-company count remains 9 + 2 = 11. Explanation II’s exclusion for twenty does not supply an exclusion from ten.
Illustrative example 7: A valid lower limit can bind earlier
Assume an operative special resolution applicable to this director validly sets a five-company maximum. The director holds four active public and two ordinary active private directorships. The total of 6 and public count of 4 pass the general twenty/ten tests, but six exceeds the applicable lower limit of five by one. Confirm the resolution’s actual wording before reaching that conclusion.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the person and all current company offices | Director inventory reconciled to company records |
| 2 | Establish effective appointment and cessation dates | Resolutions, consents, resignation and cessation evidence |
| 3 | Include alternate offices in distinct companies | Alternate-office appointment and termination documents |
| 4 | Verify each company’s public or private status | Current statutory company-status evidence |
| 5 | Map private holding/subsidiary links to public companies | Effective group structure and supporting ownership records |
| 6 | Substantiate any dormant-company exclusion | Current legal dormant-status evidence |
| 7 | Compute the twenty-company column | Complete inventory with documented exclusions |
| 8 | Compute the ten-public-company column separately | Explanation I inclusions and no unsupported dormant deduction |
| 9 | Review any lower and additional applicable limits | Special resolutions and relevant listed/sectoral framework |
| 10 | Test the proposed event before acceptance and monitor changes | Dated pre/post-event capacity worksheet and signed declarations |
Sixteen practitioner FAQs
1. Are twenty total and ten public alternative choices?
No. They are simultaneous constraints. Passing one does not excuse failure of the other.
2. Do alternate directorships count?
Section 165(1) expressly includes alternate directorships. Capture their effective period in the inventory.
3. Does non-executive status remove an office from the count?
The general provision applies to holding office as director; it is not confined to executive positions.
4. Are all private companies outside the public-company limit?
No. Explanation I includes private companies that are holding or subsidiary companies of a public company.
5. Must the public-company relationship be tested only once a year?
A current capacity decision needs the relationship applicable at that time. Changes in group structure can change the count.
6. Does dormant status remove an office from the twenty-company count?
Explanation II expressly excludes a directorship in a dormant company for reckoning twenty.
7. Does the same dormant exclusion automatically reduce the public count?
The explanation is specifically framed for twenty. Do not apply it as a general exclusion from the ten-public-company test.
8. Can a loss-making company be treated as dormant?
Losses or inactivity alone do not establish the legal status relied upon for the exclusion. Obtain current status evidence.
9. Can a proposed resignation create immediate spare capacity?
An intention to resign is insufficient. Establish the legally effective cessation before relying on it.
10. What if the group acquires a private company under a public holding company?
Reassess Explanation I on the effective facts. The public-company count may increase without the director accepting a new board seat.
11. Can members set a smaller number?
Section 165(2) permits a lesser number through a special resolution, subject to subsection (1). Read and apply the actual operative resolution.
12. Can a special resolution raise the statutory ceilings?
Subsection (2) permits a lesser number subject to subsection (1), not a higher permission overriding twenty or ten.
13. Does section 165 provide one year to fix every new excess?
The one-year language in subsections (3)–(5) is a historical commencement transition, not a recurring appointment grace period.
14. Does passing this calculation resolve listed-company limits?
No. Applicable listed-entity and other special restrictions require independent examination.
15. Can these examples be used unchanged for Section 8 or foreign companies?
They deliberately assume ordinary Indian-company portfolios. Examine the actual exemptions and scope before applying counts to other populations.
16. What should the board receive before another appointment?
A dated inventory and both count workings, effective cessation evidence, relationship/status support and any applicable lower-limit analysis.
Conclusion
Approve capacity on a dated portfolio, with separate twenty-company and public-company workings. Substantiate every exclusion and relationship, and test the proposed appointment before acceptance.