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Appointment Of Director
Adding a director means appointing an individual person on the board of directors of the company. Only a natural person can be appointed as a director of the company. During the life of the company, the company can add or remove the director anytime with the consent of the board of directors of the company and/or shareholders of the company in the meeting. A new director in the company can only be appointed by the shareholders of the company but in certain circumstances:-
- The board of directors of the company can appoint the director but that director shall have to be regularized in the general meeting of the company.
- If the shareholders of the company didn’t approve the appointment of the directors in the general meeting then the board of directors does not have the power to appoint such a person as a director of the company.
- A company appoints a new director when it needs to either maintain the minimum limit of director in the company or to distribute the responsibility of the management of the company.
At the time of registration minimum, one director is required in One Person Company, two in Private Limited Company, and three in Public Limited Company but the maximum number of the directors can be 15. But after the approval of the shareholders in the general meeting of the company the board of directors can appoint more than 15 directors in the company and the same has to intimate to the registrar of the companies.
Types Of Director
There are many different types of directors in the company each director has a different role in the company, but the role of a few director’s is fixed and prescribed by the government under the Act, so they can do only the activity which is prescribed under law. The types of directors with their role are as follows:-
Additional director is appointed by the board of directors. The additional director has all the powers and obligations like any other directors of the company. And Additional director possesses the office till the next general meeting and if he is not elected by the shareholders of the company in the general meeting then he has to vacate the office and have to resign from the position of the director.
An alternate director is appointed by the board of directors of the company as a substitute for any director, in his absence for the period of not less than 3 months from India. He will act as a director on behalf of the director in whose position he is appointed. The alternate director will act as a director only for the permissible period and he has to vacate the office once the director in whose position he is appointed returns to India.
Whole Time Director or Executive Director:
A whole-time director means a director who is in fulltime employment of the company and rendering his full service to the company. He participates in day-to-day management and action of the company and he decides on behalf of the company
Part-Time Director or Non-Executive Director:
A director who is not in fulltime employment of the company and does not participate in day-to-day work. They only monitor the performance or management of the whole-time director in the interest of the company.
This is a new concept introduced under the companies act, 2013 via section 149(6). The following company has to appoint an independent director:1. Every Listed company has to appoint at least 1/3rd of its total number of directors as an independent director
2. Unlisted company has to appoint at least 2 directors as an independent director. The following public company has to appoint independent director:
** Public Company having paid-up capital of Rs. 10 crores or more; or
** Public Company having a turnover of Rs. 100 crores or more; or
** Public Company having aggregate outstanding loans, deposits, and debentures of Rs.50crores.
An independent director has a vital role in the company, he acts as a guide, examiner, or mentor of the company. His function is like a watchdog in the company who looks the matter of the company and plays the main role in the risk management of the company he enhances the creditability of the company.
This is also a new concept introduced in the Companies Act, 2013 for the empowerment of women in India. A women director can also take good governance decisions for the company and according to Catalyst Bottom Line Report, the companies who have more woman directors in its board of directors experiencing more financial performance. As per this report, a woman can deal more efficiently with the risk. The following company has to appoint at least one director as a woman director in its board of director:
- Every listed company has to appoint at least one director as a woman director in the company and
- Every public company whos’s
**Paid-up capital is Rs. 100 crores or more; or
**Turnover is Rs. 300 crores or more.
A director nominated by the banks or financial institutes and appointed by the board of directors of the company. Those banks or financial institutes who have some interest in the company, interest means any financial interest like loans or investment into shares of the company. His responsibility is to ensure that the interests of the financial institute are safe and secure, and look after into the functions of the company that the company is utilizing the funds of the financial institutes in a good manner.
Small Shareholder Director:
This type of director is elected by the shareholder of the company, the shareholder who has a share of the nominal value of Rs. 20000 or less in any public company can be elected as a small shareholder. The right of the small shareholder is to protect the right and interests of the minority shareholders of the company. The following company has to appoint a small shareholder:
** A public company having paid-up capital of Rs. 5 crores or more
** A public company having 1000 or more shareholder
Process For Appointment Of Directors
The complete process for the appointment of the director is as follow:
- To appoint the director in the company the power for such appointment shall be provided in the Article of the company if the power for the appointment of the director is not provided in the Article then the first step is to amend the article of association of the company and insert such provision in it.
- Hold board meeting for the appointment of the director and pass the resolution for his or her appointment
- Apply for the Digital Signature for the proposed director
- If the proposed director does not have Director Identification Number (DIN), then the DIN has to be applied. The DIN is applied by the company in which he or she is proposed to be a director.
- The DIN application (DIR-3) shall be filed for DIN allotment along with the documents of the applicant and the board resolution of the company in which he or she is proposed to be the director. The form will be signed by the applicant and the existing director of the company with their DSC.
- This DIN will be valid for the lifetime of the director. One person can have only one DIN during his life and it will be cancelled only either at the time of death of the director or if he surrendered it.
- The proposed director must give his consent for the appointment of a director in form DIR-2 to the company along with DIR-8 that he is not disqualified under section 164 of the companies act, 2013
- After receiving his consent for becoming the director of the company the board of directors of the company shall have to intimate the registrar about such an appointment in form DIR-12. This form is submitted to the ROC within 30 days from the date of appointment along with the resolution passed for such appointment, DIR-2 the consent letter, and DIR-8 document for disclosure for not disqualified.
- Once the form is submitted the details of the person will be entered as an additional director of the company in the register of the Registrar
- The director who is appointed by the board of directors of the company shall hold the position of an additional director in the company until the conclusion of the next general meeting.
- If in the next general meeting an additional director is not regularized by the shareholders for the company then he shall have to vacate the office of the company as a director.
AFTER THE APPOINTMENT OF DIRECTOR :
- The notice of the general meeting shall contain the information for the regularization of an additional director of the company. The notice shall be sent to the shareholders of the company at least 21 clear days before the meeting.
- Hold the general meeting (it can be either Extra-Ordinary General Meeting or Annual General Meeting).
- Pass the resolution for the regularization of the additional director as a director of the company
- After passing such resolution the copy of the resolution shall be filed to the registrar within 30 days from the date of the meeting along with fees.
- After uploading this form with the shareholders’ consent the Registrar will change his or her position from the additional director to the director on his database or register. Now the government will consider him as a director of the company.
- Once the appointment of the director is submitted to the government the same has to be updated in the GST account of the company. And the company has to change the details of the directors of the company in the GST portal.
Minimum Requirements To Become A Director
There is no specific qualification that is required to become the director of the company but there are certain conditions which a person needs to fulfil before he or she is appointed as a director:
- A director should be an individual or a natural person. A body corporate cannot become the director in any company
- Age should not be less than 21 years and not more than 70 years
- The person should have a Director Identification Number (DIN)
- Not disqualified under section 164 of the companies act, 2013
Residency Requirement For The Director
There is no restriction in the appointment of a director who is either Non-Resident or Forigenor. But among all the directors of the company one director should be a resident of India and he must have stayed in India for not less than 182 days in the previous year.
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Frequently Asked Questions
The different companies have a different minimum requirement of the director in the company:
- One Person Company: Only one director
- Private Limited Company: 2 directors
- Public Limited Company: 3 directors
- Nidhi Limited Company: 3 directors
- Section-8 company: 2/3 directors
But in all the companies the maximum limit of the director can be 15. A company can also appoint more than 15 directors if shareholders of the company have approved for such appointments.
Yes, a person who is appointed as a director in the company can give his/her resignation from the position of the director in the company. Under Section 168 of the Companies Act, 2013 a person who wants to resign from the directorship of the company shall have to send the notice for such in writing to the company. After receiving such notice the company has to intimate the registrar regarding such resignation to the registrar within the specified time limit.
This is a new concept introduced in the new Companies Act, 2013 where every company whether listed or unlisted, public or other than the public has to appoint a woman director when its:
- Paid-up share capital is Rs. 100 crores or more; or
- Turnover is Rs. 300 crores or more
In the above situation, a company has to mandatorily appoint a woman director in its board of directors. In case of vacancy of the woman director the board has to fill that vacancy as soon as possible but not later than next board meeting or three months from the date of vacancy whichever is later
For example: If a company XYZ Ltd have a woman director Mrs. A and she left the job due to any reason on 1st July,
The board has to appoint a woman director not later than next board meeting or three months from the date of vacancy whichever is later
The next board meeting shall be held on 25th September; and
Three months from vacancy will be 1st October
Conclusion: The board shall have to appoint a woman director before 1st October the last date for the appointment is 1st October, so the board has to appoint as earliest before the expiry of 3 month
The next board meeting shall be held on 11th October; and
Three months from vacancy will be 1st October
Conclusion: The board shall have to appoint a woman director before 11th October the last date for the appointment is 11th October, so the board has to appoint as earliest before the next board meeting
No, as per Section 149(1) of the Companies Act, 2013 only an individual person can be appointed as a director of the company. No company can become the director in another company, because a company needs a natural person to run the business and the company is unable to run its business by itself it needs human and natural persons to operate its functions, therefore, a company cannot become the director.
Yes, a company can add an NRI or foreigner as a director in the company because there is no such restriction under the companies act, 2013 for the appointment of the director, the director should be the natural person among all the directors at least one should be the resident of India.