Type of director appointment in a company

Type Of Director Appointment In A Company

There are many ways to appoint a Director in the company. The first director of the company is generally appointed at the time of incorporation. And after incorporation of the company the director will be appointed by the shareholder of the company in the general meeting.

ADDITIONAL DIRECTOR

The additional director is appointed by the board of director at the board meeting as per section 161 (1) of the companies act, 2013. The main purpose of appointing the additional director in the company is to maintain the quorum. The appointed additional director hold the office till the conclusion of next annual general meeting or the last date on which annual general meeting should have been held, whichever is the earlier period.

BUT:

  • He can be appointed as a regular director at the annual general meeting by shareholders approval.
  • He can be appointed only by the directors of the company.

ALTERNATE DIRECTOR

  • An Alternate director is a director appointed by the board of directors in the board meeting or in general meeting for the director during his absence for the period of not less than 3 months from India

BUT:

  • The alternate director shall not hold office more than the permissible period to the director in whose place he has been appointed.
  • The alternate director shall not hold the position of directorship in the same company or has already been appointed as an alternate director for any other director in the same company.

 NOMINEE DIRECTOR

  • Nominee Director is a director nominated by the third party either by any creditor or by a bank or financial institution or any other stakeholder to represent and protect the rights of the appointer. A nominee director is appointed by the board of directors of the company. The Central Government can also appoint nominee director in the company. The main purpose for the appointment of the nominee director is to protect the right and interest of the appointee.

INDEPENDENT DIRECTOR

  • All the public companies having paid-up capital of Rs. 10 crores or more; or turnover of Rs. 100 crore or more; or borrowing in aggregate (outstanding loan, debentures, and deposits) exceeds Rs. 50 crore shall have to appoint at least two independent directors in the company. The main objective of the independent director is to watch out all the governance of the company, he has to ensure that the company is not indulging or operating its function illegally.

BUT:

  • An independent director shall not be a managing director or a whole-time director or a nominee director.
  • He must not have any financial relationship with the company

SMALL SHAREHOLDER DIRECTOR

  • The director who is elected by the shareholders of the company and who is also a shareholder in the company and holding a maximum of Rs. 20000/- amount of shares. The company can itself or on the basis of an application made by the shareholders of the company can appoint a small shareholder director in the company for taking care rights and interest of small shareholders of the company. The director must be the shareholder in the company before appointed as a director.

BUT:

  • He shall be the director in the company for the period of maximum three years and he cannot be re-appointed as a small shareholder director in the company
  • He cannot be the small shareholder director in more than 2 companies at the same time.

NOTE: Before appointing any director the company should take the following steps:

  1. That person should have an active DIN (Director Identification Number) and Digital Signature.
  2. That person is not disqualified to be the director in the company as per section 164 of the Companies Act, 2013.
  3. The proposed director should not be a minor.
  4. That person should be an individual person and not an artificial entity.

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