Overview of Appointment and Resignation of Director
It is well said that Directors are the brain of the company. They are the managerial staff who control and administer the company's services. The revolution of directors takes place in one or another way – either by the selection of new director or withdrawal of existing. Endeavor to carry out the change of directors is always to guarantee an optimum blend of experts on board for the interest of the company. The authorization to approve the resignation of the director lies with the parts of BoD, whereas the appointment must be made through the consent of shareholders. Whether it is an appointment, removal, or resignation, the change does not take effect continuously; the intimation is made to 'Ministry of corporate affairs.'
What is the Eligibility Criteria to be a Director?
There are no designated qualifications, but an individual should comply with the following mentors be a director:
However, according to the law, a specific natural person only can be a director of any company.
- Age Demarcation
There is no alternate fixed age for being a director, but it is essential that the person who should be competent to enter into any contract. Moreover, in a matter of 'managing director,' 'full-time' director, or 'independent' director of a recognized company, the person becomes eligible to be a director if he is of 21 years and has not reached the age of 70 years officially.
- Determination of Nationality
There is no restriction. However, there must be a minimum of one Indian director in the company.
- DIN Needed
To be eligible to be designated as a company's director, the person must get a Director Identification Number. The main intention behind having a DIN is to make assured that fake directors do no fraud, and in case anyone ventures any such criminal activity, they can be traced within this unique number.
- Limit of Valid directorship
A personality can only be a director of 20 separate companies at a time. Out of these 20 companies, only ten can be public companies.
- Unsound mind or bankrupt person
Anybody who is of unsound mind or is incompetent of making decisions on his own cannot be appointed as a director. This involves children, mentally disabled individuals, and frames with unstable mental faculties. Furthermore, insolvent people or individuals who have maintained bankruptcy claims in the court of law are disqualified from acting directors.
- Criminal background
If a personality has a criminal record and was sentenced to confinement for more than seven years or more, he cannot be a director.
- Pending overdue returns
If the individual has not met previous returns in any of the preceding years, he shall be barred from keeping the directorial position.
Recognition: Types of Director
The directors of a company change in terms of the role they play, such as managing director who runs the overall purposes of the company, executive directors who look after the day to day methods, and independent directors who assure proper governance of the company. Thereby, one company can have increased directors; nevertheless, the appointment of directors also depends on the type of business like:
- As per 'Section 149(1)' of the Companies Act, 2013, every public corporation shall have a minimum number of 3 directors, whereas the least amount of directors in a private company is two and only one director in case of the 'One Person Company.'
- The highest number of directors in a public company is 15. Besides, a company can also select more than 15 directors after getting a permit from a specific resolution in the general meeting. The method of appointment of more directors does not expect the endorsement of the Central Government.
- A director can determine the maximum number of directorships up to 20, including any alternative directorship of a person.
- In the event of any private company or 'public company,' either holding or subsidiary company shall restrict to10 directorships in the 'public company'.
- All the Certified companies must appoint at least one woman director in the Board of Directors in a year from the enforcement of the second Proviso to Section 149(1) of Companies Act.
- Similarly, every public company having a turnover of Rs. 300 Crore or a paid-up portion capital of Rs. One hundred crores under the latest audited financial statements shall appoint at least one woman director within a year from the convocation of the second Proviso to Section 149(1) of Companies Act.
Note: "If any person holds the efficiency of director in more than 10 or 20 companies before the commencement of Companies Act, then he shall have to determine the companies where he wishes to maintain or resign as the director within one year from such beginning. After that, he shall inform about his decision to the chosen companies as well as the concerned Registrar.
Short Note: Appointment and Resignation of Directors
Section 168 of Companies Act, 2013, implements a clear picture of the appointment and resignation of directors, which wasn’t satisfied previously in the Companies Act, 1956. Since a business does not have a physical presence, it gets identified as an artificial person to whom only a natural person can bring into life. Consequently, a person who takes charge of managing the company’s operations is known as the director. Different directors are qualified for handling various aspects of the company.
Appointment and Resignation of Directors
Why Add and Switch?
Documents needed for Appointment and Resignation of Director
- Photograph: Passport size photo of the Director to be designated
- PAN Card: Self-attested PAN card of the Director to be designated
- Proof of Residency: Aadhar Card/ Voter ID/ Passport/ Driving License director to be appointed
- Digital Signature Certificate: DSC of the ongoing Director and Director to be eliminated/removed
- Identity proof before-mentioned as Passport/Election card/Driving License/Aadhar card
- Mobile number and Personal & official email id of the Director
- It is mandatory to apostille all the documents apostilled if the Director is a non-resident of India.
- Notice of resignation filed with the company
- Proof of dispatch
- Acknowledgment of form, if received.
Appointment of Director Procedure
Directors Appointments during Incorporation
- Appointments of First Directors
At the age of company registration with MCA, the individuals who fit to be the Director are the first directors of the Company. However, while incorporation, if there are no before-mentioned directors, then the original subscribers to the MOA will automatically display the directors of the Company.
- Requisites: How to be done?
MCA has announced a new uncomplicated process of establishment of a company. There is no prior requirement to have DIN- Director Identification Number to become a director at the time of establishment. The DIN is allotment secures place at the time of enrolment of the Company. Also, it is crucial to add the details of the directors in the e-form as presented by MCA. The 'master data' of the Director will be accessible on the MCA portal after the establishment of the Company. At the event of the appointment of directors, the firm should possess the following Director’s documents attached. In the new form of association, a culmination of 3 DIN can be allotted. So if persons do not have DIN, then a maximum of 3 persons can be elected as directors.
Provisional: Appointment of Director following section 152 of the Companies act 2013
- In the matter of a One Person Company, an individual as a part shall be deemed/considered to be its first director till the member duly appoints the Director (s) according to the provisions of Section 152.
- Section '149(1)' of the Companies Act-2013, demands every Company has the least number of 3 directors in the case of a public company. Moreover, two directors in the case of a private company, and one director in the case of a One Person Company. A public company can select a maximum of 15 fifteen directors. Additionally, a company may choose more than 15 directors after passing a special resolution in customary meetings, and the consent of the Central Government is not required.
- “Any person carrying office as Director in more than 20 or 10 companies as the case may be before the initiation of this Act shall, within one year from such services, have to choose companies where he wishes to continue/resign as Director.
- Every registered Company shall select at least one woman director in the Board of Directors within one year from the initiation of the second proviso to Section 149(1) of the Act. Furthermore, every other public Company having a paid-up share capital of Rs. One hundred crores/more or an annual turnover of Rs. 300 Crore/more as on the last date of the latest audited financial statements shall also appoint at least one woman director within one year from the commencement of the second proviso to Section 149(1) of the Act.
Classes of Director Appointed in the Company
- Managing Director
they are granted with the full power and charge for the operation of the Company.
- Executive Director
they run the day o day to working of the Company, which are more responsible and Effective for the Company.
- Non- Executive Director
they are not into day to day judgment making or operating.
- Nominee Director
these are not the primary directors but are chosen by the PE/VC investors or banks who have provided the loans or shareholders in case of a certified company to represent their interests.
- Independent Director
they are selected in the Company to oversee and ensure sound governance.
Manner of Appointment of Director concerning Companies
1. Fundamental Process
- In condition to Section 161(1) of the Companies Act, 2013, indicate if the Articles of Association (AOA) of the Company recommends adding Director. If Not, then transform the Articles of the Company in a way to add company director.
- Accumulate the necessary documents and erudition required for the process
- Registration of Form DIR-2, Form DIR-12, and Form DIR-8 at ROC must be completed.
- The advertised/proposed Director must give his or her permission to act as the Director via Form DIR-2. This is one of the usual essential documents required to add a new director, and hence, must be received before advising anyone to be the Director.
- If the Company requires to appoint him as a director, then regularize the person as a director in General Meeting by Shareholder Resolution.
2. Subsequent Process
- Call the Board Meeting.
- The Director must be designated in a General Meeting and must be taken to ensure that this notice is published following the laws stated in the Companies Act, 2013, and remains by the rules mentioned in the Secretarial Standards issued by the Institute of Company Secretaries of India.
- Pass recommendation/resolution for the appointment of a supplementary director.
- Issue' Letter of Appointment'.
- The Company needs to file Form DIR-12 to the Registrar of Companies within 30 days from the date of appointment.
- The Company must make important entries in the Register of Directors and Managerial Personals as required.
- Furthermore, the Company must apply for the necessary changes in the Director's details with regards to GSTN and other Certificates, as and when required.
- Thereby, you will have the new company director's designation on the MCA website.
Resignation of the Director under Section 168
- Any director can resign from his office by furnishing written notice to the company. After collecting such notice, the Board shall take note of the same, and the corporation shall intimate the Registrar in such a manner, time, and form as designated. Provided that-
- The company shall place the case of such resignation in a report of directors shortly after the general gathering of the company.
- The director shall also intimate and forward a copy of his resignation along with a precise reason for his resignation to the Registrar within 30 days of resignation.
- The resignation of a director should take its influence from the date on which the company accepted his notice or from the itemized period mentioned by the director in mind, whichever comes later: Provided- that the director who has resigned should be liable for the offenses which appeared during his tenure even after the resignation.
- Whenever all the directors of a company resign at the identical time, then the promoter or the Central Government shall select the expected number of directors during which old directors have to hold company till the new ones get nominated by the company in general meeting.
Understandings behind Resignation of Directors
- Dispute with the Board
When many directors work commonly, a difference of opinion ought to happen. It results in hindering the overall performance of the corporation; in such a position, the directors may decide to resign.
- More beneficial Career Opening
Everyone seeks for a more satisfying career opportunity to enlarge their domain, and choose that option which encourages their inner aspirant. Similarly, the directors may resign if they get better chances or some venture wherein he got selected as a director by AOA.
- Misuse in the Company Affairs
When a director gets introduced to the illegal practices of the company, he may find himself becoming dragged into it that matches his reason for resignation. To defend himself from personal liability appearing out of such activities, he chooses to resign.
- Suspension due to infringement
Any non-adherence, violation, or defaults on the director’s end can lead him into trouble.
- The recession of nomination
It is only appropriate to the Nominee directors who primarily get appointed by the NBFC’s investors on the BOD. Once the transaction between the company and entity is complete, the Nominee director can resign, or he may also leave after the removal of nomination.
Manner of Resignation of Director concerning Companies
The resignation of a director/managing director, companies act 2013, asserts that the company has special duties and obligations to fulfill after.
- The first and principal option is to be the company passing a joint resolution to authorize the notice or letter of resignation and commission to file form DIR11 defining the reasons behind the departure, as per the provision specified in section 168(1) of Companies Act, 2013.
- As per rule '16 of Companies Rule, 2014 (Appointment and Qualification of directors)', the resignation report or notice and ideas for the resignation has to be shared with the Registrar of Companies (ROC) using 'Form DIR11', within '30 days' of the date of removal.
- In extension to filing eForm 'DIR11', the company requires to provide the notice or letter of resignation necessarily. This is the scheme for the company through the resignation of managing director; companies act 2013.
- Documents to be submitted are :
Notice of resignation filed with the company
Proof of dispatch
Acknowledgment of form, if received.
CorpBiz Complete Procedure:
Frequently Asked Questions
As per section 168 of Companies act 2013, the administration does not have any right to reject the resignation presented by a director.
The effective date of withdrawal will be the date on which the director presents the same with the Board of directors.
If so, the promoter will take charge. If there is no promoter, the central government will provide for temporary directors to manage the Company, until fresh directors are appointed.
- The intended individual must be a major.
- He or she needs to qualify as per the laws mentioned under the Companies Act, 2013.
- The Members of the Board must agree to the appointment of the proposed person.
- Companies Act does not consider any educational qualification to be trained to become a Director.
No, a DIN or 'Director Identification Number' is forever allotted and can hence, be used for a continuance.
No, As per the Companies Act, 2013, only individuals can serve as Directors of Public and Private Limited companies.
Yes, to do so, they must have a valid Passport and a DIN. In case they do not have a DIN, they must apply for the same via the Company they wish to become a Director of.
- Public Company: Minimum of three directors
- Private Company: Minimum 2 directors
- OPC: Minimum one director
- Producer company: Minimum 5 directors