Appointment and Resignation of Directors
Procedure for the Appointment or Resignation of the director – Normal Case.
Procedure for the Appointment of Directors – when all director resign at the same time.
According to Chapter XI of section 149(1) of the Companies Act, 2013 it is very clearly stated that every single company shall have a board of director consisting of individual directors. In the case of a public company Appointment of Director to minimum 3 is required to be appointed and in the case of a private company Appointment of minimum 2 directors is required to ensure smooth functioning of the company.
However, In the case of a One Person Company Appointment of director is only while the minimum numbers of the director in a producer company registration have to be five. The maximum number of directors in a company can be 15 and after that, a special resolution is passed if a company wants to hire more than 15 directors.
This chapter of the act also mentions such class or classes of companies where there has to be one female director. It also states that every company existing on or before the date of the commencement of this act shall be bind by the law to comply with the requirement of the provision of the Appointment and Resignation of Directors under Companies act 2013.
Furthermore the Companies Act 2013, states that it is mandatory to have at least one director who has resided in India for more than 182 days in the previous calendar year.
Now coming to the core objective of this article which is what is the procedure of Appointment and Resignation of Directors on the same date.
But first, we need to know who is a director of the company?
As we all know the company is a legal entity but with no physical existence like a normal person it is an artificial person where the company can only function through its director who acts as the officer of the business. The Appointment of Director is conducted by group of people whose job is to supervise a particular project or program of a company. They are usually members of the governing council or the Board of Management who are expected to act in good faith to achieve the objective of the company by due diligence and exercise their independent judgments.
It is an extremely rare case where all directors of a company resign at the same time and in such a situation the resignation of a director is treated as a choice exercised by the director of a company. There are two scenarios of appointment and Resignation of Directors which is as follows-
Under section 168 of the Companies Act, 2013 the procedure of resignation of the director is as discussed.
A notice is to be served by the director of the company mentioning the reason for resignation in it specifically. Form DIR- 11 has to be filed by the Director under his digital signature.
The road was taken by the company after the resignation notice –
All the members of the board may resign at the same time by serving notice to the company. This scenario can be seen rarest of rare in which majority of directors resign at the same time because most of the companies are family run. The Procedure is the same for the resignation which is discussed above. A return containing such particulars and documents as may be directed, of the directors and the key managerial personnel shall be filed with the Registrar within 30 days of receiving of the resignation letter.
When one director or all directors resign at the same time the company doesn’t stop working and new directors get appointed who are expected to carry forward the legacy of the company by maintaining the goodwill.
Section 168(3) of the Companies Act, 2013 states that when all the director of a company resign from the Board, the promoter or the central Government in the absence of a promoter shall appoint the required number of directors who are going to hold that seat until the new director is appointed in a general meeting.
If accompany is empty handed with no appointed director than the shareholder of the company comes into the picture as they may have the authority to appoint a new director. According to the Companies Act, 2013 there is no vested power of the shareholders to appoint directors and this power has been delegated to the Board of members of the company.
The company where all directors have resigned faces a lot of difficulties while filing the forms for Appointment of Directors. Therefore, the Appointment Of Directors through e- forms cannot be done as the MCA issued a clarification vide General Circular No. 3/2015 dated March 3rd, 2015 which states that the RoC may allow any of one of the resigned directors who has an authorized signature of the company to file the e- form as applicable and subject to compliance of other provision of the act of 2013.
As per the Internal Circular of the MCA dated 6th October 2017, the following should be followed as per the Standard Operating Procedure for the Appointment of Director for the vacant board of Non- complaint companies in accordance with the terms of section 164(2):
Section 168(3) of the Companies Act, 2013 states that when all the director of a company resign from the Board, the promoter or the central Government in the absence of a promoter shall appoint the required number of directors who are going to hold that seat until the new director can be appointed In a general meeting.
In case of public company, the company secretary has to issue a notice to call for a general meeting in which new director will be appointed. In the case where there is no company secretary the promoter or a member of the board may take the needful action. The resolution needs to be passed by a minimum number of members as required to constitute a public company.
In the case of private, a promoter or any member of the board can issue a notice to call the general meeting in which new director is appointed. The resolution needs to be passed by a minimum number of members as required to constitute a private company.
The notice issued includes a resolution to appoint a minimum number of directors and also includes the general authority to such appointees for any compliance's and representation that they make on the company’s behalf.
Every person who proposed to get appointed or appointed as a director of the company in general meeting or otherwise shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this act and he has willfully given his consent to hold the office as director and such consent has Been filed with the registrar within 30 days of his appointment.
So, we have tried to compile all the major provisions on the Appointment and Resignation of Director.
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