Company is an artificial legal entity which doesn’t have any physical presence and cannot run by its own. So in order to run the affairs of it after Company Registration, it needs the Board of Directors. Board of Directors is controlling authority of the company which supervises and protects the interest of all shareholders of the company. Although companies act has not given any comprehensive definition of term ‘Director’ but it has been defined as appointed by board of company under Section 2(34) of the companies act, 2013. Similarly term “Board of Directors” has been defined as a collective body under Section 2 (10) of the Companies Act, 2013.
Definition of Independent Directors:
In order to understand term additional director better, it is important to know the definition of board of directors and independent director too. The term ‘Independent Director’ has been defined under Section 2(47) of the companies act, 2013 as the director which has been mentioned and qualified as per the provisions of Section 149 (5) and (6) of the companies act, 2013. As per that any director apart from full-time director or a managing director or a nominee one is termed as Independent director If doesn’t have any monetary or pecuniary relationship with the company or its directors.
Additional Directors as per Companies Act, 2013:
As per the provisions of Section 161 (1) of the companies act, 2013, additional directors can be appointed by the board of directors in case they have been assigned with certain powers by Articles of Association (AOA). That additional director shall hold the office till the date of next upcoming annual general meeting or till the last date when last annual meeting was held or whichever so is earlier. In case of resolution is not passed at annual general meeting to appoint him he cannot be appointed as Additional director in that scenario.
The distinction between a Director and an Additional Director:
Provisions of the act have not given any much distinction between a director and an additional director in terms of definition or powers and duties of both. The only distinction that we can see is in terms of the procedure of their appointment. A director is appointed by stakeholders of the company at the time of annual general meeting of the company, whereas in contrast an additional director is nominated by the board of directors during board meeting as per section 161 of the companies act. In terms of powers, an additional director shall have all rights, powers and duties as given to any director of the company even they come in the count for maximum number of directors to be appointed for a company.
Points need to take care before making an appointment of an additional director:
- As per Section 161 of the companies act, 2013 insure that board of directors has been authorized by articles of association (AoA) to make an appointment of additional directors.
- To verify that proposed additional director doesn’t suffer any disqualification as additional director as per provisions of Section 164 and Section 165 of the companies act, 2013.
- To check whether the person is qualified to be appointed as a director in general meeting as per Section 161(1) of the companies act, 2013.
- To check whether the proposed director has a valid DIN number (Director Identification Number) before making an appointment as per section 152.
- To furnish declaration from the director in form DIR 8 stating that he is not disqualified from being a director.
The procedure of appointment of an additional director of the company:
- An additional director must be having a valid DIN number as per Section 152 of the companies act, 2013 in order to make an appointment. For DIN, it is pertinent to have DSC (Digital Signature Certificate) of director. The company where he is proposed to be an additional director shall make an application before the Ministry of Corporate Affairs (MCA) for appointment of director. Board members shall pass a resolution approving person to act as additional director in a board meeting.
- The company can directly make an application before MCA for appointment without holding board meeting. In case the proposed director doesn’t hold a DIN, then it is important to convene board meeting in order to approve the same.
- Documents required for making an appointment:
- Form DIR-2: Director’s consent to be nominated as a director in the company
- Form DIR-8: Intimation and declaration by director undertaking that he is not disqualified from appointing as a director as per the provisions of Section 164(2) of the companies act, 2013
- Disclosure about director’s interest in any other company or about its directorship in other companies
- Board of director’s copy of resolution authorizing appointment of additional director
- Letter of appointment of the director
- Submission of required documents along with application of appointment of director before MCA in Form DIR-3. This application is required to be digitally signed by the applicant himself and other directors of the company where he is proposed to be additional director.
- Declaration form and consent form as DIR8 and DIR2 respectively to be submitted while making an application
- After filing an application of appointment of an additional director, Form DIR-12 is required to be filed with MCA within 30days of appointment. As per the provisions of the companies act, 2013 every company that is whether new or existed shall file this form mentioning particulars of directors and other key managerial of the company within a period of 30 days from the date of appointment or removing of any director of the company.
Although there is a difference in the procedure of appointment of a director and an additional director of the company, the powers and duties of both are same and cannot be distinguished. So both a director and an additional director plays an important role in the day to the operation of the company and are key personnel of the organization without which it is not feasible to do proper execution of the company.
Read our article:An Insight into Section 164, Companies Act: Disqualification of Directors