A company is a legal entity, it has no physical existence, and it can act through a natural person only. The Company hires professionals to direct its affairs, and they are called directors, so the directors are the persons who act on behalf of the Company. The Company deals with the appointment, removal, qualification and disqualification of directors.
The Directors are defined under section 2(34) of the Companies Act, 2013 as “a director appointed to the board of a company”. A director is a natural person appointed by Company to give directions to Company in which he is appointed. Such directors are also called officers of the Company.
They share the responsibility of achieving all the goals mentioned in the MOA of the Company. Directors are involved in the management of tasks and execution, supervision and control of such tasks. The main aim of directors is to achieve the ultimate aim or objective of the Company, and qualification and disqualification of directors and even their appointment and removal are taken care of by the same Company.
The public Company should have a minimum of three directors while a private company should have at least a minimum of two directors, and for One Person Company, only one Director is required.
Responsibilities of Directors
Primarily, the board of Director is responsible and accountable for the followings:
- Appointment of the senior management
- Deciding the Company’s strategies and objectives and also shaping them.
- Guiding the Company towards achieving its aim of it.
- The Company’s accounts and finances, etc.
Classification of Directors
The followings are the types of directors who are part of a company:
- Ordinary Director
Such Director is also known as a Simple Director. They attend every board meeting and participate in the matters put before in the same. They are neither whole time directors nor the managing Director.
- Residential Director
According to section 149(3) of the Act, there should be at least one person as Director in the Company who has stayed in India for not less than 182 days in the previous calendar year.
- Managing Director
Section 2(54) of the Companies Act, 2013 defines the Managing Director as a directors who, by virtue of the Company’s AOA, agreement with the Company, board of Director or resolution passes in general meeting has substantial power of managing affairs of the Company.
- Whole-time Director
A whole-time director is the Director who is in whole-time employment of the Company.
- Alternate Director
Section 161(2) of the Act, the alternate Director is appointed by the Company if a director is absent for more than three months in India. The board of directors appoints such a director when a resolution is passed in a general meeting or authorised in the AOA of the Company. Such an alternate Director cannot hold the office for a term more than the Director in whose place he has been appointed, and he should vacate the office the moment the original Director comes back.
- Additional Director
Section 161(1) of the Act says that any person can be appointed as an Additional Director by the Company.
- Professional Director
A director who has a professional qualification and he has no pecuniary interest in the Company.
- Independent Director
Section 149(6) of the Companies Act, 2013 defines an independent Directors as a director other than managing, whole-time or nominee director who is a person with integrity and possesses relevant experience; or who is not related to promoters of a company or its holding, associate or subsidiary companies or who has no pecuniary interest in the company or its holding, associate or subsidiary companies; or who possesses a relevant qualification as required.
- Interested Director
A director who or his relatives, family, firm, body corporate or another association is interested in a contract or arrangement entered into or on behalf of the Company as stated under section 2(49) of the Act.
- Nominee Director
Those who are nominated by the Company for grant of loans by the financial institutions, banks or government are called Nominee directors.
- Woman Director
According to section 149(1)(a), there should be at least one female Director in listed companies or certain public companies.
- Small shareholder Director
As per section 151 of the Act, the small shareholder has the right to elect at least one person as a director.
The qualification and disqualification of directors depend on these above-mentioned types of directors.
Qualification and disqualification of Directors
The Companies Act, 2103 has given provisions regarding the eligibility of a director under section 164, but the qualifications required to be a director are not given under the Act. But the companies mention the qualification of directors in their AOA. The qualification and disqualification of directors can also be taken out from other provisions of the Act.
Qualifications of directors
According to all the provisions related to Director, the following can be called qualifications of a director:
- An Indian national
- Must have completed the age of 18 years
- The Director must be an individual.
- A person of sound mind
- Must be competent enough to enter into a contract
- If provided in AOA, then must hold share qualification.
- Must not be the insolvent person
- Must not be convicted for any of the offences by a Court
- The person should have his DSC (Digital Signature Certificate)
Disqualification of directors
According to Section 164 of the 2013 Act, the following can be reasons for disqualification of directors:
- Unsound person and declared so by a competent court.
- Undischarged insolvent
- Convicted by a court for any offence
- An order passed for his disqualification as Director.
- Has not to pain for calls in respect of shares of Company
- Has failed to file annual returns or financial statements for continuous three financial years
- Has failed to repay the deposit or interest, or failed to redeem the debentures on the due date or pay a dividend for one year.
- He has not got DIN
- Convicted for an offence dealing with the related party transaction in last preceding five years.
The directors are an integral part of any company. There are certain responsibilities in the Company which only a director can perform. The Act dealing with matters related to directors is The Companies Act, 2013. Shareholders of the Company appoint these directors, and the qualification and disqualification of directors are mentioned in the AOA of the Company. A strict bar of five years is given to allow a person of appropriate qualification to represent the Company. However, a provision of appeal is also given in the Company Law along with thirty days remedial period to rectify any filing error.
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