The company is a legal person who needs a natural person for managing, controlling, directing and overseeing the affairs of the company. In a Private Limited company, the board of directors can appoint or elect one person or more than one person as a director who implements and determines the policies of the company the Appointment of the Directors is done with the process discussed below.
Under Section 149(1) of the Companies Act 2013[1] (hereinafter act of 2013) there has to be a board of directors in every company includes only individuals or natural person and not any other legal entities or legal persons and Section 152 defines the appointment of directors. However, under Section 168(1) of the act defines the resignation of the directors by giving a writing notice to the board followed with due process.
Appointment of the Directors
The appointment of the directors is made as per the Articles of Association (AOA) or by virtue of section 152 of the act the subscribers to the memorandum shall be deemed directors f the company. There are categories of directors under act 2013 which are
- Woman directors are there must be one woman in the board of director where the company has paid-up capital of Rs 100 crore or more or has a turnover of Rs 300 crore or more.
- Independent Director under section 149(6)
- Directors elected by Small shareholders under section 151
- Resident director under section 149(3) is required in a company who has lived for 182 days in India in the previous year.
- Additional director under section 161
- Alternative director under section 161(2) can be appointed on the absence of the main director for at least three months and above.
- Nominee Directors under section 161(3) can be appointed by a third party or by the Central Government in the case of mismanagement or oppression.
| TYPE OF COMPANY | APPOINTMENT MADE |
| Public Company or a Private Company whic subsidiary of a public company | 2/3 of the total number of Directors are appointed by the shareholders and remaining 1/3 appointment is as per Articles of Association. In case AOA is silent, then shareholders shall appoint the remaining. |
| Private Company (not a subsidiary of a public company) | Articles of Association prescribe the manner of appointment of any or all the Directors. In the absence of AOA, Directors can be appointed by the shareholders. |
Qualification and disqualifications of the Directors
Under the Companies Act 2013, there are no specific qualifications for the appointment of the directors of any company is provided. However, the limited shares can be held by the director of the public company or a private company which is a subsidiary of the public company that is up to rupees five thousand (Rs 5000).
Disqualification of Directors
Under section 164 of the act, the following disqualifications are provided:
- Unsound mind person
- Undischarged insolvent
- Convicted by the court
- Order of disqualifying passed by the court
- Not paying any call for the shares of the company
- Convicted for an offence
- Not filled any financial statements
- Failed to repay the deposits
- Barred by law
The requirement of director in a company
The company requires a maximum of 15 directors on the board of the company, whereas can the company can increase the number of directors by passing a special resolution in AOA.
| Company | Number of Directors |
| Public Company | Minimum number of 3 Directors |
| Private Company | Minimum number of 2 Directors |
| One Person Company | Minimum One Director |
Procedure for the Appointment of the Director in a company
A director is a person who is appointed to perform the duties and functions of a company as per the provisions of the act of 2013. Appointment of director’s procedure is mentioned under section 152 to 159 of the Companies Act 2013 is described below:
Section 153- The application for the allotment of the Director Identification Number (DIN) has to be made by the person intending to be a director of a company before the central government along with the depositing of the prescribed fees.
Section 154- The central government then allot the DIN (Director Identification Number) in favour of the applicant within the one month of the receiving of the allotment application made.
Section 155- The applicant who has already received an allotment of the DIN (Director Identification Number) previously is now allowed to apply or possess another Director Identification Number.
Section 156- The existing director has to disclose his DIN (Director Identification Number), which he has obtained by the central government within one month of the receiving. He has to intimate to the company or the companies wherein he is a director.
Section 157- The company has to inform about the DIN (Director Identification Number) of all the directors to the registrar or the authorised person within the 15 days of receiving the intimation. The fees also have to be submitted as prescribed by the central government and also mentioned under section 403. On the failure of the intimation within 15 days the company has to pay fine for Rs 25,000 twenty-five thousand which may extend to Rs 1,00,000 one lakh.
Section 158- Every company or person has to mention DIN (Director Identification Number) while furnishing any return, information or particulars in relation with the director or contain any reference of the director.
Section 159- If any of the provisions under section 152, 155 and 156 have not been followed then fine of Rs 50,000 fifty thousand has to be imposed or may be liable for the imprisonment for the six months. If there is a continuation of the contravention of the provisions then per day fine of Rs 500 has to be imposed till the contravention continues.
Ways of appointment
The appointment of the directors of a company can be done by any one of the following ways:
- By the articles of association as first directors: the subscribers of the memorandum appoint the first directors of a newly formed. If not then the subscribers are deemed to be the first directors and hold office up to date of first annual general meeting of the company.
- By the company in annual general meeting: under section 255 of the companies act provides that the directors of a company can be appointed at its annual general meetings
- By the board of directors: The general power to appoint the directors is through the general meeting of the members or shareholders but in few cases even the board of directors can appoint new directors.
- By lenders (section 161(3)): under definite conditions, the articles may authorize the banking company, debenture holders, and a financial corporation to appoint their nominations to the board of directors. Nonetheless, the number so appointed must not go beyond 1/3rd of the board of director’s total strength.
- By the central government: the central government has the power to appoint the directors to avoid oppression or mismanagement and the appointment of the directors may be made for the time period not beyond three years at a time.
Documents furnished on Appointment of Director
- The Company has to call the board meeting and pass the resolution to appoint the additional director according to the AOA of the company if no clause is mentioned then in accordance with provisions of section 161 of the act.
- It has to ensure there must be allotment of the DIN (Director Identification Number) to the director who wants his appointment.
- Form DIR 12 filled along with the letter of the appointment and then submission of the documents by the director within 30 days.
- The consent Form DIR-2 has to be given in writing for willingness to be a director. It is under Rule 8 of Companies Appointment and Qualification of the Director Rules 2014.
- The appointing director has to provide Form DIR 8 intimating that he is not disqualified under the provisions of section 164(2) of the act.
- After the appointment, the director has to give Form MBP-1 in compliance to section 184(1) read with Rule 9(1) of Companies (Meeting of Board and Its Powers) Rules 2014.
Resignation of the Director
A Director of a company can give resignation from the office by giving a notice in writing to the board of the company under section 168(1) of the Companies Act 2013.
After this, the company will take the following steps to remove the concerned name from the register of Directors on the MCA Portal[2].
- The Board members of the company will hold a Board meeting by providing seven days of clear notice. A clear notice for 21 days issued by the company which excludes the day on which the notice was sent and received.
- In the board meeting, the Board members will discuss and then decide whether to accept the resignation or not.
- If the board accepts the resignation of the director, they will pass a Board resolution accepting the resignation in the following format :
- “Resolved that the resignation of Mr ABC is accepted with immediate effect.
- “FURTHER RESOLVED “ that Mr ABC has performed really well during his/her tenure as the director of the company. The board places this appreciation as a record.
- “RESOLVED FURTHER” that the concerned director who is putting forward his/her resignation is hereby authorized to do all deeds, acts and things which are necessary for the resignation procedure of the director from the Directorship position of the company.
- After the resolution is being passed, the outgoing director will file the form DIR-11 along with the Board Resolution, proof of the delivery of the resignation letter and copy of the resignation letter.
- The Form– DIR-12 is needed to be filed in this case. DIR-11 is filed by the Director while DIR-12 is filed by the company itself with the ROC (Registrar of the Companies) along with the Resignation of the letter and the Board Resolution.
- In the end, the name of the concerned director’s data has to be removed from the company records who has given his/her resignation in the MCA (Ministry of Corporate Affairs) website
Conclusion
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