A Guide On Appointment of Directors under the Companies Act, 2013

Introduction:Appointment of Directors 

A director may be defined as an individual who directs, controls and manages the affairs and functioning of a company. A director is a person who is appointed to carry out the duties and functions of a company in harmony with the provisions of The Company Act, 2013.  The appointment of directors takes place in accordance with provisions of the above-mentioned Act.

The directors are collectively known as Board of Directors. The Board of Directors plays a very significant role in managing the business and other affairs of a company. Appointment of Directors is extremely crucial for the expansion and management of a company.

Minimum No. of Directors as per Section 149(1) (a)

  • Three directors in case of Public Company.
  • Two directors in case of Private Company.
  • One director in case of One Person Company(OPC)
  • Maximum 15 directors any Company will have If Company wants to have more than 15 directors essential approvals is required under the law.

Qualifications for Directors

The Companies Act has not prescribed any qualifications for Directors of any company. An Indian company may, consequently, in its Articles, stipulated qualifications for Directors. The Companies Act does, though, limit the specified share qualification of the Directors which can be prescribed by a public company or a private company that is a subsidiary of a public company, to be Rs. 5,000/-.

Documents are necessary for the appointment of a person as Director

  1. Apply for DSC: In India, the appointment of directors can only be done through the digital signature and so the first step is to create the DSC.
  2. Apply for DIN: This is a compulsory requirement for becoming a director in a Company. A person should have DIN i.e. Director Identification Number which can be produced online by filing DIR -3 on MCA.
  3. Documentation Preparation: A written letter stating his consent as Director should be prepared. A written letter to the effect that the person is not ineligible to be appointed as Director as specified under Law is also required. Disclosure of interest in other companies (shareholding pattern); if any, else a NIL disclosure is enough should also be prepared.
  4. Notice to call Board meeting with an Explanatory Statement: A Resolution has to be passed at the meeting for the appointment of a director. Appointment letter is then issued by the Company to a director for its appointment.
  5. Filing of Form DIR-12: E-form DIR-12 with ROC all along with above-mentioned documents such as assent / Approval letter, DIR- 2, and notice and certified copy of the resolution of Meeting. Form to be filed in 30 days.

New Categories of Directors

Resident Director

This is one of the most significant changes made in the new regime, particularly for the appointment of the Directors under section 149 of the Companies Act, 2013. It states that each Company should have at least one resident Director i.e. a person who has resided in India for not less than 182 days in the previous calendar year.

Woman Director

Now the legislature has made it obligatory for certain class of the company to appoint a woman as director. As per section 149 of the act, prescribes for the certain class of the company their women strength in the board should not be lesser than 1/3. Such companies are either listed company and any public company having-

  • Paid up share capital of Rs. 100 cr. or more, or
  • The overall turnover of Rs. 300 cr. or more.

Restrictions on the number of Directorships

The Companies Act prevents a Director from being the Director, at the same particular time, in more than fifteen companies. For the purposes of establishing this upper limit number of companies in which a person can be a Director, the following companies are barred:

  • A “pure” private company;
  • An association which is not carrying on its business for profit, or one that prohibits the payment of any dividends; and
  • A company in which he or she is only appointed as an Alternate Director.

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