Appointment of Director

The appointment of director is made as per the Articles of Association or under the Companies Act, 2013. In case of a public limited company, at least three directors must be appointed.

In the case of a private company, at least two directors must be appointed. In the case of a one-person company, only directors are to be appointed.

A company may appoint a maximum of fifteen directors, a company may exceed the number of maximum directors after passing a special resolution at a general meeting of the company.

A director is an individual who is appointed to perform the duties and functions of a company according to the Companies Act, 2013.

Appointment of Directors Under Companies Act, 2013

The minimum number of directors required in the company are:

1. Minimum of two directors is required in the case of a private limited company
2. Minimum of three directors is required in the case of a public limited company
3. Only one director is required in the case of a one-person company.
4. Maximum of 15 directors can be appointed by any company. When a company wants to appoint more than 15 directors then it is necessary to pass a special resolution.

Director appointment is given under section 152 of the Companies Act, 2013 with the Companies (Appointment and Qualification of directors) Rules, 2014.

The Companies Act, 2013 has not prescribed any specific qualifications for directors of any company. The articles can provide the qualifications. The procedure for the appointment of director in company law is given in the following steps:

Step 1 : Obtain a Digital Signature Certificate

Step 2 : Application for Director Identification Number (DIN) is made by the proposed director of a private limited company before the ROC with the prescribed fees. It can be obtained by filing DIR-3 with the Ministry of corporate affairs (MCA). There is no restriction relating to nationality, Indian nationals, Non-resident Indians and even foreign nationals can obtain DIN from MCA.

Step 3 : Checking Articles of association (AOA) for provision of director appointment of a private limited company. The AOA must provide a clause for appointing or adding a director. The appointment of directors pdf can be downloaded from google. When there is no provision in the AOA for adding a director, the AOA can be modified to contain a provision that allows adding an additional director.

Step 4 : A letter in writing is taken for consent as director in writing in Form DIR-2 for willingness to become a director.

Step 5 : A letter in writing to the effect that the person is not disqualified to be appointed as director as given in Form DIR-8 under the Companies Act.
Disclosure of Interest in other companies with a shareholding pattern, if any or otherwise a NIL disclosure is filled.

Step 6 : Notice of appointment of director to call Board meeting - The company must appoint a director by passing a resolution in a board meeting/general meeting unless the act provides otherwise. In the case of a private limited company, when the documents are silent for the director’s appointment other than a general meeting, directors must be appointed at the general meeting by shareholders.

Step 7 : Appointment letter to be issued by the company to a director for its appointment.

Step 8 : File E-Form DIR-12 with the Registrar of Companies along with documents such as consent/ approval letter with DIR-2 and notice and certified copy of a resolution of meeting within 30 days.

Documents Required for Appointment of Director

The documents required for the appointment are as follows:

• PAN card of the director as proof of identity
• PAN card of the director as proof of identity
• Allotment of Director Identification Number (DIN)
• Consent in Form DIR-2 to act as a director
• Letter of appointment from the company
• The resolution passed by the company for an appointment
• Identification proof such as Voter ID, Driving license, Aadhar card, etc.
• Proof of residence such as electricity bill and rental agreement, etc.
• Passport size photograph
• Digital signature certificate
• Form DIR-8 for intimation of he is not disqualified to become a director
• Form MBP-1 after the appointment under the Companies (Meeting of board and its powers) rules, 2014.

Disqualifications of Director

As per section 164 of the Companies Act, 2013 for appointment of director states in order to be appointed as the director of the company. The person shall possess certain eligibility criteria. Form DIR-8 provides a detailed disclosure of his qualification under the specified section. The following points are given and are not eligible to become a director:

• A person of unsound mind
• Undischarged insolvent
• A person applying to be adjudicated as insolvent and his application is pending
• A person who has been imprisoned for more than six months and five years has not elapsed
• Court or tribunal disqualified such a person
• A person who has not paid any calls on share and six months have elapsed
• Convicted in offense of related party transactions in the preceding five years cannot be made for the appointment of director.
• A person who has not been allotted a Director Identification Number.
• Any company where the director has not filed annual return for three consecutive years or defaulted in payment or redemption of deposits or debentures or its interest or default in payment of the declared dividend is not eligible for reappointment in the same company and appointment in any other company for a period of five years.

Categories of Director

1. Executive Director

A director who is employed in the company and manages the day-to-day affairs of the company are known as the executive director. They have deep knowledge of the company. It includes managing directors and whole-time directors.

2. Non-Executive Director

This category of appointment of director in private company are neither employed nor engaged in day-to-day functions of the company are called Non-executive. This category includes professional directors and nominee directors, etc.

3. First Director

The directors which are specified in the articles at the time of registration of the company. In case it is not specified then it shall be selected by a majority of subscribers as per Table F. In the case, Table F is not applicable then all the subscribers to the memorandum are called the first directors. They are appointed till the subsequent directors are appointed in place.

4. Rotational Director

In the case of companies other than private companies and government companies, the appointment of directors from not less than two third of the directors shall retire by rotation. The articles of association specify the retirement of all the directors of the company by rotation. Not less than one-third of rotational directors are liable to retire either by agreement.

5. Non-rotational Director

Directors other than Rotational are called Non-rotational Directors.

6. Managing Director

A Managing director has the substantial powers of managing the company’s business with an agreement with the company.

7. Resident Director

Every company should have at least one resident director, who has stayed in India for not less than 182 days in the previous calendar year.

8. Independent Director

These are non-executive directors who help the company to improve credibility and standards. The tenure of the independent director is up to five consecutive years. The appointment of director section 152 of the Companies Act, 2013, at least two independent directors as follows:

• Public companies with paid-up capital of Rs. 10 crores or more
• Public company having an annual turnover of Rs. 100 crore or more
• Public company with total outstanding loans, deposits and debentures of Rs. 50 crores or more

9. Woman Director

There is a certain class of the company listed below:

• Listed company
• A public company having paid-up capital of Rs. 100 crore or more
• A public company has a turnover of Rs. 300 crores or more.

10. Additional Director

Every company may appoint an additional director. However, the articles should allow and such a person shall not fail to be selected as director in the general meeting. An additional director is the appointment of director resolution in a board meeting or by passing a resolution by circulation.

11. Nominee Director

The Nominee director is appointed by a third party or by the Central government in case of mismanagement or oppression.

12. Small shareholder Director

A listed company upon notice of a minimum of 1000 small shareholders or 10% of the total number of the small shareholders, whichever is lower, shall have a director who is elected by small shareholders. They are members who can appoint or remove a director in a company.

13. Additional Director

These directors are appointed till the next Annual general meeting. In absence of the AGM, the date on which such AGM should have been held.

14. Alternate Director

It refers to the personnel appointed by the board, to fill in for a director who is absent from the nation for more than three months.

Procedure for Removal of Director in Private Company as per Companies Act, 2013

There are two situations where a director can be removed after the appointment of director.

Situation 1: If the director has not attended three board meetings in a row

Situation 2: In case the director is removed suo-moto by the board. The director is removed by issuing a special notice under the Companies Act, 2013. The removal of director needs a specific procedure to be followed in order to remove a director of a company is as follows: -

1. Preparation of notice of board meeting along with draft resolutions to be passed in the board meeting.
2. Company shall intimate the director about his removal.
3. Sending of Notice with the Agenda of the Board meeting to all the Directors of the company.
4. Convene board meeting and pass the Board Resolution for the matter of removal after the appointment of director of the concerned person and notice of a general meeting to members of the company.
5. Sending of the general meeting notice to all the members at least 21 days before the date of the general meeting along with a special resolution with the intention of removal of a director by the members of the company.
6. The special notice must be signed, individually or collectively by the number of shareholders holding not less than one percent of the total voting power or holding shares of an aggregate sum of not more than five lakh rupees has been paid up as for appointment of director on the date of the notice is required given to the company.
7. Hold the Annual general meeting (AGM) giving an opportunity to be heard of the removing director after the appointment of the director to be heard and speak in the meeting.
8. Preparation of documents for removing the director and intimation to the departments.