Additional Director – Procedure for Appointment

An additional Director is a new director appointed by the Board of Directors of the company. This type of director must hold the office till the next annual general meeting of the company.

The Companies Act, 2013 grants the power to the Board of Directors to appoint a new director to the Board of Directors of the company. The Articles of Association of the company must authorize appointing the such director. 

The powers on the board of directors for appointment is a temporary power vested in them, and this will be subject to revision or confirmation in the general meeting.

What is the term of Additional Director?

A person appointed can occupy their post until the date of the next Annual General Meeting. In the absence of an Annual General Meeting, their appointment will conclude on the date on which the Annual General Meeting should have been held.

The appointment is made temporarily; such a director is vested with the same powers as other directors. They are also subject to all obligations and limitations of a director. They are also entitled to seek appointment as a permanent director at the next General Meeting (whether Annual General meeting or extraordinary general meeting). The resolution can be passed before AGM by passing a resolution in an extraordinary general meeting.

What is the procedure for the appointment of Additional Director?

• First, the company needs to check the Articles of Association of the company whether it is authorized for the appointment of a said director or not. If the articles don’t authorize then the company needs to alter the articles to insert a clause for the appointment of such directors.
• We need to ensure that the maximum number of directors as permitted in the Articles doesn’t exceed after appointing the Addition director because such directors are also counted in the list of total directors.
• The director shall not be disqualified to act as the director under the relevant provision in the Companies Act, 2013.
• Check whether the Additional Director has a valid DIN (Director Identification Number)
• The Board shall obtain consent in Form DIR-2 and a declaration in Form DIR-8 from the proposed director.
• After the completion of this process, the board meeting shall be conducted for passing a board resolution for the appointment of said Director.
• The company shall file DIR-12 to the Registrar of Companies within 30 days of passing the Board Resolution.
• The Attachment to Form DIR-12 are:

A signed copy of the Board resolution

Signed consent in DIR-2 of the proposed director

Form MBP-1 for disclosure of Interest from the proposed director

What is Key Managerial Personnel?

Key Managerial Personnel refers to a group of people responsible for the company's operation. The Additional Directors are not appointed to the key managerial position of the company. They are responsible for making decisions and the smooth running of the company. These personnel is vested with key roles and functions.

The provisions of the Companies Act,2013 give the list of Key Managerial Personnel for a company as:

• Manager or chief executive officer or managing director
• Company Secretary
• Whole-time Director
• Chief financial officer
• Other officers as may be specified

The key managerial personnel is responsible to make crucial company decisions and manage employees. 

What is the Key Difference between Managing Director and Whole Time Director?

The difference between Managing and Whole Time Directors are as follows:

1. A Managing Director is the person who is responsible for day-to-day management. Additional Directors are often corporate executives. On the other hand, a Whole Time Director is a person appointed with a special contract of employment as a full-time employee of the company.

2. A Managing Director is an officer of the company who possesses substantial powers of management. Unlike this, Whole Time Director is an officer without having substantial powers of decision-making.

3. A Managing Director is appointed in the Board meeting and the shareholder's approval is not mandatory. Whereas, the appointment of Whole Time Director is passed through a special resolution in the Annual general meeting.

4. A company can appoint either a managing director or a manager at a time. Whereas, a company can appoint a whole-time director, an additional Director, and a manager at the same time.

5. An individual can become a managing director in more than one company. On the other side, the whole-time director cannot hold the position in more than one company.

What is a Woman Director?

As per the Companies Act, 2013, it is mandatory to appoint at least one woman director on the Board of Directors of the company in certain types of companies. The relevant rules are prescribed in the Companies Act, 2013 states that at least one woman director is required for appointment in the following group of companies:

• Every Listed Company
• Every other company with Paid-up capital of Rs.100 crores or higher, or Turnover of Rs. 300 crores or more.

There are no specific criteria for the additional director. However, When a company satisfies the above criteria, it must appoint a woman director to its board within six months from the date of fulfilment of prescribed conditions.

What is the Removal of Director in the Companies Act, 2013?

Removal of a director means termination of the tenure of a director before the expiry of his term in the office.

There are three common situations when the removal of a director takes place:

• Where the director gives their resignation himself
• Removal of the director based on sub-moto by the board
• When the director has not attended three consecutive board meeting

Shareholders have the right to remove any director before the expiry of his term. There is an exemption to the director being elected by the tribunal for the prevention of oppression and mismanagement and a director appointed as per the principle of proportional representation.

Closure Now…

An additional Director is appointed by the shareholders of the company. Such kind of director shall hold the office only up to the next annual general meeting AGM of the company. We have discussed the term and procedures for the appointment of such a director on an urgent basis. The term of Key Managerial Personnel and the appointment of a woman director and the removal of a director from the company.

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