Procedure for the Appointment of Director in Private Company

The Appointment of Director must be under the Companies Act, 2013. A director is an individual who is appointed to perform day-to-day functions with management, directing, and controlling the affairs of the company. The combination of all directors is called a ‘Board of directors’. They are involved in the policy-making and smooth running of a company. There are several types of directors in companies appointed in certain companies. The Companies Act, 2013 provides the procedure for an appointment with a minimum and maximum number of directors in a company. In this blog, we will be discussing the form and resolution of the process of appointment.

What is the Procedure of Appointment of Directors?

The steps given for the appointment to be followed:

Step 1: Check Articles of association (AOA) for director appointment provision

The first step is to check the AOA of the company before appointing a director of a private limited company. The AOA must provide a clause for appointing or adding a director. 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 2: Convene a board meeting of the directors

·        Issue notice of the board meeting at least seven days before the date of the meeting to all the directors of the company at their registered postal address with the company. However, a shorter notice of appointment of director can be issued in case of urgent business.

·        Attach agenda of meeting with notes to agenda and draft resolution with the notice sent.

·        Hold a meeting of the board of directors of the company to discuss the agenda and pass board resolution to consider the appointment of a new director or re-appointment of retiring directors including regularization of an additional director subject to the approval of members at a general meeting. To fix the day, date, time and venue of the general meeting and to approve the draft notice convening the general meeting along with an explanatory statement annexed to the notice as per the requirement of section 102 of the Companies Act, 2013 and authorize the director or Company secretary to sign and issue a notice of general meeting for appointment of directors in company law.

·        Prepare and circulate draft minutes within 15 days from the conclusion of the board meeting by hand/speed post/registered post/courier/e-mail ID to all the directors for their comments.

Step 2: Consent and declaration from the proposed director

The proposed director must submit the consent to act as a director in form DIR-2 and intimation by the director about his disqualification in form DIR-8 to the company either in the board meeting or during the board meeting of directors.

Step 3: Obtaining DIN and Digital signature certificate (DSC):

·        If the person does not have DSC then he shall obtain a digital signature from certifying authority in India.

·        The person shall have a valid DIN allotted by filing the appointment of directors form with the Ministry of corporate affairs (MCA). Individuals seeking a DIN must do so through the organisation that will be employing them.

·        The application for DIN is required to be signed by the director of the company and a copy of the resolution approving the proposal of appointment is also submitted by the individual in Form DIR-3 filled with MCA along with his Identity & address proof and digitally signed by himself and a director of the company where the proposed director is intended to be appointed.

·        The documents for Form DIR-3 for the appointment of directors under companies act, 2013 are as follows:

               i.     One passport-size photo

             ii.     The Board resolution in which the appointment as director in an given company

          iii.     Signature duly verified

          iv.     ID proof whether a driving license, passport, or election voter ID card.

             v.     Residence proof – Utility bills such as Electricity bills or telephone bills or bank statements or mobile bill

          vi.     Other attachments like Income tax PAN and Aadhar cards for Indian nationals and Passport for foreign nationals

Step 4: Convene the General Meeting

·     Notice of the general meeting shall be given at least 21 clear days before the actual date of the general meeting in writing, by hand or ordinary post or by speed post or by registered post by courier or by e-mail ID or by any other electronic means in the appointment of directors pdf or a shorter notice can be issued with the consent of at least majority in number and ninety-five percent of such part of the paid-up capital of the company giving a right to vote at such a meeting.

·     Notice will be sent to all the directors, members, auditors of the company, secretarial auditor, debenture trustee and others who are entitled to receive the notice of the general meeting.

·     The notice shall specify the day, date, time and full address of the venue of the meeting and contain a statement on the business to be transacted at the meeting.

·     Hold the general meeting as per appointment of director section 152 of the Companies Act, 2013 with rules thereunder, on a fixed day and pass an ordinary resolution for the appointment of a new director or re-appointment of the retiring director or regularization of the additional director. Check the quorum present and check whether the auditor is present then leave of absence granted or not.

·     Issue a letter of appointment to the director of the company mentioning the terms and conditions of the appointment and the salary to be payable to the director.

·     Prepare minutes of the general meeting with signatures and compile them.

Step 5: Obtain Form MBP-1 from the appointed director

Obtaining a declaration from the appointed director regarding his interest in other entities in Form MBP-1.

Step 6: Filing of return of director appointment with the ROC

After the general meeting, a return of appointment in Form DIR-12 is required to be filled with Registrar with the appointment of director resolution within 30 days of appointment with a copy of the ordinary resolution, consent to act as director and declaration about his disqualifications. In the case of companies other than OPC and small companies, the return is also to be certified by a company secretary/chartered accountant/cost accountant. The following document will be required as an attachment with Form DIR-12.

·        To attach a certified copy of the resolution passed in the meeting

·        DIR-2 for consent for acting as a director

·        DIR-8 given in Declaration by director

·        Letter of appointment.

Conclusion

An Individual for being a director is not required to have any fixed qualifications unless the Article of association mentioned or otherwise.

For the Appointment of director, it is required to appoint a minimum of two directors in a private limited company.

The board can appoint or even elect one person or more than one person as a director who can implement and determine the policies of the company. The consent of the director in Form DIR 2 with all the necessary documents.

The directors of a company are mainly responsible for their performance and goodwill in the market.

In this blog, we have discussed the detailed procedure of appointing a director in a company with steps and mandatory attachments to the Form filled with the registrar.