About the appointment of director in the company

Appointment of director to a company is one crucial step. A company is an artificial legal entity and can act only through a natural person. The one who acts on its behalf is called Director.

Normally, the owner / Share Holders of the company choose a director of the company to manage daily activities and affairs of the Company and finances. The company Director is appointed for determining and implementing company policy and define elements of the corporate.

Section 2(34) specifies that "director" means a director appointed to the Board of a company”. The definition of Director is an inclusive definition and includes any person who occupies the position of a director is termed as Director whether or not designated as Director.

About the appointment of director in the company

APPOINTMENT OF DIRECTOR

Section 149(1) of the Companies Act,2013 specifies that

Every Company needs to have a Board of Directors consisting of Individuals as directors. Hence According to this Clause, only an Individual can be a director of the Company. Body corporate, LLP, and any person other than Individual cannot be Company Director.

Section 149(1)(a) deals with the Minimum requirement of an appointment of director in the company as follows:

  • In the case of a Public Company, there shall have a minimum number of three directors
  • In the case of a Private Company, there shall have a minimum two number of directors
  • In the case of OPC, there shall have a minimum number of one director.

Maximum: 15 Directors

If a company wants to appoint more than 15 directors then Special Resolution is required to be passed in the General Meeting of Share Holders of the company.

Section 8 companies shall be exempt from the requirement of the ceiling of minimum and a maximum number of appointment of directors of the company vide MCA notification dated June 05, 2015.

Categories of Directors:

Resident Director:

As per Section 149(3) of the Companies Act, 2013, the Board of Directors of every company must have at least one Resident Director i.e. A person who has stayed at least 182 days in India in the previous calendar year. As per General Circular No. 25/2014, the Residence requirement would be counted from the date of commencement of section 149 of the Act i.e. 1st April 2014.

The requirement of a resident director shall apply proportionately to the newly incorporated company at the end of the financial year in which it is incorporated.

Women Director:

Proviso to section 149(1) read with Rule 3 of Companies (Appointment and Qualification of Directors), Rules specifies that certain categories of companies to have at least One-Woman Director on the board of directors of the company. Such companies are:

  • All listed companies
  • All Public companies have Paid-up Capital of INR. 100 crore or more; OR
  • All Public companies have a Turnover of INR. 300 crore or more

Independent Director:

Independent Director refers to a member of a board of directors but they are not attached to the existing management.

The concept of Independent Director is first time introduced in the Companies Act, 2013 under section 149(6). Section 149(6) of the Companies Act, 2013 provides a broad definition of independent directors. An independent director is a Non-executive director who is not the managing director or the nominee director of the company.

Section 149(4) read with Rule 4 of Companies (Appointment and Qualification of Directors), Rules provides a minimum number of independent directors in case of the following class or classes of companies:

  1. All listed public companies shall have at least 1/3rd of the total number of directors
  2. The following public companies shall have at least 2 directors
    • All Public Companies shall have paid up share capital of 10 crore rupees or more; or
    • All Public Companies shall have a turnover of 1000 rupees or more; or
    • All Public Companies shall have, outstanding loans, debentures, and deposits in aggregate, more than 50 crore rupees:

Additional Director:

Any person other than who has failed to be appointed through a general meeting of the shareholders can be appointed as an Additional Director by a company under section 161(1) of the Companies Act, 2013.

Additional Director holds office up to the date of the next AGM or the last day on which the AGM needs to be held, whichever is earlier.

If the additional director of the company had been appointed as managing director of the company during his tenure, his appointment as managing director also ceases simultaneously with the termination of his directorship.

Nominee Director:

As per Section 161(3), the Board may appoint any person as a Director nominated by any financial institution in pursuance of the provisions of any law for the time being in force or of any agreement or appointed by the Central Government or any other person to represent its interests.

The nominee Director is not liable to retire by rotation and cannot be removed by the company and also hold office at the pleasure of their nominating agencies.

Note:

There should be a provision in the AOA (Article of Association) of the Company for the appointment of a Nominee Director, if there is no provision in the AOA of the Company then alters the AOA.

Alternate Director:

As per Section 161(2) if the articles confer power on the Board of directors of a company to appoint an alternate director by passing a resolution in a general meeting in place of a director during his absence for not less than three months from India

An Alternate Director cannot hold the office longer than the term of the original Director in whose place he has been appointed and is away from India

He ceases to be director, if and when the original Director returns to India. Any provisions of the Act relating to the term of office made during the absence of the original director will apply to the original director and not to the Alternate one.

Procedure for Appointment of Director in Private Limited Company

Procedure for Appointment of Director in Private Limited Company

The Proposed Director Should first apply for DSC and avail DIN before giving his/her consent to act as a Director of any Company.

The applicant shall apply for DSC to Certifying Authority appointed by the Controller of Certifying Authority.

The applicant is also required to provide a Photo, PAN – Self attested Aadhar/Bank Statement/ Passport – Self Attested as Address Proof, Mobile Number, and Email- ID.The applicant is also required to provide a Photo, PAN – Self attested Aadhar/Bank Statement/ Passport – Self Attested as Address Proof, Mobile Number, and Email- ID.

Application for Director Identification Number (DIN)

  • Number (DIN)
  • The following are the mandatory attachments to be filed form DIR-3

Proof of Identity

  • Income-tax PAN, in case Indian nationals
  • Passport, In case of foreign nationals

Proof of residence:
passport/ election (voter identity) card/ ration card/ driving license/ electricity bill/ telephone bill or Aadhaar (not be older than 2 months)

Board resolution
The applicant has to fill in other details like the Name of the Applicant, Father's name, Mobile Number, and E-mail id.

  • The form DIR-3 needs to be signed by the applicant himself. The DSC of the applicant needs to be registered on the MCA website. i.e MCA Services < DSC Services < Associate DSC.
  • The Form DIR-3 shall be verified digitally Chartered Accountant/ Cost Accountant/ Company Secretary in Whole-time practice or a company secretary of the company or by the managing director or director of the proposed company.
  • The Government Fees for Allotment of DIN is Rs. 500 and this form be processed in STP/Non-STP mode.
  • Consent in writing to act as Director of the Company in Form DIR-2 pursuant to Rule 8 of the Companies (Appointment & Qualification of Director) Rules, 2014
  • After allotment of DIN company should file DIR-12 for informing ROC about the Appointment of the Director.
  • The following Documents are required from the directors to appoint him as a director:
  • Intimation by Director in form DIR-8 in terms of Companies (Appointment & Qualification of Director) Rules, 2014, to the effect that he/she is not disqualified u/s 164(2) of the Companies Act, 2013.
  • Disclosure of Interest in Form MBP-1 pursuant to Section 184(1) read with Rule 9(1) of Companies (Meetings of Board & its Powers) Rules, 2014.

After receiving all the documents from the Director

  • Call the Board Meeting to give notice of the Extra-ordinary General Meeting for the appointment of the Director
  • Hold the General Meeting and pass the necessary resolution
  • Issue Letter of Appointment
  • File e-form DIR-12 within 30 days from date of appointment of Director (Along with CTC+ Consent Letter+ Letter of Appointment)
  • The E-form DIR-12 shall be download from www.mca.gov HYPERLINK "http://www.mca.gov/" HYPERLINK "http://www.mca.gov/" HYPERLINK "http://www.mca.gov/". HYPERLINK "http://www.mca.gov/" HYPERLINK "http://www.mca.gov/" HYPERLINK "http://www.mca.gov/" website under the head of “Forms and Download”
  • The E-form DIR-12 needs to be digitally signed by the Director so authorized by the Company in its Meeting.
  • The e-form DIR-12 needs to be certified by a Chartered Accountant/ Cost Accountant/ Company Secretary in Whole-time practice. Enter the details of the professional and attach the digital signature certificate.
  • After filling out the form, Click the Check Form button. The system performs level validation of forms like checking if all mandatory fields are filled. Then click the Pre-scrutiny button, System performs some checks and shows errors, if any. Correct the errors. If there are no errors are found, a message is displayed “No errors found.”
  • The Check Form and Pre-scrutiny functionality required Internet Connectivity.

  • Upload the e-form and pay the following fees.

Fee for filing e-form DIR-12:

Nominal Share Capital Fee applicable
Less than 1,00,000 Rupees 200
1,00,000 to 4,99,999 Rupees 300
5,00,000 to 24,99,999 Rupees 400
25,00,000 to 99,99,999 Rupees 500
1,00,00,000 or more Rupees 600

Penalties for delayed filing of DIR 12 form

The Form DIR-12 shall be filed with ROC within 30 days from the date of appointment of the director and additional fees shall come to effect in case of delayed filing of the DIR 12 form. The following penalties shall be paid as per the number of days delayed.

Period of delay Additional Fee
Up to 30 days 2 times of standard fees
More than 30 days & up to 60 days 4 times of standard fees
More than 60 days & up to 90 days 6 times of standard fees
More than 90 days & up to 180 days 10 times of standard fees
More than 180 days 12 times of standard fees

Attachments Required

Form Documents Lists
DIR-12 DIR-2
DIR-8
Board Resolution
Notice of Extra-Ordinary General Meeting
Certified True Copy of Extra-Ordinary General Meeting EGM Minutes
Letter of Appointment

  • The e-Form will be processed in STP (straight-through processing) mode. On successful submission of the e-Form DIR-12, SRN will be generated and SRN will be used for future communication with MCA.

Frequently Asked Questions

A company is an artificial legal entity and can act only through the natural person. The one acting on its behalf, is called Director. Directors are the officers of the corporation and are pointed for determining and implementing company policy and defining elements of the corporate.

A company director is appointed to manage daily activities and affairs of the Company and finances and to ensure that the company is run in accordance with the Companies Act 2013, the articles of association (AOA) of the Company.

Section 169 of the Companies Act, 2013 provides detailed clauses for the removal of directors. Shareholders of the company can remove a director after giving him the opportunity of being heard. Special notice under section 115 of the Companies Act, 2013 must be issued at least 14 days prior to the meeting.

During the liquidation, the role of the company director ceases and it loses all decision-making power in the company. Directors can act as a director of the company after liquidation if there has been no case of misfeasance.

Section 149(1)(a) deals with the Minimum requirement of a Director in the company as follows:

  • In the case of a Public Company, there shall have a minimum number of three directors
  • In the case of a Private Company, there shall have a minimum two number of directors
  • In the case of OPC, there shall have a minimum number of one director.

Maximum: 15 Directors

If a company wants to appoint more than 15 directors then Special Resolution is required to be passed in the General Meeting of Share Holders of the company.

No, Company Secretary is not a director of the company. The company secretary is key managerial personnel of the company.

Only an individual can be appointed as director of the company. Body corporate, LLP a,nd any person other than Individual cannot be Company Director.

Normally, the Chairman of the company shall become the Chairman of the Board. If the company does not have a Chairman, the Board of directors of elect one of themselves to be the Chairman of the Board.