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.

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.