Appointment of Director:

Every Company shall have a Board of Directors consisting of Individuals as director.

A director may be defined as an individual who directs controls or manages the affairs of the Company. A director is a person who is appointed to perform the duties and functions of a company in accordance with the provisions of The Company Act, 2013. They are comparatively known as Board of Directors.

Appointment of Directors under Companies Act 2013

Generally, in a public company or a private company subsidiary of a public company, two-thirds of the total numbers of Directors are appointed by the shareholders and the remaining one-third’s appointment is made as per Articles and failing which, shareholders shall appoint the remaining one-third. In a private company, which is not a subsidiary of a public company, the Articles can prescribe the manner of appointment of any or all the Directors. In case the Articles are silent, the Directors must be appointed by the shareholders.

The Companies Act also permits the Articles to provide for the appointment of two-thirds of the Directors according to the principle of proportional representation, if so adopted by the company in question.

Nominee Directors can be appointed by a third party or by the Central Government in the case of oppression or mismanagement.

A Minimum Number of Directors Required in Company

• 1. Minimum two directors in case of Private Limited Company.
• 2. Minimum three directors in case of Public Limited Company.
• 3. In the case of one person Company minimum one director.
• 4. Maximum 15 directors any Company shall have If Company wants to have more than 15 directors necessary approvals is required under the law.

Qualifications for Directors

The Companies Act does not prescribe any qualifications for Directors of any company. An Indian company may, therefore, in its Articles, stipulated qualifications for Directors. The Companies Act does, however, limit the specified share qualification of Directors which can be prescribed by a public company or a private company that is a subsidiary of a public company, to be five thousand rupees (Rs. 5,000/-).

Categories of Director

Resident Director:

As per Section 149 sub section 3 of Companies Act 2013, Board of Directors of a company, must have at least one resident director i.e. (A person who has lived at least 182 days in India in the previous calendar year) Resident Director: Under Section 149 of the Companies Act, 2013, an appointment of one resident director is necessary by the “Board of Directors” of a company, who has lived in India for more than 181 days in the previous calendar year. It requires all companies to comply with the section 149 within a period of one year.

This is one of the most important changes made in the new regime, particularly in respect of the appointment of Directors under section 149 of the Companies Act, 2013. It states that every Company should have at least one resident Director i.e. a person who has stayed in India for not less than 182 days in the previous calendar year.

Woman Director:

Now the legislature has made mandatory for certain class of the company to appoint women as director. As per section 149, prescribes for the certain class of the company their women strength in the board should not be less than 1/3. Such companies either listed company and any public company having-

• 1. paid up capital of Rs. 100 cr. or more, or
• 2. turnover of Rs. 300 cr. or more.

Restrictions on number of Directorships

The Companies Act prevents a Director from being a Director, at the same time, in more than fifteen (15) companies. For the purposes of establishing this maximum number of companies in which a person can be a Director, the following companies are excluded:

• 1. “pure” private company;
• 2. An association not carrying on its business for profit, or one that prohibits the payment of any dividends; and
• 3. A company in which he or she is only appointed as an Alternate Director.

Failure of the Director to comply with these regulations will result in a fine of fifty thousand rupees (Rs. 50,000/-) for every company that he or she is a Director of, after the first fifteen (15) so determined.

Independent Director:

Independent Director is for the first time introduced in the Companies Act, 2013 under section 149(6) Independent Director: Section 149 (4), states that a listed company is required to have at least 1/3rd independent directors of the total number of directors. Independent Directors are those directors’ who do not have a material or pecuniary relationship with the company or related persons. They do not own shares in the company, they only seek sitting fees. Section 149(6) demarcates the conditions for the qualifications of an independent director as follows:

• 1. Person of integrity and relevant experience
• 2. Person must not be a promoter or in any relation with the directors or promoters of the company and its associate, subsidiary or holding company;
• 3. There must be no pecuniary relationship by the person with company, or its holding, subsidiary or associate company, or a relation with the promoters or directors from the last two years of his/her appointment
• 4. Person does not have relatives who have a relationship that is pecuniary with the company, and its holding, subsidiary or associate company, its promoters or directors, which overall amounts a 2 % in the preceding two years of the person’s appointment.
• 5. who possesses such other qualifications as may be prescribed.

The shareholders must approve that such appointment of independent directors.

Nominee Director:

As per Section 161(3). Subject to AOA of company, the Board May appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.( According to term: Subject to AOA of company mean there should be provisions in Articles of Association of Company for appointment of Nominee Director, if there is no provision in Articles of company then alter the provision in AOA).

Alternate Directors:

As per Section 161(2) A company May appoint, if the articles confer such power on company or a resolution is passed (if an Director is absent from India for atleast three months).

• An alternate Director cannot hold the office longer than the term of the Director in whose place he has been appointed.
• Additionally, he will have to vacate the office, if and when the original Director returns to India.
• Any alteration in the term of office made during the absence of the original Director will apply to the original Director and not to the Alternate Director.

Additional Director:

Ensure that the director to be appointed by board of directors exercising the power so conferred in them by the Articles of the company is not such a person who has failed to get appointed as a director in a general meeting. The additional director has to be appointed till date of next AGM or last date on which AGM should have been held, whichever is earlier.

PROCEDURE:

• First Check whether Articles (AOA) of the Company contain power/authorization to appoint Additional Director read with Section 161(1) of the Companies Act, 2013. {If there is no provisions in Articles of the Company then Alter the Articles of the company to have enabling clause for appointment of Additional Director.
• Second Check whether such person have DIN No. or Not. If such person doesn’t have DIN No. then Apply for DIN.

Following documents are require from director to appointment him as additional director.

• Consent in writing to act as Director in Form DIR-2 pursuant to Rule-8 of Companies (Appointment & Qualification of Director) Rules, 2014-
• Intimation by Director in form DIR-8 in terms of Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that he/ she is not disqualified u/s 164(2) of Companies Act, 2014.-
• Disclosure of Interest in Form MBP-1 pursuant to Section 184(1) read with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014. {One thing should be noted MBP-1 should not be dated earlier than date of his/her appointment as Director}. –

However, if there is nothing to disclose on the part of new Director, even then also require to take form MBP-1 from Director. (NIL disclosure is also a disclosure under section 184(1).

After receiving all the documents from the director:-

• Call the Board Meeting.
• Pass Resolution for appointment of Additional Director.
• Issue Letter of Appointment.
• File e-form DIR-12 [Along with CTC+ Consent + Letter of Appointment)
• File e-form MGT-14[For disclosure of interest in MBP-1]

Now this person will be Additional Director Till AGM of company. If company want to appoint him as director then regularize the person as director in General Meeting by Share holder Resolution. File form DIR-12 for Change in Designation of Director along with ordinary resolution.