Appointment Of Directors In Company Law

The company doesn’t have any physical existence, neither body nor soul of its own. As such, it cannot act within the capacity of their own person. It can do so only through some human agency. The people that are liable for the management of the affairs are termed as directors. They’re collectively cited as Board of Directors or the Board.

The directors are the brain of an organization. They occupy a pivotal position within the structure of the company. Directors take the decision regarding the management of an organization collectively in their meetings called Board Meetings or at the meetings of their committees constituted for certain specific purposes.

A director may be portrayed as an individual who coordinates controls or deals with the affairs of the Company. A director is someone who is appointed to carry out the responsibilities and functions of a company in accordance with the provisions of the Company Act, 2013. They are relatively referred to as the Board of Directors.

Every Company or organization shall have a Board of Directors consisting of people as director. They play a completely crucial position in managing the business and different affairs of the Company. The appointment of Directors is exceptionally vital for the growth and management of the Company.

Appointment Of Directors In Company Law or Under Companies Act, 2013

By and large, in a public company or a private company subsidiary of a public company, two-thirds of the whole numbers of Directors are appointed by the shareholders and therefore the remaining one-third’s appointment is formed as per Articles and failing which, shareholders shall appoint the remaining one-third.

In case of a private company, which isn’t a subsidiary of a public company, the Articles can prescribe the manner of appointment of Directors. In case the Articles are silent, the Directors must be appointed by the shareholders.

First directors of the company shall be named in the MOA and AOA. The first directors are
deemed to have been appointed on the incorporation of the company. The first directors will
hold office until the first Annual General Meeting (AGM) where they will retire.

The appointment of directors in company law likewise allows the Articles to accommodate 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.

Minimum Directors In Private Company/ Public Company/ OPC

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

Qualifications for Directors

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

Following documents are required for the appointment of a person as Director;

1. Apply for DSC: In India, the appointment of directors can be only done through the digital signature and so 1st step is to create DSC.
2. Apply for DIN: That’s the mandatory requirement for becoming a director of a Company. A person must have a DIN i.e. Director Identification Number which can be obtained online by filing DIR -3 on MCA.
3. Documentation Preparation: A letter in writing stating his consent as Director; A letter in writing to the effect that the person is not disqualified to be appointed as Director as specified under Law; Disclosure of Interest in Other Companies (shareholding pattern); if any, else a NIL disclosure is sufficient. Resolution to be passed at the meeting for the appointment of a director. An appointment letter to be issued by the Company to a director for its appointment.
4. Filing of Form DIR-12: E-form DIR-12 with ROC along with the above-mentioned documents such as consent/approval letter, DIR- 2, and a certified copy of a resolution of the meeting. Form to be filed within 30 days.

New Categories of Director

Resident Director:

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

Woman Director:

Now the legislature has made mandatory sure as shooting classes of the corporate to appoint women as director. As per section 149, prescribes for a particular class of the corporate their women’s strength within the board mustn’t 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 the 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 needs of building this maximum number of companies during which someone will be Director, the subsequent companies are excluded:

1. A “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 within 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 each company that he or she is a Director of, after the first fifteen (15) so determined.

Conclusion:

The supreme executive authority controlling the management and affairs of the company vests within the team of directors of the company collectively called its BODs. At the core of corporate governance, practice is that the Board of Directors oversees how the management serves and protects the long-term interests of all the stakeholders of the Company.

The institution of a board of directors was based on the premise that a group of trustworthy and respectable people should look after the interests of the large number of shareholders who are not directly involved in the management of the company.

The position of the board of directors is that of trust as the board is entrusted with the responsibility to act in the best interests of the company.

Although the Board comprises individual directors, yet the actions and deeds of directors individually functioning cannot bind the company, unless a particular director has been specifically authorized by a Board resolution to discharge certain responsibilities on behalf of the company.

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