Summary
It is often argued that the directors are the company’s intellectual core. They are the managers who oversee and manage the services provided by the business. A change in directors can occur in several ways, such as by the appointment of new directors or the resignation of current ones. The goal of implementing a change of directors is to ensure that the company has the best possible mix of specialists on board.
The Board of Directors has the authority to accept a director’s resignation, but shareholder approval is required for the appointment. Notification is sent to the “Ministry of Corporate Affairs” when a change occurs, be it an appointment, removal, or resignation.
What are the requirements to be considered for a directorship?
What are the requirements to be considered for a directorship?
On the other hand, a particular natural person is limited by law to serving as a director of one business.
Age Demarcation
Although there isn’t another minimum age requirement to become a director, the individual must be able to sign contracts. Furthermore, if an individual is 21 years old and has not officially turned 70, they are qualified to serve as a “managing director,” “full-time” director, or “independent” director of an established corporation.
Determination Of Nationality
There are no limitations. However, the corporation needs to have at least one Indian director.
DIN Needed
A Director Identification Number is required for an individual to be able to serve as a director of a corporation. The primary goal of a DIN is to ensure that fraudulent directors do not engage in fraudulent activities. Should any such criminal action occur, the perpetrators can be identified using this unique number.
Limit Of Valid Directorship
A celebrity can serve as a director of no more than 20 different firms at once. Only ten of these twenty companies are eligible to go public.
Ineligibility
Irresponsible Thinking or Debtor
A person who is incapable of making decisions for themselves or who lacks mental capacity cannot be appointed as a director. Children, people with mental disabilities, and people with fragile mental capabilities are all involved in this. In addition, those who are insolvent or who have filed for bankruptcy in a court of law are not eligible to serve as acting directors.
Criminal Background
A personality cannot serve as a director if they have a criminal record or if they have served a term of more than seven years in prison.
Awaiting Past-Due Returns
The person will not be allowed to continue in his role as director if he has not made the required returns in any of the years prior.
Recognition: Director Types
- According to ‘Section 149(1)’ of the Companies Act, 2013, a public corporation must have a minimum of three directors, but a private company can have as few as two directors or a single director in the case of a ‘One Person Company.’
- In a publicly traded business, the maximum number of directors is 15. Additionally, a business may appoint more than 15 directors with permission granted by a certain resolution passed at the general meeting. The Central Government’s support is not anticipated in the process of appointing additional directors.
- A director may designate up to 20 directorships, including any additional positions that an individual may hold.
- Any holding or subsidiary company in the case of a private company or “public company” is limited to 10 directorships in the “public company.”
- Following the implementation of the second proviso to Section 149(1) of the Companies Act, all Certified companies are required to designate at least one female director to the Board of Directors each year.
- Similar to this, within a year of the second Proviso to Section 149(1) of the Companies Act’s convocation, every public company with a turnover of Rs. 300 crore or a paid-up portion capital of Rs. 100 crores, as reported in the most recent audited financial statements, must appoint at least one woman director.
Brief Note: Directors' Appointment and Resignation
A clear image of the appointment and resignation of directors is implemented by Section 168 of the Companies Act of 2013, which was not previously satisfied by the Companies Act of 1956. A business is perceived as an artificial person that can only be brought to life by a natural person because it lacks a physical presence. As a result, the director is the person in charge of overseeing the business’s activities. Different directors are capable of managing different facets of the business.
Documents Required for Director Appointment and Resignation
- Picture: A passport-sized picture of the designated director
- PAN Card: The appointed Director’s self-attested PAN card
- Evidence of Residency: Aadhar Card, Voter ID, Passport, or Driver’s License
- Certificate of Digital Signature: DSC for the current Director and the Director who is going to be removed
- Identity verification previously indicated as a driver’s license, passport, election card, or Aadhar card
- The Director’s official email address and mobile number
- If the director does not reside in India, then all apostilled documents must be apostilled.
- Resignation notice submitted to the employer
- Evidence of dispatch
- Confirmation of receipt of the form, if any.
Appointment of Director Procedure
Directors’ Appointments During Incorporation
Appointments Of First Directors
The people who are eligible to serve as directors are the company’s original directors at the time of registration with the MCA. However, the original subscribers to the MOA will automatically display the directors of the Company during incorporation if there are no directors listed above.
Conditions: What Has to Be Done?
A new, simple company formation method has been revealed by MCA. To become a director at the moment of establishment, you do not need to have a DIN, or director identification number. When the company enrolls, its place is secured by the DIN allocation. It is also essential to include the directors’ details in the e-form that the MCA has provided. Following the Company’s formation, the Director’s “master data” will be available on the MCA portal. The following director’s documentation should be in the firm’s possession in the event that directors are appointed. Three DIN might be assigned as a culmination in the new association format. Consequently, a maximum of three people may be voted as directors if they do not hold a DIN.
Provisional: Director appointment in accordance with Section 152 of the 2013 Companies Act
- When a One Person Company is involved, the individual will be regarded as the company’s initial director until the member properly selects the Director(s) in accordance with Section 152’s rules.
- According to Section ‘149(1)’ of the Companies Act 2013, a public company must have no more than three directors. Additionally, one director in the event of a one-person corporation and two directors in the case of a private firm. A publicly traded business may appoint up to fifteen directors. Furthermore, a corporation does not need the approval of the Central Government to select more than 15 directors if a special resolution is passed during regular meetings.
- Anyone holding the position of director in more than 20 or 10 businesses, as applicable, prior to the implementation of this Act will have to select the firms where he wants to remain a director or step down within a year of commencing such services.
- Within one year following the second proviso to Section 149(1) of the Act’s introduction, every registered company is required to designate at least one female director to the Board of Directors. In addition, within a year of the second proviso to Section 149(1) of the Act taking effect, every other public company with paid-up share capital of at least Rs. 100 crores or an annual turnover of at least Rs. 300 crores as of the last date of the latest audited financial statements must appoint at least one woman director.
Classes of Director Appointed in the Company
Managing Director
– They are given complete authority and responsibility for running the business.
Executive Director
– They manage the day-to-day operations of the business, which is more accountable and productive for the business.
Non- Executive Director
– They don’t enjoy making decisions or running things on a daily basis.
Nominee Director
– In order to represent their interests, these are not the principal directors; rather, they are chosen by PE/VC investors, banks that have supplied loans, or shareholders in the case of a certified business.
Independent Director
– They are chosen by the company to supervise and guarantee good governance.
Process of appointing directors in relation to companies
1. Basic Procedure
- Indicate whether the company’s Articles of Association (AOA) recommend adding a director to comply with Section 161(1) of the Companies Act, 2013. If not, add a company director by changing the firm’s articles of incorporation.
- Assemble the knowledge and paperwork needed for the procedure.
- It is necessary to complete Form DIR-2, Form DIR-12, and Form DIR-8 registration at ROC.
- The Director who is being advertised or proposed must use Form DIR-2 to grant authorization to function in that capacity. Before recommending someone to be the director, this is one of the standard necessary documents that must be received.
- If the company demands that he be appointed as a director, the shareholder resolution at the general meeting will officially recognize him as a director.
2. Subsequent Process
- Set up a meeting of the board.
- A general meeting shall nominate the Director and take action to guarantee that this notice is published by the Companies Act, 2013 and the guidelines outlined in the Secretarial Standards published by the Institute of Company Secretaries of India.
- Adopt a resolution or recommendation for the appointment of an additional director.
- Send out “The Appointment Letter.”
- Within 30 days following the date of appointment, the Company must submit Form DIR-12 to the Registrar of Companies.
- Important entries in the Register of Directors and Managerial Personnel must be made by the Company as needed.
- Additionally, as and when required, the Company shall apply for the necessary modifications to the Director’s details about the GSTN and other Certificates.
- As a result, the MCA website will display your new firm director designation.
Director's resignation according to Section 168
- Any director can resign from his office by furnishing written notice to the company. After collecting such notice, the Board shall take note of the same, and the corporation shall intimate the Registrar in such a manner, time, and form as designated.
- The matter of the resignation will be included in a report of directors by the corporation soon after the annual general meeting.
- Within 30 days of resigning, the director must also notify the Registrar and send a copy of his resignation along with a detailed explanation.
- A director’s resignation should be effective as of the day the company accepted his notice or as of the itemized period the director intended to quit, whichever comes first: As long as the departing director remains accountable for any transgressions committed during their employment, even after they have left.
- When a company’s directors all step down at the same time, the promoter or the Central Government appoints the anticipated number of directors, after which the outgoing directors must serve until the company’s general meeting nominates the new directors.
Reasons for Directors' Resignation: Understandings
According to the Act, an insurance marketing firm will be permitted to carry out the following tasks:
Conflict With The Board
When multiple directors collaborate, disagreements are bound to arise. It causes the corporation’s overall performance to suffer, and in such a situation, the directors may choose to step down.
More Advantageous Career Opportunity
Everyone looks for more fulfilling work opportunities to broaden their horizons and selects the path that fulfills their inner ambition. The directors may also step down if they are offered better opportunities or a project in which they were chosen by AOA to serve as directors.
Abuse Concerning Business Matters
Upon learning of the company’s illicit activities, a director might find himself drawn into them, which would be consistent with his reason for quitting. He decides to step down to protect himself from any personal liability arising from such actions.
Suspension Because of Violation
If the director violates any rules or defaults, he may find himself in trouble.
The Decline in Nomination
Only the Nominee directors, who are mostly chosen for the BOD by the NBFC’s investors, should do so. The nominee director may step down following the revocation of the nomination, or he may step down once the transaction between the company and the entity is finalized.
Manner in which a director resigned with regard to companies
By the Companies Act of 2013, the firm is required to undertake specific duties and obligations upon the resignation of a managing director or director.
- As per the requirement mentioned in section 168(1) of the Companies Act, 2013, the first and primary alternative is for the company to make a joint resolution authorizing the notice or letter of resignation and commission to file form DIR11 explaining the grounds for the departure.
- The resignation report, notification, and ideas for the resignation must be shared with the Registrar of Companies (ROC) using ‘Form DIR11′, within ’30 days’ of the date of removal, by rule ’16 of Companies Rule, 2014 (Appointment and Qualification of Directors)’.
- The notification or resignation letter is a mandatory requirement from the company in addition to filing eForm ‘DIR11’. The Companies Act of 2013 outlines the plan for the company in the event of the managing director’s resignation.
- Documents to be submitted are :
- Resignation notice submitted to the employer
- Proof of dispatch
- Acknowledgment of form, if received.
Which doors lead to the requirements for adding a new Director?
They are:
- The person who is intended for must be a major.
- He or she must meet the requirements outlined in the 2013 Companies Act.
- The recommended candidate’s appointment requires the approval of the board members.
- The Companies Act does not recognize any specific educational requirements for training to be a director.
Frequently Asked Questions (FAQs)
The Companies Act of 2013’s section 168 states that the administration is powerless to reject a director’s offered resignation.
The date the director notifies the board of directors of their withdrawal will be the withdrawal’s effective date.
In that case, the promoter will be in command. In the event that no promoter is found, the central government will appoint interim directors to oversee the Company until new directors are chosen.
No, a DIN, or “Director Identification Number,” is assigned indefinitely and can therefore be used indefinitely.
