Appointment of director
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Adding or Appointing a Director - Overview
When a new company is incorporated, whether private, public, or one-person, it is necessary to appoint a director to oversee and manage the company’s affairs. According to Section 2(34) of the Companies Act, 2013, a director is a person appointed to the board of a company to perform its duties and functions.
The process for appointing directors varies for first and subsequent appointments. The first director is typically appointed immediately after incorporation. Section 152 of the Companies Act, 2013, governs the appointment of directors. If the articles of the company do not specify the appointment of the first director, the subscribers to the memorandum (individuals) are deemed as the first directors until formally appointed. However, in the case of a one-person company, the sole member is deemed the first director until a formal appointment is made.
Subsequent directors are appointed by the company in a general meeting through an ordinary resolution.
Types of Directors in a Company
Directors in a company can fall into several categories:
- Resident Director: Must reside in India for at least 182 days during the financial year.
- Independent Director: Non-executive and independent of the company, as per Sections 149(4) and 149(6) of the Companies Act, 2013.
- Small Shareholder Director: Appointed upon request by a significant number of small shareholders.
- Women Director: Mandatory for certain classes of companies as per the Companies Act, 2013.
- Additional Director: Appointed to meet immediate management needs until the next AGM.
- Alternate Director: Appointed by the board during the absence of the original director.
- Nominee Director: Nominated by institutions such as banks or financial bodies.
- Executive Director: Full-time director with significant management responsibilities.
- Non-Executive Director: Part-time director not involved in daily operations.
- Managing Director: Holds substantial management powers by virtue of articles, agreements, or resolutions.
Number of Directors Required Based on Company Type
Under Section 149 of the Companies Act, 2013:
- Public Company: Minimum of three directors.
- Private Company: Minimum of two directors.
- One-Person Company: Minimum of one director.
- Maximum of fifteen directors, extendable by special resolution.
Why Appoint a Director?
Directors play a crucial role in managing company affairs, determining policies, and monitoring progress towards goals. They act as agents and trustees of the company.
According to Section 149 of the Companies Act, 2013, only individuals can be appointed as directors. Certain disqualifications apply as per Section 164, including mental incapacity, insolvency, criminal convictions, and non-compliance with company law provisions.
No specific list is provided in the Companies Act, apart from:
- Director Identification Number (DIN).
- Consent in Form DIR-2.
- Digital Signature Certificate.
To obtain a DIN, Form DIR-3 must be submitted with necessary documents.
The process varies by type of director:
- First Directors: Appointed as per the company’s articles or by default as per the memorandum.
- Subsequent Directors: Appointed via general meeting, requiring consent, DIN, and digital signature.
- Independent Directors: Reappointed via special resolution.
- Additional, Alternate, and Nominee Directors: Appointed by board resolution.
- Casual Vacancy Directors: Appointed by the board, with approval required at the next general meeting.
FAQs
An individual holding a valid DIN as per Section 152 of the Companies Act, 2013, and who is not disqualified under Section 164 of the Companies Act, 2013, can be appointed as a director of the company.
Yes, directors specified under Section 161, namely additional director, alternate director, nominee director, and a director appointed to fill a casual vacancy, can be appointed by the board of directors.
DIN refers to a Director Identification Number, which is allocated to a prospective director by the Central Government to qualify for appointment as a director of the company. The provisions regarding DIN are detailed under Section 152 of the Companies Act, 2013.
If a person already holds a DIN, it is not mandatory for them to obtain a Digital Signature Certificate (DSC). However, if they do not hold a DIN and intend to be appointed as a director, obtaining a DSC is necessary to apply for a D
No, there is no specific age limit prescribed for directors, except for a managing director, manager, or whole-time director. A person above the age of seventy years cannot be appointed as a managing director, manager, or whole-time director, except where exceptions are provided under Section 196(3) of the Companies Act, 2013.
