Appointment of a Director

Every company is required to have certain numbers of directors in the company to constitute the Board as per the provisions of Companies Act, 2013. The criteria for numbers of Directors is differ for every type which is also prescribed in law. A private Limited Company must have minimum 2 number of director whereas a Public Limited and One Person Company should have minimum 3 and 1 director respectively. Maximum 15 directors any Company shall have if Company wants to have more than 15 directors necessary approvals is required under the law.

Further, every Company should have one Resident Director (i.e a person who has lived at least 182 days in India in the previous calendar year)Director’s appointment is covered under section 152 of Companies Act, 2013, with Rule 8 of the Companies (Qualification and Appointment of Directors) Rules, 2014.

In public or a private company, two-thirds of directors are employed by the shareholders. The rest of the one-third is appointed in connection with guidelines recommended in the Article of Association.

In case of a private company, their Article of Association can recommend the system to appoint any one/all directors. If the Articles are silent, the directors should be appointed by the shareholders.

The Companies Act also includes a clause that lets a company to appoint two-thirds of the company directors to be appointed according to the principle of proportional representation. This is applicable if the company has accepted this policy.

Nominee directors will be employed by third party authorities or the Government to deal with mismanagement and misconduct. The responsibilities of directors include acting honestly, take care and skill while accomplishing their duties for the organization.

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Appointment of Managing Directors

A managing director should be a person (a real individual) and can be employed for a maximum period of five years.

A managing director of an active company can be appointed as a managing director of another company only if the board of directors of the first company approve this new appointment.

Conditions to appoint Directors

Following conditions are valid while appointing a director :

He or she should not have been sentenced to imprisonment for any period, or a fine imposed under a number of statutes.

They should not have been found guilty for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

He or she should have completed twenty-five (25) years of age, but be less than the age of seventy (70) years. However, this age limit is not pertinent if the appointment is permitted by a special resolution passed by the company in general meeting or the Central Government’s approval is acquired.

They should be a managerial individual in one or more companies and takes remuneration from one or more companies depends on the upper limit mentioned in Section III of Part II of Schedule XIII.

He or she must be a resident of India. ‘Resident’ incorporates a individual who is living in India for a constant period of not less than 12 months immediately preceding the date of his or her appointment as a managerial individual and who has come to stay in India due to employment in India or for running business or vocation in India.

Documents required

 Business Purchase Agreement

 Senior Employment Contract

 Non-executive director letter of appointment

Procedure of appointing Director

 Step 1 –
Check whether Articles of company includes power to appoint additional director as per section 161(1) of the Companies Act, 2013 otherwise alter the Articles and insert the required provision.

 Step 2 –

 Check whether such individual have DIN, otherwise apply in DIR-3.

 Call the Board Meeting.

 Pass the board resolution for appointment of Additional Director.

 Documents to be deposited by such person to the company

 DIR-2 –
Consent to act as a Director of a Company as per to Rule-8 of Companies (Appointment & Qualification of Director) Rules, 2014

 DIR-8 –
Intimation by Director to the effect that he/she is not disqualified u/s 164(2) of Companies Act, 2013

File DIR-12 to Registrar of Companies within 30 days from passing Board Resolution. Attachments for DIR-12 as follows

Signed copy of Board Resolution

 DIR-2 by such individual

 Also ask for MBP-1- Disclosure of Interest as per Section 184(1) read with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014  from additional director.

Make sure MBP-1 should not be dated earlier than date of appointment as Director.

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