Appointment of Director in a Company

Every director is appointed in the General Meeting apart from the First Director in the Company. The person must have a DSC and DIN to be appointed as a Director. Form DIR-12 is to be filed on MCA along with consent letter (DIR-2) and an affidavit (INC-9).

Who is a Director?

A director is a person who manages or directs the activities in a Company. As per the Companies Act 2013, a director is appointed to perform the duties and responsibilities of the Company. Every company consists of different directors together known as the Board of Directors.

The rights, duties and powers of a director is listed in the Articles of Association.

There can be a maximum of 15 directors in a Company however; if you wish to increase the number then a special resolution is to be passed in the General Meeting. You can also appoint a Foreign National or Non-Resident Indian as a director in the Company.  

Note: The rights, duties and powers of a director are listed in the Articles of Association of a Company.

Types of Directors

There can be different types of directors in a Company which includes –

Resident Director

The Board of Directors of a Company must have at least one Resident Director. This means that the resident director must have lived in India for at least 182 days. According to the Companies Act, 2013 a company must have at least one resident director during its incorporation.

Independent Director

Independent Directors help a company to improve its credibility and managerial skills and are also known as the non-executive directors of the Company. To make sure the decisions and judgement of the director is not-biased, there must be no relation between the Independent Director and Company.

An independent director must not be -

  • A promoter of any company or its subsidiary, holding or associate company
  • Related to any promoters/directors of the company

The person should not have any relation with the company, its promoters or directors nor does he or his relatives hold a ‘Key Managerial Personnel’ or has been an employee in the Company.

An Independent Director is appointed for a period of 5 years after which the person can be reappointed by passing a special resolution in the General Meeting. At least two independent directors need to be appointed by Public Companies with -

  • Paid-up Capital of Rs. 10 Crore or more
  • Total outstanding loans, deposits, debentures of Rs. 50 Crore or more.
  • A Turnover of Rs. 100 Crore or more.

Women Director

It is mandatory to appoint minimum one women director for companies who have a paid-up capital of Rs. 100 Crore or more or a Turnover of Rs. 300 Crore or more.

Additional Director

An additional director can be appointed in the Annual General Meeting by the existing directors till date of the next meeting or last date on which it should have held. If a director fails to get appointed in the annual meeting then the person cannot be appointed as an additional director also.

The Article of Association (AOA) of the Company must contain a provision to appoint additional director in the company. If not so, the company needs to alter the AOA and then appoint the director.

Note: The person must have a Director Identification Number (DIN) to be appointed as a Director in the Company.

Nominee Director

A nominee director can be appointed by the shareholders of the company, central or state government through contracts or any agreement. There should a provision in the Articles of Association to appoint a nominee director if the case be.

Alternate Directors

If the director of a Company is absent from the country (India) from a period of 3 months or more then, the company may appoint an alternate director on its place. The alternate director cannot hold the office longer than the appointed time period of the director (whose place has been appointed).

Changes, if any, are made to the term of the office will apply only to the original director and not to the one appointed as alternate director on its place. The alternate director will require vacating the place (office) in case the original director returns to his duties.

Mandatory Requirements

Digital Signature Certificate (DSC)

The Ministry of Corporate Affairs has made it mandatory to sign all the reports, forms or applications using a DSC only.

It contains all the information of the holder like user name, e-mail address, country, pin code, date of issuance of certificate and name of the Certifying Authority issuing it.

All the directors of a Company must have a DSC and register the same on Ministry of Corporate Affairs under ‘Associate DSC’. Once you get a DSC it is valid for a period of 2 years after which you require renewing its registration.

Only a registered Certifying Authority (CA) can issue DSC after verifying all the details on his part. You can get a DSC within 2-3 working days provided all your documents are appropriate as per the requirements.

Director Identification Number (DIN)  

A Director Identification Number helps to keep a track of all the directors of different companies in India. According to The Companies Act, 2013, it is mandatory for every director to get a DIN before initiating any work in the Company.

For a new director to be appointed, one of the directors of the concerned company will file the DIN application (DIR-3) on his behalf.

An allotment number is generated upon successful filing and the same is communicated to the applicant’s registered e-mail. The Government might also ask for resubmission, in case there is any error in the application.

A maximum of 3 re-submissions is allowed on Ministry of Corporate Affairs ( MCA). To continue using your DIN an e-KYC is to be done every year failing which it will be deactivated.

Note: Applicant’s DSC is required to sign the application.

How to become a Director in an Indian Company?

The process of appointing a director in the company proceeds once the applicant has a DSC and DIN. A practising/professional Company Secretary (CS) or Certifying Authority (CA) will file form DIR-12 along with –

  • Letter of Appointment from the concerned Company.
  • Special Resolution passed by the Company.
  • An affidavit proving the authenticity of the details provided in form INC-9.
  • Consent Letter to act as the Director of the Company in form DIR-2.

The application is to be submitted on the MCA portal duly signed by the DSC of the CS/CA filing the application. The concerned authorities will verify all the details and then add the information in their database.

The cost of appointed a director in the company DIR-12 depends on the amount of Authorized Capital invested of the Company.

For example – Cost of adding directors in the company will be Rs. 300 if, the authorized capital is Rs. 1 Lakh.

Foreign Nationals/NRI as Directors

A Company can also appoint Foreign National or Non-Resident Indians as additional directors. In this case, all the documents and forms need to be notarized by the approved Public notary and apostilled by the Governing Authority of the respective country.

Such applicants can also maintain a foreign currency account with a bank outside India to receive the salary or transfer money. They need to attend at least one Board Meeting every year either physically or through video conferencing.

Every director is eligible for remuneration, travel expenses, commission and sitting fees from the company which is taxable under the Income Tax Act. The appointment and resignation of the directors must be updated with the Registrar of Companies within 30 days of such event. 

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