Appointment and Resignation of Directors

Ineligibility

Unsound mind or bankrupt person

Individuals who are of unsound mind or incapable of making independent decisions are ineligible for appointment as directors. This encompasses children, those with mental disabilities, and individuals with unstable mental faculties. Additionally, individuals who are insolvent or have filed for bankruptcy in a court of law are disqualified from serving as directors.

Criminal background

If an individual has a criminal record and has been sentenced to imprisonment for seven years or more, they are ineligible to serve as a director.

Recognition: Types of Director

The directors of a company change in terms of the role they play, such as managing director who runs the overall purposes of the company, executive directors who look after the day to day methods, and independent directors who assure proper governance of the company. Thereby, one company can have increased directors; nevertheless, the appointment of directors also depends on the type of business like:

• As per 'Section 149(1)' of the Companies Act, 2013, every public corporation shall have a minimum number of 3 directors, whereas the least amount of directors in a private company is two and only one director in case of the 'One Person Company.'
• The highest number of directors in a public company is 15. Besides, a company can also select more than 15 directors after getting a permit from a specific resolution in the general meeting. The method of appointment of more directors does not expect the endorsement of the Central Government.
• A director can determine the maximum number of directorships up to 20, including any alternative directorship of a person.
• In the event of any private company or 'public company,' either holding or subsidiary company shall restrict to10 directorships in the 'public company'.
• All the Certified companies must appoint at least one woman director in the Board of Directors in a year from the enforcement of the second Proviso to Section 149(1) of Companies Act.
• Similarly, every public company having a turnover of Rs. 300 Crore or a paid-up portion capital of Rs. One hundred crores under the latest audited financial statements shall appoint at least one woman director within a year from the convocation of the second Proviso to Section 149(1) of Companies Act.

Note: If an individual holds the position of director in more than 10 or 20 companies, as applicable before the commencement of the Companies Act, they must decide within one year from such commencement which companies they intend to continue serving as a director and from which companies they choose to resign. Subsequently, the individual is required to communicate their decision to both the selected companies and the relevant Registrar.

Short Note: Appointment and Resignation of Directors

Section 168 of Companies Act, 2013, implements a clear picture of the appointment and resignation of directors, which wasn’t satisfied previously in the Companies Act, 1956. Since a business does not have a physical presence, it gets identified as an artificial person to whom only a natural person can bring into life. Consequently, a person who takes charge of managing the company’s operations is known as the director. Different directors are qualified for handling various aspects of the company.

Documents needed for Appointment and Resignation of Director

• Photograph: Passport size photo of the Director to be designated
• PAN Card: Self-attested PAN card of the Director to be designated
• Proof of Residency: Aadhar Card/ Voter ID/ Passport/ Driving License director to be appointed
• Digital Signature Certificate: DSC of the ongoing Director and Director to be eliminated/removed
• Identity proof before-mentioned as Passport/Election card/Driving License/Aadhar card
• Mobile number and Personal & official email id of the Director
• It is mandatory to apostille all the documents apostilled if the Director is a non-resident of India.
• Notice of resignation filed with the company
• Proof of dispatch
• Acknowledgment of form, if received.

Appointment of Director Procedure

Directors Appointments during Incorporation

Appointments of First Directors

At the time of company registration with MCA, the individuals eligible to be Directors become the first directors of the company. However, in cases where no such directors are designated during incorporation, the original subscribers to the Memorandum of Association (MOA) will automatically assume the roles of directors for the company.

Requisites: How to be done?

The MCA has introduced a new and straightforward process for the establishment of a company. Unlike before, there is no prerequisite for obtaining a Director Identification Number (DIN) to be appointed as a director at the time of establishment. The allocation of DIN is ensured during the company's registration process. It is essential to furnish the details of the directors through the e-form provided by the MCA. The 'master data' of the directors will be accessible on the MCA portal post the company's establishment. Upon the appointment of directors, the company should provide the required documents for the appointed directors. In the new format, up to 3 DINs can be allotted. Therefore, if individuals do not have DIN, a maximum of 3 persons can be elected as directors.

Provisional: Appointment of Director following section 152 of the Companies act 2013

• In the case of a One Person Company, an individual acting as a member is considered its first director until the member duly appoints the Director(s) in accordance with the provisions of Section 152.
• As per Section 149(1) of the Companies Act-2013, every company must have a minimum of 3 directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company. A public company can appoint a maximum of 15 directors. However, if a company wishes to appoint more than 15 directors, it can do so by passing a special resolution during regular meetings, without the need for consent from the Central Government.
• “Any person holding office as a director in more than 20 or 10 companies, as the case may be, before the initiation of this Act, shall, within one year from such commencement, decide which companies he wishes to continue/resign as a director."
• Every registered company must appoint at least one woman director on the Board of Directors within one year from the commencement of the second proviso to Section 149(1) of the Act. Additionally, every other public company with a paid-up share capital of Rs. One hundred crores or more or an annual turnover of Rs. 300 Crore or more, as on the last date of the latest audited financial statements, must also appoint at least one woman director within one year from the initiation of the second proviso to Section 149(1) of the Act.

Classes of Director Appointed in the Company

Managing Director

they are granted with the full power and charge for the operation of the Company.

Executive Director

they run the day o day to working of the Company, which are more responsible and Effective for the Company.

Non- Executive Director

they are not into day to day judgment making or operating.

Nominee Director

these are not the primary directors but are chosen by the PE/VC investors or banks who have provided the loans or shareholders in case of a certified company to represent their interests.

Independent Director

they are selected in the Company to oversee and ensure sound governance.

Provisional: Appointment of Director following section 152 of the Companies act 2013

• Any director can resign from his office by providing written notice to the company. Upon receiving such notice, the Board shall acknowledge it, and the company shall notify the Registrar in the manner, time, and form specified. However, it is provided that-
• The company must include the details of such resignation in a directors' report shortly after the general meeting of the company.
• The director must also notify and submit a copy of his resignation, along with a precise reason for resigning, to the Registrar within 30 days of the resignation.
• The resignation of a director becomes effective from the date on which the company acknowledges his notice or from the specified period mentioned by the director, whichever comes later. It is further provided that the resigning director remains liable for any offenses that occurred during his tenure even after resignation.
• In the event that all directors of a company resign simultaneously, the promoter or the Central Government shall appoint the necessary number of directors to ensure the continuity of the company until new directors are appointed through a general meeting.

Frequently Asked Questions (FAQs)