Appointment and Removal of Directors

11/03/2020 0 By indiafreenotes

Appointment of Directors


An individual who is appointed or elected as the member of the board of Directors of a Company, who, along with the other directors, has the responsibility for determining and implementing the policies of the company.

Director is an individual who directs, manages, oversees or controls the affairs of the Company.

A director is a person who is appointed to perform the duties and functions of a company in accordance with the provisions of The Company Act, 2013.

As per Section 149(1): Every Company shall have a Board of Directors consisting of Individuals as director.

They play a very important role in managing the business and other affairs of Company. Appointment of Directors is very crucial for the growth and management of Company.


Public Company or a Private Company subsidiary of a public company 1. 2/3 of the total Directors appointed by the shareholders.

2. Remaining 1/3 appointment is made as per Articles and failing which, shareholders shall appoint the remaining.

Private Company which is not a subsidiary of a public company 1. Articles prescribe manner of appointment of any or all the Directors.

2. In case, Articles are silent, Directors must be appointed by the shareholders

 *Nominee Directors can be appointed by a third party or by the Central Government in the case of oppression or mismanagement.


Private Limited Company Minimum Two Directors
Public Limited Company Minimum Three Directors
one person Company Minimum One Director

 * A company may appoint more than (15) fifteen Directors after passing a special resolution.

*Further, every Company should have one Resident Director (i.e. a person who has lived at least 182 days in India during the financial year)

Director’s appointment is covered under section 152 of Companies Act, 2013, along with Rule 8 of the Companies (Appointment and Qualification of Directors) Rules, 2014.


According to The Companies Act no qualifications for being the Director of any company is prescribed. The Companies Act does, however, limit the specified share qualification of Directors which can be prescribed by a public company or a private company that is a subsidiary of a public company, to be five thousand rupees (Rs. 5,000/-).

New Categories of Director

Resident Director:

 This is one of the most important changes made in the new regime, particularly in respect of the appointment of Directors under section 149 of the Companies Act, 2013. It states that every Company should have at least one resident Director i.e. a person who has stayed in India for not less than 182 days in the previous calendar year.

Woman Director

Now the legislature has made mandatory for certain class of the company to appoint women as director. As per section 149, prescribes for the certain class of the company their women strength in the board should not be less than 1/3. Such companies either listed company and any public company having-

  1. Paid up capital of Rs. 100 cr. or more, or
  2. Turnover of Rs. 300 cr. or more.

Foreign National as a Director under Companies Act, 2013

Under Indian Companies Act, 2013, there is no restriction to appoint a foreign national as a director in Indian Companies along with six types of Directors which are appointed in a company, i.e., Women Director, Independent Director, Small Shareholders Director, Additional Director, Alternative and Nominee Director. By complying with the Companies Act, 2013 (hereinafter referred as “The Act”) read along with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (hereinafter referred as “The Rules”)

Restrictions on number of Directorships

The Companies Act prevents a Director from being a Director, at the same time, in more than fifteen (15) companies. For the purposes of establishing this maximum number of companies in which a person can be a Director, the following companies are excluded:

A “pure” private company;

An association not carrying on its business for profit, or one that prohibits the payment of any dividends; and

A company in which he or she is only appointed as an Alternate Director.

Failure of the Director to comply with these regulations will result in a fine of fifty thousand rupees (Rs. 50,000/-) for every company that he or she is a Director of, after the first fifteen (15) so determined.

Removal of Directors

A director may be removed by the shareholders or by the Central Government or by the Court. Procedure for removal of Director of a company according to the Companies Act 1956 are briefly discussed below.

Removal of Directors by Shareholders, Government, Law Tribunal

1. Removal of Director by Shareholders

According to Sec.284 of the Companies Act 1956, the company in a general meeting may remove a director at any time by passing an ordinary resolution.

The removal of a director or appointment of a director in the place of a removed director needs a resolution requiring special notice. Hence, the proposer has to send a notice to the company not less than 14 days before the meeting and the company has to send the proposed resolution to the concerned director and the members. The director has a right to make representations and to speak at that general meeting.

He may also request that these representations be notified to the members of the company. Under such circumstances, the company shall

  1. state the fact of the representations having been made in any notice of the resolution given to the members of the company; and
  2. send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company).

If a copy of the representations is not sent as aforesaid because they are received too late or because of the company’s default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting.

The removed director may get compensation or damages for the termination of his appointment. If the vacancy is not filled at the same meeting, the Board may fill it as if it is a casual vacancy. But the removed director cannot be reappointed.

2. Removal of Director by the Central Government

As per Secs. 388 B to 388 E of Companies Act 1956, the Central Government has power to remove managerial personnel on the recommendations of the National Company Law Tribunal. The Central Government may refer the case to the National Company Law Tribunal if it is of the opinion that:

  1. the director or directors is or are guilty of fraud, misfeasance, negligence or default in carrying out his/their functions, or
  2. the business is carried on against sound business principles or commercial practices, or
  3. the company is carried on in a manner likely to cause injury to the interest of the trade, industry or business to which it belongs, or
  4. the concerned director manages the company for defrauding the creditors or members or for a fraudulent or unlawful purpose.

If the National Company Law Tribunal after inquiry decides against the director or directors, the Central Government may remove him/them from office. In this case, no compensation is payable for the loss of office.

3. Removal of Director by National Company Law Tribunal

As per Sec. 402 of Companies Act 1956, if, on hearing an application for prevention of oppression or mismanagement, the National Company Law Tribunal feels that a relief ought to be granted, it may set aside, terminate or modify any agreement of the company with a director. Such a terminated director cannot get compensation for the loss of office.