Appointment of Directors, Legal Position01/03/2020
SECTION 152 OF THE COMPANIES ACT, 2013: APPOINTMENT OF DIRECTOR
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.
APPOINTMENT OF DIRECTORS UNDER COMPANIES ACT 2013:
|TYPE OF COMPANY||APPOINTMENT MADE|
|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.
REQUIREMENT OF A COMPANY TO HAVE BOARD OF DIRECTORS:
|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.
QUALIFICATIONS FOR DIRECTORS:
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
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.
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-
- Paid up capital of Rs. 100 cr. or more, or
- 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.