The Structure of a Corporate form of organization is such that the ownership and management is separated from one another. The shareholders are the owners of the company and the Directors are managers. The shareholders, in the general meeting of the company, appoint the directors to run the company with the intention of achieving its objects.
Section 2 (34) of The Companies Act, 2013 defines director as “a director appointed to the Board of a company.”
Section 149 of The Companies Act, 2013 mandates the appointment of directors on the board of the company.
Every Indian company shall have at-least 1 director who is a resident director. i.e. duration of stay in India during the financial year is not less than 182 days.
Requirements for appointment as directors :
- The director needs to be an individual person.
- The director needs to hold a valid DIN issued by the Central Government,
- The director needs to furnish a declaration that he is not disqualified to become a director under this Act.
- The director needs to give his consent accepting the appointment and such consent is filed with the Registrar of Companies within 30 days of Appointment.
Appointment of Additional Director :
The articles of a company may confer on its Board of Directors the power to appoint an additional director in the Board meeting by passing an ordinary resolution. The tenure of the office of such additional director will be up to the conclusion of the upcoming annual general meeting or the due date by which the upcoming annual general meeting must be held, whichever is earlier.
Such appointment of additional director can be ratified by the shareholders in the annual general meeting and the designation of additional director will change from “Additional director” to “Director”.
Change is designation of Directors is to be filed with ROC within 30 days of such change.
In the event of casual vacancy caused due to expiry of the office of any director in the normal course, the Board of directors may fill such vacancy by appointing an additional director which shall be subsequently approved by members in the upcoming general meeting.
Appointment of Alternate Director :
The Board of Directors may, on authorization by AOA or on Shareholder’s Resolution in this regard, appoint a person to act as an alternate director for an existing director during his absence , for a term of not less than 3 months, from India.
An alternate director is appointed to act on behalf of a director when the latter is unavailable to perform their duties. The appointment of an alternate director is usually made by the board of directors, and it is necessary to ensure the smooth functioning of the company’s operations.
The alternate director shall not hold office for a period longer than that permissible to the existing director in whose place he has been appointed and shall vacate the office if and when the existing director in whose place he has been appointed returns to India.
Appointment of Nominee Director :
The articles of a company may confer on its Board of Directors the power to appoint any person as a nominee director representing any institution in pursuance of the provisions of any law or agreement for the time being in force or representing the Government by virtue of its shareholding in a government company.
Limit on Directorship (Section 165) :
The companies Act, 2013 prescribes a limit of 20 companies as the maximum number of directorships that a person can hold. Such limit is inclusive of alternate directorships and exclusive of directorship in dormant companies.
Provided that, the maximum number of public companies shall not exceed 10. Directorship in private companies which are either holding or subsidiary companies of a public company shall be included in the said limit of 10 companies.
| Types of Company | Maximum Limit |
|---|---|
|
Public Company (incl. Subsidiary/ Holding co. of Public Co.) |
10 |
|
Private Company |
Balance |
|
Dormant Company |
No Limit |
|
Total |
20 |
Violation of this section shall attract a penalty of Rs.2,000/- per day, during which such violation continues, subject to a maximum penalty of Rs. 2,00,000/-.