Types of Directors in a Company

Types of Directors in a Company

1. Executive Director: Executive director is basically a person who is responsible for the day to day functioning of the company. They are the members of the board who are also the employees of the company and are paid salary in consideration of their services. Eg. Managing Director, Whole time director etc.

2. Non-Executive Director: Non-executive directors are the members of the board of the company and not in employment of the company. They do not take part in day to day activities of the company. Their major role is to provide professional expertise and outside perspective to the board. They may or may not be independent directors.

3. Shadow Director/ De Facto Director: A shadow director is a person who is not officially appointed as the director of the company, but has major influence on the happenings on board of the company. The relationship between the shadow director and the company is such that the directors and employees of the company are accustomed act in accordance to the directions of the shadow director. Such directors although not considered as director per se is covered under the definition of ‘officer’ of the company u/s 2(59) and is thus liable for the obligations of the company.

4. Woman Director: To promote the importance of gender diversity on the board, The companies Act, 2013 has mandated appointment of atleast 1 woman director on the board of listed and certain other specified class of companies.

Applicability:

Types of Company

5. Resident Director: Resident Director refers to the person who is appointed as the director of the company and whose minimum duration of stay in India during the financial year is not less than 182 days. Pursuant to section 149 (3) of the companies Act, 2013 every company shall have at least 1 Resident director as a member of the board of the company.

 

6. Independent Director: Independent director as the name suggests is independent of the company’s management. He is a non-executive director, who satisfies all the criteria enlisted in section 149(6) of the companies act, 2013. The addition of an independent director to the board of the company serves to diversify the viewpoints on the board and prevent any dominance by one person or special interest group.

Applicability:

Type of company Minimum Number
NA
Listed Company
1/3rd of the Board
• If chairperson is executive, then 50% of Board will be independent;
• If chairman is non-executive, then 1/3rd of the board will be independent;
• If chairman is non-executive promoter or relative of promoter, then 50% of Board will be independent;
Top 1000 listed companies
1 independent woman director
Other Public company having:
• Paid up share capital – Rs. 10 crore or more;
OR
• Turnover – Rs. 100 crore or more;
OR
• Aggregate, outstanding loans, debentures and deposits of Rs. 50 crore or more
2

7. Nominee Director: It means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government or any other person to represent its interests. A nominee director is a non-executive director but is not considered as an independent director.

8. Small Shareholder Director: A shareholder holding shares with a nominal value of no more than Rs. 20,000/- —or any other amount that may be mandated—is considered a “Small Shareholder.” Any Director elected by the small shareholders to protect and represent their interest at the board is referred as small shareholder director.

Board Composition & Structure:

Companies ACT, 2013 SEBI
Size:
Public Company: Minimum 3 Directors;
• Optimum combination of executive and non- executive directors;
Private Company: Minimum 2 Directors;
• Atleast 1 woman director;
OPC: Minimum 1 Director;
• 50% of Board will be non-executive;
• Maximum 15 Directors; Exemption: Government company, IFSC Public company.
• Top 1000 listed entities shall have atleast 1 independent woman director;
• Top 2000 listed entities will have minimum 6 directors
Composition:
• Public listed Company: 1/3rd of the Board will be independent;
• If chairperson is executive, then 50% of Board will be independent;
• Public companies having: - Paid up share capital of Rs. 10 crore or more;
OR
- Turnover of Rs. 100 crore or more;
OR
- Aggregate, outstanding loans, debentures and deposits of Rs. 50 crore or more
– Minimum 2 Independent directors;
Exemption: Joint Venture, WOS, Dormant Company.
• If chairman is non-executive, then 1/3rd of the board will be independent;
• Public companies having:
- Paid up share capital of Rs. 100 crore or more;
OR
- Turnover of Rs. 300 crore or more
- Minimum 1 woman director
• If chairman is non-executive promoter or relative of promoter, then 50% of Board will be independent;

Liability OF Directors:

Directors are appointed by the shareholders of the company to run and manage the company. They act as agents of the company thereby creating a fiduciary relationship with the company and other stakeholders.

Since the company acts through its directors, the directors can be held as officers in default for any breach or contravention committed by the company.    Such directors are usually executive directors, whole time directors or other key managerial persons.

The non-executive directors can be held liable for those contraventions which have occurred with the knowledge, consent or assistance of such director.

Following are some of the penalties for which the directors of the company can be held liable under the companies act, 2013:

Section Fine Imprisonment
Section 102 - Failure to comply with provisions related to statement to be annexed to notice calling a meeting
Rs. 50,000/- or 5 times the benefit gained, Whichever is higher
Sec 127- Punishment for failure to distribute dividends.
Rs.1,000/- per day of default along with Simple Interest @ 18% p.a for the period during which the default continues
Max: 2 years
Sec 128 – Failure to comply with the provision relating to maintenance of books of accounts etc.
Min: Rs. 50,000/-
Max: Rs. 5,00,000/-
Sec 129 – Failure to comply with provisions relating to proper disclosure of financial statements
Min: Rs. 50,000/-
Max: Rs. 5,00,000/-
Max: 1 year
Sec 137- Failure to file the copy of financial statements with the ROC.
Min: Rs. 10,000/- along with a fine of Rs. 100/- per day during which the default continues Max: Rs. 50,000/-
Sec 159 – Contravention of:
- Sec 152 - appointment of directors,
- Sec 155 - Prohibition to obtain more than one DIN
- Sec 156 - Director to intimate DIN
Rs. 50,000/- along with a fine of Rs. 500/- per day during which the default continues
Sec 165 – Contravention of maximum directorships
Rs. 2,000/- per day during which the default continues Max: Rs. 2,00,000/-
Sec 167 – Presiding over the office of the director after being disqualified
Min: Rs. 1,00,000/-
Max: Rs. 5,00,000/-
Sec 184 – Failure to disclose interest held by directors in any company/contract/arrangement
Rs. 1,00,000/-
Sec 189 – Failure to disclose the interest of the director in any contract/arrangement in Register
Rs. 25,000/-

Apart from the companies act, the directors of the companies can be penalised as the officers in default for contravention of other laws such as Insolvency and bankruptcy Code, 2016, FEMA 1999, Labour laws, GST Act, 2017, Income Tax Act, 1961 etc.

Your Company

    Subscribe to our Newsletter

      Proprietorship Registration