appointment of the directors under companies act 2013

ALL ABOUT THE APPOINTMENT OF THE DIRECTORS

BRIEF INTRODUCTION

Appointment of Directors shall be made according to the Articles of Association (AOA) or as per the provisions of section 152 of the Companies Act 2013.

In general, the subscribers to the MOA shall be deemed to be the directors of the corporate entity. Some of the categories of directors, being provided under the Companies Act 2013, are as follows –

• Women directors are there must be one woman within the board of directors where the corporate entity has paid-up capital of Rs 100 crore or more or features a turnover of Rs 300 crore or more.
• Independent Director under section 149(6).
• Small Shareholder Director, being elected by small shareholders of the entity, under section 151.
• Resident director under section 149(3) is required in a very company that has lived for 182 days in India within the previous year.
• Additional director under section 161.
• Alternative directors under section 161(2) may be appointed in the absence of the most director for a minimum of three months and above.
• Nominee Directors under section 161(3) are appointed by a 3rd party or by the Central Government in the case of mismanagement or oppression.

TYPE OF COMPANY	APPOINTMENT MADE
PUBLIC COMPANY OR A PRIVATE COMPANY AND SUBSIDIARY OF A PUBLIC COMPANY	2/3 OF THE TOTAL NUMBER OF DIRECTORS ARE APPOINTED BY THE SHAREHOLDERS AND THE REMAINING 1/3 APPOINTMENT IS AS PER ARTICLES OF ASSOCIATION. WHERE THE AOA IS SILENT, THE SHAREHOLDERS ARE REQUIRED TO APPOINT THE REMAINING DIRECTORS.
PRIVATE COMPANY (NOT A SUBSIDIARY OF A PUBLIC COMPANY)	ARTICLES OF ASSOCIATION PRESCRIBE THE MANNER OF APPOINTMENT OF ANY OR ALL THE DIRECTORS. IN THE ABSENCE OF AOA, DIRECTORS CAN BE APPOINTED BY THE SHAREHOLDERS.

QUALIFICATION OF DIRECTOR

• As per the Companies Act 2013, no specific qualifications has been provided in respect of the appointment of the Directors in an entity.  The public limited company’s corporate affairs are governed by the board of directors. They are in charge of coming up with plans, policies, and strategies.
• The Memorandum of Association makes no mention of a director’s qualifications. The Articles of Association specify the qualifications. The Companies Act does not provide any precise qualifications for directors. However, the directors must meet the requirements: Directors must acquire a specific number of shares.

DISQUALIFICATION OF DIRECTORS

Under section 164 of the act, the subsequent disqualifications are provided:

• Unsound mind person
• Undischarged insolvent
• Convicted by the court
• Order of disqualifying elapsed the court
• Not paying any necessitate the shares of the corporate entity
• Convicted for an offence
• Not filled any financial statements
• Failed to repay the deposits
• Barred by law

REQUIREMENT OF DIRECTOR

The company requires a maximum of 15 directors on the board of the corporate entity, whereas can the corporate entity can increase the number of directors by passing a special resolution in AOA.

COMPANY	NUMBER OF DIRECTORS
PUBLIC COMPANY	MINIMUM NUMBER OF 3 DIRECTORS
PRIVATE COMPANY	MINIMUM NUMBER OF 2 DIRECTORS
ONE PERSON COMPANY	MINIMUM ONE DIRECTOR

PROCEDURE FOR THE APPOINTMENT OF DIRECTOR

A director may be one that is appointed to perform the duties and functions of a corporation as per the provisions of the act of 2013. The procedure for the appointment of director has been provided under sections 152 to 159 of the Companies Act 2013 and the same are as follows –

• Section 153- the appliance for the allotment of the Director identification number (DIN) needs to be made by the person aspiring to be a director of an organization before the central government together with the depositing of the prescribed fees.
• A Section 154- The central government then allot the DIN (Director Identification Number) in favor of the applicant within one month of the receiving of the allotment application made.
• Section 155- The applicant to whom DIN has already been allotted, shall now use or possess another Director Identification Number.
• Section 156- The existing directors are required to disclose their DIN (Director Identification Number), which has already been obtained by them from the central government.
• The director is required to intimate said DIN, to the corporate entity or the businesses wherein he’s a director.
• Section 157- The corporate entity is required to inform about the DIN (Director Identification Number) of all the Directors to Registrar of Companies, or the authorized person, and the same shall be reported within 15 days from receiving the intimation. Prescribed fees are required to be submitted along with the report, as provided under section 403.
• On the failure of the intimation within 15 days the corporate entity must pay a fine for Rs 25,000 twenty-five thousand which can reach Rs 1,00,000 one lakh.
• Section 159- If any of the provisions under sections 152, 155, and 156 haven’t been followed then a fine of Rs 50,000 fifty thousand should be imposed or could also be accountable for the imprisonment for the six months. In case of continuation of contravention, a penalty of Rs 500 for each day of default, shall be imposed till the contravention continues.

WAYS OF APPOINTMENT OF DIRECTOR

The appointment of the Directors of a corporation is done by any one of the subsequent ways:

• In accordance with the articles of association in the case of first directors: The subscribers of the MOA are appointed as the primary directors of a newly formed. If not, then the subscribers are deemed to be the primary directors and hold office up to this point of the first annual general meeting of the corporate entity.
• By the corporate entity in annual general meeting: under section 255 of the company’s act provides that the directors of a corporation is appointed at its annual general meetings
• The board of directors: the overall power to appoint the Directors is thru the overall meeting of the members or shareholders but in a few cases, even the board of directors can appoint new directors.
• By lenders of the Entity: The articles may also authorize the bank, debenture holders, and a financial corporation to appoint their nominated candidates in the Board of Directors.
• However, the said number of candidates so appointed must not exceed 1/3rd of the total strength of the Board.
• By the central government: the central government has the ability to appoint the Directors to avoid oppression or mismanagement and therefore the appointment of the Directors is also made for the fundamental measure, not beyond three years at a time.

DOCUMENTS REQUIRED FOR APPOINTMENT

• The Company has got to call the board meeting and pass the resolution to appoint the extra director in keeping with the AOA of the corporate entity if no clause is mentioned then in accordance with provisions of section 161 of the act.
• All the proposed directors shall be in receipt of a DIN (Director Identification Number).
• Form DIR 12 is filled together with the letter of the appointment so submission of the documents by the director within 30 days.
• The consent form DIR-2 should tend in writing for willingness to be a director.
• The appointing director should provide Form DIR 8 intimating that he’s not disqualified under the provisions of section 164(2) of the act.
• After the appointment, the director has got to give Form MBP-1 in compliance with section 184(1) read with Rule 9(1) of Companies (Meeting of Board and Its Powers) Rules 2014.

RESIGNATION OF THE DIRECTOR

• A Director of a corporation can give resignation from the office by giving a notice in writing to the board of the corporate entity under section 168(1) of the Companies Act 2013.
• After this, the corporate entity will take the subsequent steps to get rid of the concerned name from the register of Directors on the MCA Portal [2].
• The Board members of the corporate entity will hold a committee meeting by providing seven days of clear notice. a transparent notice for 21 days issued by the corporate entity excludes the day on which the notice was sent and received.
• In the board meeting, the Board members will discuss then decide whether to just accept the resignation or not.
• Where the board accepts such resignation of the director, they shall pass a Board resolution accepting the resignation within the following format:

“Resolved that the resignation of Mr. XYZ is accepted with immediate effect.

“FURTHER RESOLVED “that Mr. XYZ has performed rather well during his/her tenure because of the director of the corporate entity.

“RESOLVED FURTHER” that the concerned director who is affirming his/her resignation is hereby authorized to try and do all deeds, acts and things which are necessary for the resignation procedure of the director from the Directorship position of the corporate entity.

• After the resolution is being passed, the outgoing director will file the shape DIR-11 together with the Board Resolution, proof of the delivery of the resignation letter, and a replica of the resignation letter.
• The Form– DIR-12 is required to be filed during this case. DIR-11 shall be filed by the Director, however, the DIR-12 is required to be filed by the corporate entity itself, and both the forms be filed with the ROC (Registrar of the Companies) along with the Resignation letter and therefore the Board Resolution.
• In the tip, the name of the concerned director’s data has got to be far away from the corporate entity records who has given his/her resignation within the MCA (Ministry of Corporate entity Affairs) website

LIST OF FORMS TO BE FILED WITH ROC FOR THE PURPOSE OF DIRECTOR

S. NO.	FORM NO.	PURPOSE
1	DIR-3	APPLICATION IN RESPECT OF ALLOTMENT OF DIRECTOR IDENTIFICATION NUMBER OF THE PROPOSED DIRECTOR.
2	DIR-6	INTIMATION OF CHANGE IN PARTICULARS OF DIRECTOR TO BE GIVEN TO THE CENTRAL GOVERNMENT
3	DIR-5	APPLICATION FOR SURRENDER OF DIRECTOR IDENTIFICATION NUMBER
4	DIR-3C	INTIMATION REGARDING THE DIN, BY THE COMPANY TO THE REGISTRAR OF COMPANIES.
5	DIR-3 KYC/DIR-3 KYC WEB	APPLICATION FOR KYC OF DIRECTOR
6	DIR-12	PARTICULARS OF APPOINTMENT OF DIRECTORS AND THE KMPS AND THE CHANGES AMONG THEM
7	DIR-2	CONSENT GIVEN BY A PERSON TO ACT AS THE DIRECTOR OF THE COMPANY
8	DIR-9	DISQUALIFICATION OF DIRECTORS TO BE INTIMATED TO THE REGISTRAR BY THE COMPANY
9	DIR-10	APPLICATION FORM IN RESPECT OF REMOVAL OF DISQUALIFICATION OF THE DIRECTORS.
10	DIR-8	INTIMATION BY DIRECTOR OF HIS DISQUALIFICATIONS AND INTERESTS
11	DIR-11	NOTICE OF RESIGNATION TO THE REGISTRAR BY THE DIRECTOR HIMSELF

CONCLUSION

• The appointment of the director and its procedure is made easy with the assistance of the team of experts at RJA.
• Registration for the Appointment and Resignation of the Directors are assisted and verified by the RJA and that we are able to serve you likewise.
• The resignation is additionally provided to the Directors and is additionally managed and guided by the corporate entity.
• Directors play an awfully significant role within the functioning and growth of the corporate entity and exercise powers that are in their capacity. they’re the agents of the corporate entity.
• This famous quote, “With great powers comes great responsibility”, fits well within the case of directors of an organization. must accommodate all the statutory obligations applicable to them so the corporate entity doesn’t have to suffer due to them being non-compliant.

UPDATE ON NEW COMPANIES ACT 2013

The New Companies Act of 2013, has made major changes in the corporate laws of India. Among the major changes introduced by the new Act are the followings:-

For all companies:-

• Resident Director: Every Company must have a director who stayed in India for a total period of 182 days or more in a previous calendar year.
• Company Letterheads, bills, or other official communications must have the full name, address of its registered office, Corporate Identity Number (21 digit number allotted by Government), Telephone number, fax number, email id, website address if any.
• Accounting Year: Every company shall follow uniform accounting / financial year i.e. 1st April -31st March. Those companies which follow a different financial year have to align their accounting year to 1st April to 31st March within 2 years.
• Articles of Association: In the next General Meeting, it is desirable to adopt Table F as a standard set of Articles of Association of the Company with relevant changes to suit the requirements of the company.
• Memorandum of loans Association: Every copy of the Memorandum of Association and Articles of Association issued to members should contain a copy of all resolutions/agreements that are required to be filed with the Registrar.
• Loans to Director: The Company cannot advance any kind of loan/guarantee/security to any director, director of holding company, his partner, his relative, Firm in which he or his relative is partner, private limited in which he is director or member or any bodies corporate whose 25% or more of total voting power or board of directors is controlled by him.
• Disqualification of Director: All existing directors must have Directors Identification Number (DIN) allotted by the central government. Directors who already have DIN need not take any action. Directors not having DIN should initiate the process of getting DIN allotted to them and inform companies. The Company, in turn, has to inform the registrar.

For Public Companies:-

• Appointment of Statutory Auditors: Every Listed company can appoint an individual auditor for 5 years and a firm of auditors for 10 years. This period of 5 / 10 years commences from the date of their appointment.
• Therefore, those companies have reappointed their statutory auditors for more than 5 / 10 years, have to appoint another auditor in Annual General Meeting for year 2014.
• Woman Director: Every Listed Company /Public Company with paid up capital of Rs 100 Crores or more / Public Company with turnover of Rs 300 Crores or more shall have at least one Woman Director.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.