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Appointment of director: Companies Act 2013

Courtesy/By: Aarushi Ghai | 2021-01-06 17:10     Views : 320

A director is an individual who has been appointed to the board of directors by the shareholders in the general meeting of the shareholders. He is appointed to be a part of the management branch of the company and acts as a link between the company and the shareholders. 

Section 2 (10) of the companies act 2013 states the appointment of directors by the shareholders. However, not all types of directors are appointed by shareholders, some can also be appointed by the Board of directors themselves, such directors are usually temporary directors. 

Often the question of a company being a director in another company or partnership firm comes before. But a company cannot be a director in another company, as directors are individuals who have a mind of their own and a company does not have a mind of its own. Therefore it does not qualify to become a director. According to section 149 (1) of the Companies Act 2013, A director can only be an individual i.e. a natural person. 

Talking about the appointment to a director, before the shareholders elect the directors to the board, there are certain pre-requisites before such appointment. Section 152 till section 154 of the Companies act 2013, lays down these pre-requisites as follows:

  1. No person shall be appointed as the director of the company unless he has been allotted the Director Identification Number under section 153 of the Companies Act 2013. The government makes it mandatory to have this identification number as it helps them to maintain the record of the directors and their activities as well. A director can have only 1 identification number issued on his name, having dual DINs will amount to an offense.
  2. The amendment to section 153 of the Companies Act provides that the Central Government may prescribe an identification number which can be treated as the Directors Identification Number. 
  3. Section 153 of the act requires every individual intending to be appointed as the director to make an application with FORM DIR 3 with requisite fees and according to the procedure laid down under rule 9 of the Companies Qualification and Appointment Rules 2014.
  4. The application must be signed using the digital signature of the person
  5. It has to be verified by a full-time company secretary or the CFO
  6. The central government shall allot the DIN within 30 days of such verification if satisfied with all the documents 
  7. The company on receiving the information is required to inform the Registrar Of Company within 15 days of receiving this information 
  8. A director who has already been allotted a DIN under section 154 cannot obtain another DIN. The contravention of this will make the director liable with a fine up to Rs 50,000 and Rs 500 every day till the contravention continues. 

The appointment of directors is governed by the Companies Act of 2013. The set procedure must be followed to avoid any legal consequences.

 

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.

Courtesy/By: Aarushi Ghai | 2021-01-06 17:10