APPOINTMENT OF DIRECTORS UNDER COMPANIES ACT, 2013

There are several types of companies and have certain mandatory rules for companies to appoint certain kinds of directors in certain companies. That means there are several types of directors. According to section 2(34) of the Companies Act, 2013 a director is a person who is appointed as a director in the company. A person who is designated as a director but not appointed will not be considered as a director under this Act.

In the case of a public company the minimum number of directors is required is 3, a private company needed 2, and one person company needed 1. The maximum number of directors is 15 but more can be appointed through a special resolution. Special resolutions are not required for the government company and the company licensed under section 8[i].

No person can hold directorship in more than 20 companies. In the case of a public company as per section 165 of the Companies Act, 2013 is10 in number. According to section 149, only an individual can be a director of the company.

TYPES

Executive Director – a director employed in a company and closely witness the affairs of the company are known as executive directors. This includes managing directors and whole-time directors as well. They possess deep knowledge of the company.

Non-Executive directors – directors, neither employed nor closely involved in the day to day management of the company are known as non-executive directors. This class includes nominee directors, professional directors, etc who have an unbiased attitude towards the company.

Independent Directors – every listed company have at least one-third of the total number of directors. In section 149(4) of the companies Act, 2013.

They are the directors must comply with the criteria mentioned in section 149(6). An independent director can be appointed for 2 years. Then a gap of 3 years is required for reappointing of the director in the same company and in the same position.

Prescribed companies shall have a minimum of 2 independent directors: -

• Whose paid-up shares is of 10 crores or more,
• Turnover is 100 crores or more.
• Whose outstanding loans, debentures, and deposits in aggregate more than 50 crores.

If a company has an audit committee then the number of directors should be more than half appointed as independent directors.

Appointment of directors elected by the small shareholders – in a listed company, one director must be elected by the small-shareholders.[ii] Small shareholder means a shareholder holding shares of the nominal value of not more than Rs 20,000 or such sum as may be prescribed.

The first director – they are appointed by the subscribers of the memorandum. They are generally listed in the articles of the association of the company. They are appointed till the company appoints subsequent directors.[iii]

Nominee director – these are the directors appointed by the third party subject to the articles of the company. In pursuance with the law or any provisions for the time being in force.

Woman director – following companies must have at least one director:

• Every listed company,
• Every public company, whose paid-up shares exceeds 100 crores, and
• Every public company, whose turnover exceeds 300 crores.

A vacancy shall be filled by the 3rd month from such vacancy. Immediate next board meeting after such vacancy or whichever is later.

 Appointment by nomination – an agreement among the shareholders may be imbibed in the articles of the company to the effect that every holder of 10% shares shall have the right to nominate a director on the board.

Appointment by voting on an Individual basis – appointment of every director is required to be made by voting at the general meeting. If 2 or more people are appointed directors by a single resolution, then it is considered void and non-existed in the eye of law.

DISQUALIFICATION OF DIRECTORS

Section 164 of Companies Act, 2013. Following are not eligible to be a director –

• Unsound mind
• Insolvent
• Court or tribunal disqualify such person.
• A person who has been in prison for more than 6 months and 5 years have not passed.
• A person applied for adjudicated as an insolvent and his application is pending.

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. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.