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Appointment and Resignation of Director
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Directors are often regarded as the strategic leaders of a company, responsible for managing and overseeing its operations. Changes to the board of directors can happen through the addition of new members or the resignation of current ones.
The goal of modifying the board's composition is to ensure the company benefits from a balanced combination of expertise and leadership. While the Board of Directors (BoD) has the authority to accept a director’s resignation, the appointment of a new director requires shareholder approval.
All changes, whether appointing, removing, or resigning directors, are not immediate. Proper notification must be submitted to the Ministry of Corporate Affairs.
Director Appointment and Resignation: A Comprehensive Review
Minimum Age
A director must be at least 18 years old. There is no upper age limit, except for directors of public companies, where special conditions may apply.
Legal Capacity
The individual must be legally competent to enter into a contract. This means they should not be insolvent, mentally incapacitated, or otherwise disqualified by law.
Director Identification Number (DIN)
Every aspiring director must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). This unique number is mandatory and serves as an identifier for directors.
Resident Requirement
At least one director of every company must be a resident of India. A resident is defined as someone who has lived in India for at least 182 days in the previous calendar year.
Qualifications (if applicable)
In general, there is no specific educational qualification required. However, certain sectors (like banking or insurance) may require directors to have specific professional qualifications.
Special Qualifications for Independent Directors
For public companies that are required to have independent directors, there are additional eligibility criteria:
Should have relevant experience and knowledge in finance, law, management, or other fields related to the company's business.
Must not have any material financial relationships with the company.
Eligibility Criteria to Become a Director
Section 149(1) of the Companies Act, 2013 requires that every company shall have a minimum number of 3 directors in the case of a public company.
Two directors in the case of a private company,
One director in the case of a One Person Company.
A company can appoint maximum 15 fifteen directors. A company may appoint more than fifteen directors after passing a special resolution in general meeting and approval of Central Government is not required.
Minimum/Maximum Number of Directors in a Company
An individual cannot hold directorships in more than 20 companies at a time, and out of these, not more than 10 public companies.
Limit on Directorships
Certain individuals are disqualified from becoming directors under Section 164 of the Companies Act, 2013:
A person shall not be eligible for appointment as a director of a company if —
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence.
If a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;
(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years.
Disqualification
Executive Director: A full-time working director involved in the day-to-day operations.
Non-Executive Director: A part-time director, not involved in daily operations but attends board meetings.
Independent Director (Section 149(6)): Applicable for listed companies and certain unlisted companies, requiring them to have at least 1/3rd of the board as independent directors.
Woman Director (Section 149(1)): Mandatory for certain classes of companies, such as listed companies and public companies with paid-up capital of ₹100 crore or more.
Types of Director
Photograph: Passport-sized photo of the newly appointed Director.
PAN Card: Self-attested copy of the incoming Director's PAN card.
Proof of Residence: Aadhar Card, Voter ID, Passport, or Driving License of the appointed Director.
Digital Signature Certificate (DSC): DSC for both the current Director and the Director being removed.
Identity Proof: Valid identification such as Passport, Election Card, Driving License, or Aadhar Card.
Contact Information: Mobile number and personal or official email address of the Director.
Apostilled Documents: Non-resident Directors must provide apostilled documents.
Resignation Notice: Notice of resignation submitted to the company.
Proof of Dispatch: Confirmation that the notice has been sent.
Acknowledgment: Receipt of acknowledgment for the form, if available.
Documents required
1. Appointment by Board of Directors (Section 161)
Additional Director (Section 161(1)):
The Board of Directors can appoint an additional director if authorized by the Articles of Association.
This director holds office until the next annual general meeting (AGM).
Alternate Director (Section 161(2)):
If a director is absent from India for more than three months, the board may appoint an alternate director.
Nominee Director (Section 161(3)):
A nominee director may be appointed by any financial institution or in pursuance of any agreement.
Casual Vacancy (Section 161(4)):
A casual vacancy in the office of any director appointed in a general meeting can be filled by the board.
Director Identification Number (DIN) (Section 152(3) & Section 153)
Section 152(3): No person can be appointed as a director unless they have been allotted a DIN.
Section 153: Application for DIN is made through e-form DIR-3.
Consent to Act as Director (Section 152(5))
Every person proposed to be appointed as a director must furnish their written consent in the prescribed form (DIR-2) before being appointed.
The consent must be filed with the Registrar of Companies (ROC) within 30 days of the appointment through e-form DIR-12.
Declaration by Independent Directors (Section 149(7))
Independent directors must give a declaration that they meet the criteria of independence as outlined in Section 149(6).
Procedure For Appointment Of Director
Can the resignation of “Director be rejected?
As per section 168 of Companies act 2013, the administration does not have any right to reject the resignation presented by a director.
Whichever is the operative date of resignation in case of non-acceptance of resignation notice, and non-filing of form DIR11, by the Association?
If all the directors resign or vacate their offices then who runs everything?
If I already have DIN, Should I apply again?