Among Asia's Top 100 Consulting Firm
10,000 + Happy Customers
Lowest Fees
4.5+ Google Rating
Expert Assistance
Appointment and Resignation of Director
It is right that Directors are the working brain of any company and they are the managerial staff who manages, control and administer the company operations and services. The rotation of directors takes place in two ways – either by choosing the new director or withdrawal of the present. The attempt of changing of directors is always to assure an optimum blend of experts and shareholders on board for the concern of the company. The approval of the resignation of the director lies with the parts of the Board of Directors, whereas the appointment of directors should be made through the approval of shareholders. Whether it is an appointment, resignation or removal, the change that does not take effect continuously; then the intimation is made to MCA or Ministry of corporate affairs.
Who is the Director of the Company?
As per the Companies act 2013, there is no exhaustive definition of the word ‘director”. A director is an important person of the company who is appointed to execute the duties and functions of the director of a company according to the provisions of the Companies Act, 2013[1]. Section 2 (34) of the act mentioned that ‘director” means a director placed to work with the Board of Directors.
As per Section 2 (10) of the Companies Act, 2013 a ‘Board of Directors” or ‘Board” that associated to a company means the collective members of the directors of the company. At the core of the corporate organization, the Board of Directors supervises the management working and secures the long term interests of all the Company’s stakeholders.
The Eligibility Criteria to be a Director
There are no specified designated qualifications mentioned or followed to become a director of the company, but an individual should follow with the following mentors be a director of the company:
As per the law, a specific natural person only can become a director of any company.
- Determination of Nationality
There is no confinement. However, a minimum of one Indian director in the company is compulsory.
- Age Demarcation
There is no specified fixed age to become a director, but it is necessary that the individual who should be skilled to enter into any company contract. Furthermore, in a matter of ‘managing director,’ ‘independent’ director or ‘full-time’ director, of an authorized company, the person qualifies to be a director if he or she is of 21 years old and has not above 70 years old officially.
- Limit Of Valid Directorship
At a time, any individual can only be a director of 20 separate companies and out of these 20 companies, ten can be public limited companies.
- DIN Needed
To qualify to be the director of the company, the individual must obtain a Director Identification Number. The main purpose behind obtaining a DIN is to make ensured that fake directors do no dupery, and in case the person has any black mark such as criminal activity, they can be caught using this unique number.
Ineligibility
- Unsound Mind or Bankrupt Person
Any Individual who is of an unstable mind or is fumbling of making decisions on his own without any second thought cannot be appointed as a director of the company. This includes children, mentally disabled person, and builds with unstable mental faculties. Moreover, individuals or insolvent people who have held bankruptcy claims in the court of law are not qualified from acting directors.
- Criminal Background
If the individual has a criminal record or lawful claims and was doomed to confinement for more than seven years, then that individual cannot be a director of the company.
- Pending Overdue Returns
If the recommended person has not met previous returns in any of the past years, he or she shall be banned from becoming the director.
Classes of Director Appointed in the Company
- Managing Director: They are issued with the complete power and charge for the full operation of the Company.
- Executive Director: They run the everyday working and operations of the Company, and they are more responsible and efficacious for the Company.
- Non- Executive Director: They are not into day to day working, judgment making or business operating.
- Nominee Director: They are not the primary directors but are selected by the PE/VC investors or banks who have offered the loans or shareholders in case of a recognized company to represent their interests.
- Independent Director: They are chosen in the Company to oversee and ensure sound governance.
Documents needed for Appointment and Resignation of Director
- PAN Card of the Director to be designated
- Photograph of the Director to be designated
- Proof of Residency such as Aadhar Card, Voter ID, Passport or Driving License of the director to be appointed
- Digital Signature Certificate or DSC of the ongoing Director and for the Director to be eliminated or removed
- Proof of dispatch
- Identity proof such as Passport, Election card, Driving License or Aadhar card
- Mobile number and email id of both personal and official of the Director.
- It is mandatory to apostille all the needed documents apostilled if the Director is not a citizen of India.
- Notice of resignation submitted with the company
- If received acknowledgement of form.
Appointment of Director Procedure
Directors Appointments at the time of Incorporation
- Appointments of First Directors
At the time of the company registration process with MCA, the someones who fit to be the Director are the first directors of the Company. Moreover, while the registration process, if there are no directors, then the original endorsers to the MOA will display automatically the directors of the Company.
- Requisites: How To Be Done?
MCA has declared a new simple process of incorporation of a company. There is no early requirement to have Director Identification Number or DIN to be a director while establishment. The DIN is allocation assures place at the time of registration of the Company. Also, it is important to add the complete information of the directors in the e-form as introduced by MCA. The ‘master data’ of the Director will be approachable on the MCA official website after the incorporation of the Company. At the time of the appointment of directors, the company should own the following Director’s needed documents. In the new form of affiliation, a culmination of 3 DIN or Director Identification Number can be allotted. Therefore, if any individuals do not have DIN, then a maximum of 3 individuals can be elected as directors.
Resignation of the Director under Section 168
- Any director of the company can resign from his position by providing written notice. Once such notice is collected, the Board members shall take note of the same, and the company shall intimate the Registrar in a formal manner with time, and form as designated. Following that-
- The company shall place the notice of such resignation after the general gathering of the company in a report of directors shortly.
- The director shall also suggest and forward a copy of the resignation with a precise reason for his resignation from the position of Director of the company to the Registrar within a month or 30 days of resignation.
- The resignation of a director of the company should take its influence from the time or date on which the company approved his notice or from the itemized period stated by the director in mind, whatever comes later: Provided- that the director of the company who has resigned should be liable for the offences which came along while his tenure even after his resignation.
- Whenever all the directors resign at the same time, then the Central Government or the promoter shall select the awaited number of directors during which old directors of the company have to hold company till the new ones or new director get nominated by the company in the announced general meeting.
Understandings behind Resignation of Directors
- Dispute with the Board
When many directors work ordinarily, a difference of opinion may happen which results in hindering the overall operation or performance of the company; in such a situation, the directors may take a decision to resign.
- More beneficial career opening
Everyone looks for a more substantial career opportunity to elaborate their domain, and choose that next option which encourages their inner aspiring. Same like the directors may resign if they obtain a better option or some venture wherein he got chosen as a director by AOA.
- Misuse in the Company Affairs
When a director involved in the illegal practices of the company, hence the director may find himself becoming dragged into it that meets his reason for resignation. To oppose himself from personal liability appearing out of such activities, he chooses to resign.
- Suspension Due To Infringement
Any violation, non-adherence, or defaults on the director’s end can head the way into trouble.
- The Recession of Nomination
It is only allowed to the Nominee directors who primarily get placed by the NBFC’s capitalists or investors on the BOD. After completing the transaction between the company and entity is complete, now the Nominee director of the company can resign, or he may also leave the company after the removal of nomination.
Frequently Asked Questions
According to section 168 of Companies act 2013, the administration does not have any power to reject the resignation submitted by a director.
If so, the promoter or impresario will take charge. If there is no promoter, then the central government will provide directors on a temporary basis to manage the Company operations, until fresh directors are appointed.
Yes, a director resign own self from the Company
Yes, it can be done, they must have a DIN and a valid Passport. In case that person does not have a DIN, they must apply through the Company if that person wishes to become a Director of the company.
No, there is no designated requirement needed for the appointment of directors
- For Private Company: Minimum 2 directors
- For Public Company: Minimum of 3 directors
- For OPC: minimum 2 directors
- For Producer company: Minimum 5 directors
