The Companies Act,2013 defines the term Director as someone who is appointed to the Board of a Company. The Board of Directors is a group of those individuals who are elected by the shareholders of the company to manage the affairs of the company. As a company is an artificial legal person that is created by law, the company can act only through the agency of natural persons. The Company can only act through Human beings and Directors are the one through whom the company mainly acts. The Board of Directors is that body of individuals on which the management of a company is entrusted.
According, to the other definitions a Director is someone who administers, controls, or directs something. He is a person who is elected by the shareholders of a company to direct a company's policies. He is a person appointed or elected under the law, and who is authorized to manage and direct the affairs of the Company.
The following are the circumstances in which it would be necessary to add or appoint a director:
In a Company, the Directors of the company play a crucial role in the functioning. The conduct of the business and the day-to-day decisions are made by the Directors. The Directors happen to be the key people in which the shareholders of the company trust to invest their money. Below is the process on how we can add a Director in the company:
The consent of the proposed director in Form DIR 2 is necessary which is an important document and the company is required to obtain the Form DIR-2 before proposing him to the Director of the Company.
In case the proposed directors of the company do not have Digital signatures, they need to obtain a DSC.
In case the Proposed Director does not have a DIN, then the company should apply for the DIN of the proposed person. The DIN shall be applied in Form DIR 3. This DIN once alotted shall be valid for lifetime however, the person to whom DIN is alotted needs to do KYC every year from the corresponding year on which DIN has been alottet in Form DIR 3 KYC.
DIN can be obtained for any person who is above the age of 18. Also, the nationality of the proposed does not matter. Hence, the Indian Nationals, Non- Resident Indians, and Foreign Nationals can obtain the DIN and be appointed as Directors in a Company in India.
The Company should obtain all the KYC Documents along with the necessary educational qualifications documents as per the conditions of the job. Also, there is no minimum education qualification to hold the post of Director in the Company in India.
A Managing Director is a director by the virtue of Articles of Association of a company or an agreement with the company or a resolution passed in the general meeting or by the Board of Directors. As the board of directors is entrusted with the substantial powers of management of affairs of the company.
Someone who is in Full-time employment of the Company is an executive director or the whole director.
An ordinary director is a simple director who attends the Board meetings of a company and participates in the matters that are put before the Board of Directors. These Directors are not whole-time Directors or Managing Directors.
An additional director is an individual that is appointed by the Board of Directors between the two annual general meetings subject to the provisions of the Articles of Association of a Company. The additional directors should hold office only till the date of the next annual general meeting of the Company. However, the number of directors and the additional directors of a company together shall not exceed the maximum strength that is fixed for the Board of Directors by the Articles of Association.
The Board of Directors in the general meeting to act for a Director called the original director during his absence for not less than three months. In most cases, the alternate directors are appointed for a person who is non-resident Indian or for the foreign collaborators of a company.
A professional Director is a director with professional qualifications and does not have any pecuniary interest in the company. These professional Directors are sometimes appointed on board to utilize their expertise in the management of the company.
Banks and the private equity investors who provide equity assistance to a company generally impose a condition to appoint their representative on the Board of the concerned company. These nominated persons are called the Nominee Director.
Private Limited Company- Can have a minimum of two directors.
Limited Company- Minimum three directors.
One Person Company- Minimum one director.
There is no such requirement according to the Companies Act, 2013 that prohibits appointing of any person who is a foreigner or the NRI as the Director of the Company but Section 149(3) provides that every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar.
Eligibility criteria for a person to be appointed as director in a company:
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