Director

• A corporation is an artificial person, invisible,

intangible and existing only in the contemplation of
law It has neither a mind nor a body of its own.
• This makes it necessary that the company's business
should be entrusted to human agents. Hence the
necessity of directors.
• Directors refer to the part of the collective body
known as the Board of Directors that is responsible
for controlling, managing and directing the affairs of
a company.
• A director plays several roles in a company, as an
agent, as an employee, as an officer and as a trustee
of the company.
• Section 2 (10) of the Companies Act, 2013
defines that “Board of Directors” or “Board”,
in relation to a company, means the collective
body of the directors of the company and
Section 2(34) defines “director” means a
director appointed to the Board of a company.
• Every private company shall have at least two directors and
every public company shall have at least three directors.
• The directors of a company are persons elected by
shareholders to manage and control the affairs of the
company.
• Directors may be appointed by the :
 articles (first directors) or
 by the company in general meeting or
 by the board of directors or
 by third parties (nominee director) or
 by the principle of proportional representation or
 by the Central Government or
 by National Company Law Tribunal for prevention of
oppression and mismanagement.
• Directors required in a company are given in
Section 149(1)(a) and sub-clause (b);
a.) Three directors – public company
b.) Two directors – private company
c.) One director – in a one-person company
• Provided: a Maximum number of directors can
be 15. A company can have more than 15
directors but only after passing a special
resolution.
 Types of Directors
The Companies Act refers to the following two
specific categories of Directors:
• A Managing Director is a Director who has
substantial powers of management of the affairs
of the company subject to the superintendence,
control and direction of the Board.
• A Whole-time Director includes a Director who is
in the whole-time employment of the company,
devotes his whole-time of working hours to the
company in question and has a significant
personal interest in the company as his source of
income”
• Residential director – According to Section 149(3) of the
Companies Act, 2013, each company shall have a director who
has remained in India for 182 days or more.
• Independent director – The Companies Act of 1956 does not give
any specific definition of an independent director.

In a broad sense an independent director is a non-executive

director who does not have any kind of relationship with the
company that may affect the independence of his/her judgment.
According to Section 149(6), an independent director is an
alternate director other than a Managing Director/Whole Time
Director/Nominee Director. As indicated by Rule 4 of Companies
Rules,2013 (Appointment and Qualification of Directors) these
are the following type of companies which have to appoint a
minimum two independent directors:
Unlisted Public Company
 As per Rule 4 of the Companies (Appointment and Qualification
of Directors) Rules, 2014, the following classes of companies
shall have at least 2 directors as independent directors.
 Public Companies which have a turnover of Rs.10 Crores or
More;
 Public Companies which have revenue of Rs.100 Crores or More
 Public Companies which have total outstanding loans,
debenture, and deposits of Rs. 50 Crores or More.

Listed Public Company

 at least one-third of a total number of directors as independent
directors
• In opinion of Board, is a person of integrity &
possess relevant expertise and experience.
• Who is not the promoter of the Co. or its
holding, subsidiary or associate Co.
• Who is himself or neither of his relatives
having any relation with co.
 Role and functions of Independent Director
• help in bringing an independent judgment to bear on
the Board’s deliberations especially on issues of
strategy, performance, risk management, resources,
key appointments and standards of conduct
• scrutinize the performance of management in
meeting agreed goals and objectives and monitor the
reporting of performance
• safeguard the interests of all stakeholders,
particularly the minority shareholders
• moderate and arbitrate in the interest of the
company as a whole, in situations of conflict between
management and shareholder’s interest
Duties :
• to attend all meetings of the Board of Directors and of the
Board committees of which he is a member
• to attend the general meetings of the company
• keep themselves well informed about the company and the
external environment in which it operates
• pay sufficient attention and ensure that adequate deliberations
are held before approving related party transactions and assure
themselves that the same are in the interest of the company
• act within their authority, assist in protecting the legitimate
interests of the company, shareholders and its employees
• not disclose confidential information, including commercial
secrets, technologies, advertising and sales promotion plans,
unpublished price sensitive information, unless such disclosure
is expressly approved by the Board or required by law
TENURE OF APPOINTMENT OF INDEPENDENT DIRECTOR
 Subject to the provisions of section 152, an ID shall
hold office for a term up to five consecutive years on
the Board of a company, but shall be eligible for
reappointment on passing of a SR by the company.
  No ID shall hold office for more than two consecutive
terms, but such independent director shall be eligible
for appointment after the expiration of three years of
ceasing to become an independent director: Provided
that an independent director shall not, during the said
period of three years, be appointed in or be associated
with the company in any other capacity, either directly
or indirectly.
APPOINTMENT OF INDEPENDENT DIRECTOR
• The appointment of independent director(s) of
the company shall be approved at the meeting
of the shareholders.
• The explanatory statement attached to the
notice of the meeting for approving the
appointment of independent director shall
include a statement that in the opinion of the
Board, the independent director proposed to be
appointed fulfils the specified conditions. The
explanatory statement shall mention that the
proposed director is independent of the
management.
• The appointment of independent directors
shall be formalised through a letter of
appointment.
•  The terms and conditions of appointment of
independent directors shall be open for
inspection at the registered office of the
company by any member during normal
business hours.
• The terms and conditions of appointment of
independent directors shall also be posted on
the company’s website.
• FURTHER CLASSIFICATION OF DIRECTORS
• Based on the circumstances surrounding their
appointment, the Companies Act recognizes the
following further types of Directors
Small Shareholders Directors – A company may have a
director elected by small shareholders, for this purpose
small shareholder means a shareholder holding shares
of nominal value of not more than Rs. 20000 
Small shareholders can appoint a single director in a
listed company, but this activity needs an appropriate
technique like passing over a notice to at least 1000
Stakeholders or 1/10th of the entire investors.
Women Director – As per Section 149 (1) (a),
there are certain classifications according to
which there ought to be one woman as a
director on the Board. Any listed public company
having;
a.) Turnover of Rs. 100 crores or more,
b.) Revenue of Rs. 300 crores or more.
First Directors: A person who is appointed by
the subscribers of the memorandum of the
company. They are generally listed in the articles
of Association. They shall be deemed to be a
director till the directors are appointed in the
annual general meeting
Additional Director:
A person could be appointed as an additional
director and can occupy his post until next
Annual General Meeting. In absence of the
AGM, such term would conclude on the date on
which such AGM should have been held.
Shadow Director:- A person, who is not appointed to the Board,
but on whose directions the Board is accustomed to act, is
liable as a Director of the company, unless he or she is giving
advice
Difference Between Executive and Non-Executive Director:- An
Executive Director can be either a Whole-time Director of the
company (i.e., one who devotes his whole time of working
hours to the company and has a significant personal interest in
the company as his source of income), or a Managing Director
(i.e., one who is employed by the company as such and has
substantial powers of management over the affairs of the
company subject to the superintendence, direction and control
of the Board). In contrast, a non-executive Director is a Director
who is neither a Whole-time Director nor a Managing Director
in his or her professional capacity.
Alternate Director:
Alternate director refers to a personnel
appointed by the Board, to fill in for a director
who might be absent from the country, for more
than 3 months.
Nominee Directors:
Nominee directors could be appointed by a
specific class of shareholders, banks or lending
financial institutions, third parties through
contracts, or by Union Government in case of
oppression or mismanagement.