DIRECTORS OF A COMPANY

Director and a Board of Director

 Section 2(34) – “ A director means a director appointed to the

board of a company”
 Section 2 (10) – “ Board of Director means a body duly
constituted to direct, control and supervise the affairs of the
company”
 The directors manage and control the overall affairs of the
company.
 The day to day working of the company is left to other
managerial personnel.
POINTS TO BE NOTED
 Only Individuals can be appointed as director

 An individual can be appointed or re-appointed as a

director only he has been allotted with Director
Identification Number (DIN)
Types of Directors
1. Executive Director
2. Managing Director
3. Non-executive Directors
4. Women Director
5. Resident director
6. Small share Holder’s director
7. Additional Director
8. Alternate Director
9. Casual Director
10. Nominee Director
11. Shadow Director
12. Independent Director
Types of Directors
1. Executive Director: As per Rule 2(1)(k) of the Companies
(Specification of definitions details) Rules, 2014 “Executive
Director” means a Whole Time Director as defined in clause (94) of
section 2 of the Act”. Whole Time Director: As per Clause 2(94) of
Companies Act, 2013 ““whole-time director” includes a Director in
the whole-time employment of the company.
2. Managing Director: Managing director is a director who by virtue
of, the articles of a company or an agreement with the company, or a
resolution passed in its general meeting or by its board of directors, is
entrusted with substantial powers of management of the affairs of the
company by whatever name he is called [2 (54)]
Thus a director who is a part of the board and as well the management
of the company is called Executive Director.
3. Non-executive Directors: who is neither a Whole-time Director
nor a Managing Director.
4. Women Director: Every listed company and every other public or private
company having paid up share capital of Rs. 100 crores and above or turnover
of Rs 300 crores and above shall have at least one women director. This
stipulation as per section 149 of the Act shall be complied with in 6 months from
the date of incorporation of the company. Any intermittent vacancy shall be filled
with in 3 months or before the ensuing Board meeting whichever is later.

Procedure for Appointment of Woman Director

A Woman Director can be appointed during the time of company registration or
after incorporation by the Board Members and the Shareholders.

Director Identification Number

Any person who wishes to hold the position of Director in an Indian company
must first obtain Director Identification Number (DIN) which is a unique
identification number for each director. A Woman Director must first obtain DIN to
become Director of a Company. In case a Woman Director is being appointed
during the company incorporation process itself, DIN will be generated along with
the incorporation certificate. 
5. Resident director: A Director, who resides in India during the
preceding financial year, for a period not less than 182 days is called a
Resident director. Every company shall have at least one resident director.

6. Small share Holder’s director: A small share holder is one who holds
shares with a nominal value of not more than Rs 20000/- or such other
sum as may be prescribed from time to time. A listed company shall
appoint one director representing the small share holders, on requisition of
not less than 1000 small share holders or 1/10th of the total number of
such shareholders whichever is less. The tenure of such director shall not
be more than 3 consecutive years and there after they are not eligible for
reappointment.

7. Additional Director: Additional Directors are appointed by the Board

of Directors. They hold the office until the next general meeting or the last
date on which the annual general meeting is to be held whichever is
earlier. A person, who failed to get appointed in the general meeting, shall
not be appointed as an alternate Director.
8. Alternate Director
Alternate Director is appointed by the Board if permitted by the articles of
the company or by a resolution passed in the general meeting. An alternate
director is appointed in the vacancy created due to the absence of a director
in the company for a period of more than 3 months from India. The
alternate director would hold the office until the director in whose place is
appointed returns back to India or until the term of his office whichever is
earlier.
A person appointed as an alternate director shall not be a director or
alternate director in the same company as on the date of appointment. No
person can be appointed as an alternate director in the place of an
Independent director, unless the person proposed to be appointed as
alternate director is qualified to be appointed as an Independent director.
9) Casual Director
The Board of Director may appoint a person as Casual Director in the
vacancy created on account of vacation of office by an existing director
before his term. Such appointment shall be approved by members in the
immediate next general meeting. The Casual Director would hold the office
until the remaining term of the director who vacated the office.
10. Nominee director: Nominee director is a person who is permitted to
be nominated by the parties interested in the company as per the
provisions of law in force. He is appointed to the board of a company to
represent the interests of Financial Institutions, Government and others

11. Shadow Director:A Shadow Director is an “officer” within the

definition of the terms in Section 2 (59) of the Companies Act, 2013, as
it includes, “any person in accordance with whose directions or
instructions the Board of Directors or any one or more of
the Directors is or are accustomed to act”.
12) Independent Director
The Independent director is a person of integrity having experience and
expertise in the relevant field. He is neither Promoter nor Managing /
Whole Time / Nominee Director of the company or its Holding
/Subsidiary /Associate Company. He either in his personal capacity or
official capacity is not related to the company. Neither he nor his relatives
in his / their personal or official capacity have any pecuniary relationship
with the company or its Holding / Subsidiary / Associate companies,
exceeding prescribed limits specified in the Act.

A Public Company having paid up share capital of Rs 10 crores and more;

or turnover of Rs 100 crores and above; or aggregate outstanding loans,
debentures and deposits exceeding Rs 50 crores shall have at least two
independent directors. The number of independent directors in the board
shall not be less than 1/3rd of the total number of directors. While
calculating the 1/3rd number every fraction shall be rounded off to one.
NUMBER OF DIRECTORS – SEC 149
 Minimum Directors in case of public and private company
 Private company – 2
 Public company – 3
 Maximum Directors in any company is 15. A company may
appoint more than fifteen directors after passing a special
resolution in general meeting and approval of Central Government
is not required.
Number of Directorships
• A person shall not hold office as a director, including any alternate
directorship, in more than Twenty (20) companies (other than dormant
companies), of which directorship in public companies shall not exceed
Ten (10). The term public companies for this purpose include private
companies which are holding or subsidiary companies of the public
company.
• The members of a company may reduce the captioned limits by passing
a special resolution.
• A person holding directorship in more than 20 companies , within one
year from the date of commencement of the Act ,
a) Shall choose the companies up to the permitted limit, in which he
would like hold the office as director and inform them, under intimation to
the Registrar having jurisdiction in respect of each of such company.
b) Shall resign his office in the remaining companies.
• If any person holds office of directorship in contravention of the
provisions of the act, is punishable with a fine which may range from Rs
5000/- to Rs 25000/- per day after the first, during which the
contravention continues.
APPOINTMENT OF DIRECTORS
 Appointment of First directors
 Appointment of directors by shareholders at general
meeting
 Appointment of small shareholders directors
 Appointment of directors by the Board of Directors
 Appointment of directors by third parties
 Appointment of directors by Central Govt
The first directors of a company would the subscribers to its memorandum of
association, unless provided otherwise by the articles of association. They are
deemed as the first directors until the directors are duly appointed.
• In case of One Person Company, the individual member would continue to be the
first director of the company, until the directors are duly appointed.
• Every director shall be appointed by the company in general meeting
• No person shall be appointed as a director, unless he has been allotted Director
Identification Number (DIN) or such other prescribed number.
• Every person proposed to be appointed as a director shall furnish the following in
the general meeting.
• DIN / such other prescribed number
• A declaration that he is not disqualified to become a director under this act.
• The company may adopt the principle of proportional representation, where by
not less than 2/3rd of the total number of directors of a company are appointed
once in three years.
• The person appointed as director shall give consent to hold the office of director
in the company. Such consent letter shall be filed with the Registrar of Companies
within 30 days of such appointment.
At the first annual general meeting of a public limited
company, (held next after the date of general meeting
at which the first directors are appointed) and at every
subsequent annual general meeting 1/3rd of such
rotational directors are liable to retire by rotation
• The appointment of independent director shall be
approved by the company in the general meeting. The
notice for general meeting shall contain the
justification in choosing the person for appointment as
independent director.
APPOINTMENT OF DIRECTORS BY SHAREHOLDERS AT GENERAL MEETING

The legal provisions:

 Applicability to the public company:

Sec.152(6) provides that not less than 2/3rd of the total number of
directors of a company , shall be rotational directors and 1/3 rd
may be non-rotational.
 Appointment of rotational directors: annual general meeting or
extra-ordinary general meeting
 Appointment of non-rotational directors: These directors are
appointed in accordance with provisions contained in AOA
 Applicability of section 152: apply only to a public
company.
 In case of private company, appointment is made in
accordance with AOA. If it is slient
 1. All the directors shall be appointed in the general
meeting.
 2. No director shall be liable to retire by rotation.
APPOINTMENT OF SMALL SHAREHOLDERS DIRECTORS

 He is one who is appointed to represent small shareholders.

 Applicable to listed company only

 A listed company shall appoint one director representing the small

share holders, on requisition of not less than 1000 small share

holders or 1/10th of the total number of such shareholders
whichever is less.

 Small shareholders director to be a small shareholder

 Tenure of a small shareholder director-3 years

 Number of small shareholder directorships-not more than two

companies
APPOINTMENT OF DIRECTORS BY THE BOARD OF DIRECTORS

 Appointment of additional directors

 Filling of casual vacancy
 Appointment of alternate directors
 Appointment of nominee directors
APPOINTMENT OF ADDITIONAL DIRECTORS

 Authorized by articles of association: section

161(1)
 Term of office – till next AGM or the last date on
which the annual general meeting should have
been held whichever is earlier
 Position - same rights, powers, duties, liabilities
 Other points: The approval of CG is not required
to appoint additional director
FILLING OF CASUAL VACANCY

 Where company's articles contain a provision for filling

a casual vacancy
 No such provision – BOD may be fill by passing a
resolution at the board meeting
 Term of office : He shall hold office only upto the date,
upto which the director in whose place he is appoint
would have held the office.
APPOINTMENT OF ALTERNATE DIRECTORS

 In place of director who is absent for a period of more than 3 months from
India.
 AOA or

 OR at the general meeting

 Term of office- till original director comes back

Position
Other points:
1. A person can be appointed as an alternative director for an independent director

2. He cannot be appointed as an alternative director for another director at the same

time.
3. The approval of CG is not required

4. Original director expires before return to India, the provisions of automatic re-
appointment of retiring director l shall apply
APPOINTMENT OF NOMINEE DIRECTORS

 By any institution in pursuance of the provision of any

law or of any agreement


 By central govt or state govt by virtue of its shareholding

in a Government company
REMOVAL OF DIRECTORS

 Removal by the company: Procedure :Notice of

any resolution to remove a director is required-not
less than 14 days before the meeting.
 The company must send its copy to the director
concerned.
 As per request of director, the company circulate it
among the members.
 General meeting shall be held and the proposal to
remove the director shall be discussed
 Removal by the tribunal: Sometimes, an application is
made to the Tribunal for the prevention of oppression or
mismanagement.
 If the tribunal is satisfied that the relief shall be granted.
 It may terminate any agreement with a director and may
also remove the MD,, manager or any of the director of
the company.
RESIGNATION BY DIRECTORS
 By notice to company
 Copy of resignation to registrar
POWERS OF DIRECTORS
 General powers
 Specific powers
GENERAL POWERS
 Entitled to exercise all such powers as the
company is authorized to exercise
 Limitations – subject to the provisions of
Companies Act, MOA, AOA, regulations at the
general meeting
SPECIFIC POWERS

 To call on shares
 Authorize buyback
 Issue securities including debentures
 Borrow money
 Invest in funds
 Grant loans
 Approve financial statement
 Diversify the business
 Approve amalgamation, merger, reconstruction , takeover
etc…