How Does Appointing A Director Work For You?
The board of directors can remove an existing director and appoint a new one provided it is provisioned in the Article of Association
Adding a Director
As per section 260 and section 284 of the Companies Act, 1956, the Articles of Association of a company are the source of authority from where the Board of Directors draws the right to add new directors to the Board or remove existing ones. The Articles of Incorporation must provide for the addition of Directors. The person appointed must be eligible as per the relevant clauses in the Articles of Association and must give his consent to be a director in written form which the company must register with itself.
Minimum No. of Directors
Following are the mandatory compliances that private limited companies have to fulfil. At Buiznest our xpert Chartered Accountants, Accounting & Taxation professionals and Company Secretaries will take care of all your compliance requirements. We offer the best-in-class legal consultation for your company. Our team will cover the following compliance requirements as mandated by the Ministry of Corporate Affairs.
1. Facilitation Of Meeting Of Board Of Directors:
The first meeting has to be conducted within 30 days of incorporating a business after which four meetings shall be held every quarter in a calendar year. There should not be more than 120 days of gap between two consecutive meetings.
2. Preparation Of Minutes Of Proceedings Of Meeting:
Every company needs to file its minutes of the meeting and it shall be preserved permanently to add value in case of any dispute. The Meeting Minutes will be maintained at the Registered Office.
3. Issuance Of Share Certificates:
The company is required to issue share certificate to the subscribers of memorandum within 60 days of incorporation.
4. Filing Of Disclosure Of Director’s Interest And Declaration Of Disqualification:
In the first Board Meeting, all the Directors are required to give disclosure about their interest in other business entity.
5. Filing Declaration Of Commencement Of Business With RoC:
This has to be done upon registration of the company. Form INC 20A mandatorily needs to be filed within 180 days from incorporation.
6. Facilitation Of Annual General Meeting:
A company shall conduct at least one AGM each year. The first Annual General Meeting shall be held within nine months from the closing of the first financial year of the company. In other cases, it shall be within six months from the closing of the financial year.
For Eg: If a Company is incorporated on or before 31st December 2018, the First Annual General Meeting must be conducted within 9 months from the date of closing of 1st Financial Year ( 31.12.2018 – 31.03.2019), that is, by 31st December 2019.
If a Company is incorporated on or after 1st January 2019, First Annual General Meeting to be conducted within 15 months, i.e., by 31st December 2020.
7. Annual Return companies have to be e filed with the RoC within 60 days of the conclusion of AGM.
As per Section 149(1)(a), the minimum number of directors required for each type of company is as follows:
- Public Company – 3
- Private Company – 2
- One Person Company – 1
Different Categories of Directors:
- Women Director
- Resident Director
- Additional Directors
- Independent Director
- Alternate Directors
- Nominee Director
Why Add and Change Directors
Get New Talent On Board
The business world is extremely competitive and that is why it is so important for companies to stay on top of their game at all times. As businesses grow and evolve, they undergo several upheavals with regard to strategies, policies, and objectives. Therefore, sometimes companies need to get new talent on board to help formulate new strategies and business plans. Furthermore, as new alliances form between corporations, new talent is required to bridge gaps and ensure the smooth functioning of the organisation. As companies expand and venture into new areas, team leaders and experts can move from their managerial position into the role of a director to help the company stay on track.
No Dilution Of Ownership
Directors are primarily responsible for the day-to-day operations of a company. Adding or appointing an additional director helps the shareholders assign more operational responsibilities without losing any strategic control. As a Director does not subscribe or own any share capital, the ownership and the voting rights that come along with it, remain with the shareholders, preventing any dilution.
The Inefficiency Of Existing Directors
The existing directors may or may not be able to serve the company faithfully, in certain cases. In such circumstances, maybe even due to retirement, family problems, other personal reasons or physical ailments, the company adds new directors to make sure their productivity is unaffected. Hence, from time to time, companies need to process the termination and addition of new directors, so as to ensure their continued growth and success.
To Meet The Statutory Limit
In certain cases, due to sudden death or plans of retirement from existing Directors, companies fall short of the minimum required directors as prescribed by the Companies Act. Therefore, such Private and Public companies need to appoint new directors within 6 months to continue functioning as a legally valid entity.
- Identification proof (PAN card)- Self-attested
- Proof of residence (electricity bill, rental agreement, Aadhar Card, Voter ID, Passport, Driving License)
- Passport size photograph
- Digital Signature Certificate of the proposed Director
(PAN card: Mandatory for an Indian Applicant Passport: Mandatory for a foreign Applicant)
- According to Section 161(1) of the Companies Act, 2013, check if the Articles (AOA) of the company supports adding an additional director. If there are no such provisions in Articles of the company then modify the Articles of the company in a way to add an additional company director.
- Secondly, apply for the DSC (Digital Signature Certificate)
- Apply for DIN (Director Identification Number)
- If the person who is supposed to become the new Director does not have DIN, the same must be notified to the company. In such a case, the Company must pass a Board Resolution and then apply for a DIN for the proposed person. This Resolution must be filed along with Form DIR 3.
- Once obtained, the DIN serves as a lifetime identification number of the Director.
- Collect the basic documents and information required for the process
- Recording of Form DIR-2, Form DIR-12 and Form DIR-8 at ROC has to be done.
- The proposed Director must give his or her consent to act as the Director via Form DIR-2. This is one of the most important documents needed to add a new director, and hence, must be obtained before proposing anyone to be the Director.
- Take Consent/Approval of the individual who is to be selected as a Director of the organization in the recommended design.
- If the company wants to appoint him as a director then regularize the person as a director in General Meeting by Shareholder Resolution.
After The Process
- Call the Board Meeting.
- The Director must be appointed in a General Meeting and so the Company must issue a notice for holding an Extra-Ordinary General Meeting. Care must be taken to ensure that this notice is issued in accordance with the laws stated in the Companies Act, 2013 and abides by the rules mentioned in the Secretarial Standards issued by the Institute of Company Secretaries of India.
- Pass resolution for the appointment of an additional director.
- Issue the Letter of Appointment.
- Once the appointment letter has been issued, and the payment terms have been negotiated, the Company must file Form DIR-12 to the Registrar of Companies within 30 days from the date of appointment.
- Next, the company must make necessary entries in the Register of Directors and Managerial Personals as required.
- Furthermore, the Company must apply for the necessary changes in the Director’s details with regards to GSTN and other Certificates, as and when required.
Thereby, you will have the new company director’s name on the MCA website.
Procedure for Adding a Director
3 Working Days
The newly-appointed director must apply for a Director Identification Number by filing E-Form DIN-1 with the Ministry of Corporate Affairs, Government of India.
4 Working Days
A resolution needs to be passed by the board, approving the appointment of a director. Once this is done, we will file Form DIR-12 with the Registrar of Companies.
Can a Director resign himself or herself from the company?
Is there any eligibility criteria for adding a new Director?
Should I apply for another DIN, if I already have one?
Can a Company appoint another Corporate Body as its working Director?
Can a Company add a Foreigner or NRI as a Director?
60 Established Vendors
Buiznest has successfully completed 600+ registrations in the past year alone. We have partnered with some of the top experts in business across India to get your registration across to you on time.
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We make your interaction with the government as smooth as is possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.
200+ Strong Team
Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we’ll try to ensure that your doubts are cleared before they even arise.
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