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.
Sections 149-172 of Companies Act, 2013 deal with the appointment, qualifications, retirement of the board of directors and according to Section 149 of the Companies Act, 2013 every company should have a board of directors.
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
- 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 – 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:
a.) Public Companies which have a turnover of Rs.10 Crores or More;
b.) Public Companies which have revenue of Rs.100 Crores or More
c.) Public Companies which have total outstanding loans, debenture, and deposits of Rs. 50 Crores or More.
- Small Shareholders Directors – 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.
- Additional Directors – Any Individual can be delegated as Additional Directors by a company under Section 161(1) of the Companies Act, 2013.
- Alternate Directors – As per Section 161(2), a company may appoint an alternate director if the articles present such power on the company or a resolution is passed (if a Director is absent from India for at least three months). There are some conditions also, like;
a.) An alternate director cannot hold the office longer than the term of the director.
b.) An alternate director has to vacate the position immediately when the original director returns.
- Shadow Director – A person who is not selected in the Board but on whose directions the board may act and has some power to run it can be appointed as the director but according to his wish.
- Nominee Directors – They can be chosen by individual stakeholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government in case of oppression or mismanagement.
Appointment of the Board of Directors
- If there is no provision for appointment of Director in the Articles of the company, the subscribers to the memorandum that are the shareholders shall be deemed to be the first directors of the company until the directors are duly appointed. (in the one-member company, an individual is a member in Accordance would be its first director)
- Director is appointed by the general meeting. If it is done in this way, a statement for such appointment, annexed to the notice for the general meeting, shall include a statement that according to the Board, he accomplishes the conditions specified in this Act for such an appointment
- The proposed Director has to furnish his DIN (Director Identification Number) mandatorily. DIN is allotted by the Central Government on application by a person intending to be the Director of a company. DIN can be obtained in pursuance of Section 153 and 154 of the Companies Act, 2013.
- The proposed Director has to furnish a declaration stating that he is not disqualified to be a director.
- Furthermore, such appointment ought to be with his permission. Before the new Companies Act, 2013 such consent was not obligatory for private companies. Consent has to be filed with the Registrar of Companies within 30 days of appointment.
(This article has been submitted by Mansanwalpreet Singh of Rajiv Gandhi National University of Law, Patiala, Punjab, as a part of B&B Associates’ internship program.)