Who can be a director of a company?
Updated: Nov 12, 2021
A Private Limited Company is one of the most common business entities in India. In such companies, the Directors play an important role during the company incorporation process and the post-incorporation process. This article will cover all the aspects of being a director in a private limited company.
A Director of a Company is a person that is elected by the shareholders to manage the affairs of the company as per the MOA and AOA. As the company is an artificial person it can only act through the agency of a natural person. Thus, a director has to be a living person and the management of the company is entrusted to its Board of Directors. The appointment of the Directors can be required from time to time based on the requirements of the shareholders of the business.
Definition of Director:
As per Companies Act, 2013 defines the term “Director” as someone who is an appointment to the company board. The Board of Directors means a group of those individuals who are elected by the shareholders of a company to manage the affairs of the company. Since a company is an artificial legal person which is created by law, it must act only through the agency of natural persons. It can only act through human beings, and it is the Directors with the help of whom mainly the company acts. Therefore, the management of a company is entrusted to a body of persons who are called the “Board of Directors”.
Another definition of a Director is someone who administers, controls, or directs something, especially a member of a commercial company; or one who supervises, controls or manages; or a person who is elected by the shareholders of a company to direct the company’s policies; the person appointed or elected according to law, or who are authorized to manage and direct the affairs of a company.
However, for a person to become a director at the time of private limited company registration, he/she is required to have a Director Identification Number (DIN Number). DIN Number can be obtained from any person who is over the age of 18 by applying to the DIN Cell.
DIN is a unique 8- digit Director Identification Number. This number is allotted by the Central Government to any person who is going to be a Director or is an existing director of a company and obtaining a DIN is a very easy task. The DIN number has lifetime validity. With the help of the Direct Identification Number(DIN), the details of the directors are maintained in the database.
The Maximum and the Minimum Number of Directors in a Private Limited Company.
Only an Individual (living person) can be appointed as a Director of a Company. A body corporate or a business entity cannot be appointed as a Director of a Company. A company can, however, have a maximum of fifteen Directors and it can be increased further by passing a special resolution.
Thus the Minimum Number of Directors that are required n different types of Companies are as follows:
For a Private Limited Company – Minimum two Directors
For a Limited Company – Minimum three Directors
For One Person Company – Minimum one Director
Addition of New Directors
How to add a Director to a Company?
In a Private Limited 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. In this article, we are going to discuss how a company can legally change and have new directors on board in India.
The first step is to obtain the consent of the proposed directors:
The consent of the proposed director is necessary, according to form DIR-2 this is a very crucial document and the company is required to obtain the Form DIR-2 before proposing him to the Director of the Company.
Digital Signature Certificates of the Proposed Directors:
In case the proposed directors of the company do not have Digital signatures, they need to obtain a DSC.
Get the Director Identification Number (DIN):
In case the Proposed Director does not have a DIN, then the company should apply for the DIN of the proposed person. This resolution is to be attached to the form DIR3. This DIN that is allocated once can be used for a lifetime. 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 Private Limited 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.
Who is a Director in a Private Limited Company?
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 Directors can only act through Human beings and the Directors 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. A Director is someone who supervises, controls, or manages. 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.
Types of Director in Company
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.
Whole-time Director or Executive Director
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.
In the case of a One Person Company, a nominee director is an individual who is nominated by the sole Director of the One person company to take over the affairs of the OPC in case of death or incapacitation of the sole director.
Director in Private Limited Company – Residency Requirement
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. Section 149(3) also 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.
Women Director Requirement in Company
At least one woman director is to be appointed in case of Listed companies and limited companies that have a paid-up share capital of Rs.100 crore rupees or more or turnover of Rs. 300 crores.
Ministry Of Corporate Affairs has a official website which gives information about management and Board Governance for a private limited company. You can view the information by following this link