Change in Director

Director’s Appointment, resignation or change in designation of director

meaning of Change in Director

A director in a company is appointed to manage the day-to-day business activities and finances and to ensure all statutory filing obligations are met. Directors must act lawfully and honestly and make decisions for the benefit of the company and its members/shareholders. Directors are not the owners of company. They have been appointed to act and take decisions on behalf of company.

Types of directors

Ordinary Director:

An “Ordinary Director” means a simple Director who attends the Board meetings of a company and participates in the matters put before the Board of Directors. These Directors are neither whole-time Directors nor Managing Directors.

Additional Director:

An Additional Director is someone appointed by the Board of Directors between two annual general meetings subject to the provisions of the Articles of Association of a Company. Additional Directors shall hold office only up to the date of the next annual general meeting of the Company. Number of Directors and additional Directors of a company together shall not exceed the maximum strength fixed for the Board of Directors by the Articles of Association.

Alternate Director:

Alternate Director is someone appointed by the Board of Directors in a general meeting to act for a Director called the “original director” during his absence for a period of not less than three months from India. Generally, alternate Directors are appointed for a person who is Non-Resident Indian (NRI) or for foreign collaborators of a company.

Professional Director:

Any Director possessing professional qualifications and do not have any pecuniary interest in the company are called Professional Directors. In large companies, Professionals are sometimes appointment to the Board to utilize their expertise in the management of the Company.

Nominee Director:

Banks and Private Equity investors who grant debt or equity assistance to a company generally impose a condition as to appointment of their representative on the Board of the concerned Company. These nominated persons are called as nominee Director.

Small Shareholders Directors:

A listed company, could upon the notice of minimum 1000 small shareholders or 10% of the total number of the small shareholder, whichever is lower, shall have a director which would be elected by small shareholders.

Women Director:

A company, whether be it a private company or a public company, would be required to appoint minimum one woman director in case it satisfies any of the following criteria:

1) The company is a listed company and its securities are listed on the stock exchange.

2) The paid-up capital of such company is INR 100 crore or more with a turnover of INR 300 crores or more.

Independent Director:

Independent directors are non-executive directors of a company and help the company to improve corporate credibility and enhance the governance standards. In other words, an independent director is a non-executive director without a relationship with a company which might influence the independence of his judgment.

The tenure of the Independent directors the hall up to 5 consecutive years; however, they shall be entitled to reappointment by passing a special resolution with the disclosure in the Board’s report. Following companies need to appoint at the least two independent directors:

-Public Companies with Paid-up Capital of INR 10 Crores or more,

-Public Companies with Turnover of INR 100 Crores or more,

-Public Companies with total outstanding loans, deposits, and debenture of INR 50 Crores or more.

Qualification & Disqualification of director

QUALIFICATION OF DIRECTORS (WHO CAN BE DIRECTOR):

As regards to the qualification of directors, there is no direct provision in the Companies Act, 2013.But, according to the different provisions relating to the directors; the following qualifications may be mentioned:

  1. A director must be a person of sound mind.
  2. A director must hold share qualification, if the article of association provides such.
  3. A director must be an individual.
  4. A director should be a solvent person.
  5. A director should not be convicted by the Court for any offence, etc.

DISQUALIFICATION OF DIRECTORS (WHO CAN NOT BE DIRECTOR):

Under company law, a director can be disqualified for any of the following reason:

  1. He is of an unsound mind and is declared so by the court.
  2. He is insolvent.
  3. He is in the process of declaring insolvency and his application is pending.
  4. He has been convicted by a court of any offence (whether or not involving moral turpitude) and has been imprisoned for at least six months. However, if a person has been convicted of any offence and has served a period of seven years or more, he shall not be eligible to be appointed as a director in any company.
  5. If an order has been passed disqualifying him of being appointed as a director by a court or Tribunal.
  6. He has not paid any calls with respect to any shares of the company held by him, whether alone or jointly with others, and a period of six months has elapsed from the last day fixed for the payment of the call.
  7. He has been convicted of offences dealing with related party transactions at any time during the last preceding five years.
  8. He has failed to acquire a Director Identification Number.

What is DIN? documents required to apply for DIN?

Director Identification Number (DIN) is a unique identification number given to an existing or a potential Change in Director of any company which is incorporated. Director Identification Number (DIN) is a mandatory requirement for all existing and new directors (or proposed directors) of a company. A DIN number is issued under the directions provided by the amendment to the Companies Act. It is an 8-digit Unique Identification Number allotted to all directors. It has lifetime validity.

Address Proof (Any one of the below)

  1. Driving license
  2. Voter ID card
  3. Utility bills
  4. Passport
  5. Tax receipts (corporation, property tax, service tax and sales tax, registration and so on)
  6. Bank Statement (attested)
  7. PF statement

Identity Proof (Any one of the below)

  1. PAN card of the applicant (for Indian nationals)
  2. Passport of the applicant, if they are foreign nationals and NRI’s.

Once the DSC is obtained, you can apply for a DIN

Appointment & Resignation of directors

Appointment of directors:

A person who wants get appointed as a director in a company has to follow certain compliances requirements under Companies Act 2013

  1. Check whether AOA of company allows appointment of additional director
  2. Check an individual’s qualification to be appointed as a directors as per above criteria
  3. Check whether he/she is not disqualified as per above criteria
  4. Check whether he/she got the DIN
  5. Ask for individual’s consent in form DIR-2 to be act as director of company.
  6. On receiving consent from an individual, call for a board meeting and pass resolution appointing him/her as director. Issue letter of appointment
  7. File form DIR-12intiating ROC about the appointment

Resignation of directors:

As per sec 168(1) of Companies act 2013, A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company.

The company shall within 30 days from the date of receipt of notice of resignation from a director, intimate the Registrar in Form DIR-12 and post the information on its website if any. In simple words company has to file DIR-12 within 30 days of receipt of notice of resignation by the director.

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FAQS

As regards to the qualification of directors, there is no direct provision in the Companies Act, 2013.But, according to the different provisions relating to the directors; the following qualifications may be mentioned: A director must be a person of sound mind. A director must hold share qualification, if the article of association provides such. A director must be an individual. A director should be a solvent person. A director should not be convicted by the Court for any offence, etc.

YES, DIN is compulsory to acquire for appointment in a company. It is unique identity number for each director.

YES, directors can be held responsible for the acts of company unless directors specifically proves that particular act of company is done without his consent. In such cases, directors is required to prove his innocense.

YES, a company can remover director/s by following particular procedure described under companies act and needs to intimate registrar for the same.

DIR-3 is the form for application of DIN.

YES, directors KYC is compulsory for every directors.

Unique Personal Mobile Number Personal Email ID. OTP on Email ID and Mobile No

In private limited company minimum 2 directors are required and public company minimum requirement of directors is 3.

YES, Digital signature is compulsory for application of DIN.

NO, one director can not be held responsible for the act of other director. If the act of other director is against the interest of company, then the rest of the board of directors are responsible to stop him and act in the interest of company. If it is found that the rest of directors are aware of the misconduct of defaulting director, then in that case, all other directors shall be held responsible for the misconduct.

Form DIR 11 and DIR 12 are required to be filed on appointment or resignation of director.

KYC is a process of identifying the genuineness of the particulars of directors such as his identity proofs, his contact details, number of companies in which he holds directorship and so on.

FORM DIR 3 KYC is the form for KYC.

YES, DIR 3 KYC need to be certified by practicing professional like CA or CS.

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