Who Can And Cannot Be A Director Of A Company?
In India, a private limited company is one of the most popular business
structures. The Directors of a private limited company are crucial to the
incorporation and post-incorporation processes. We discuss every facet of being
a director in a private limited company in this post.
Meaning of Director in Private
Limited Company
The Companies Act of 2013 defines a "Director" as a person
appointed to a company's board of directors after company
registration online.
A group of people chosen by a company's shareholders to run its business
is referred to as the board of directors. A company must only operate via the
agency of natural individuals because it is an artificial legal person formed
by law.
It is only capable of acting via people, and the Directors are primarily
responsible for this. Therefore, a group of people known as the "Board of
Directors" is given the responsibility of managing the corporation.
One who supervises, controls, or manages; a person chosen by the
shareholders of a company to direct the company's policies. A person appointed
or elected by the law, authorised to manage and direct the affairs of a
company. These are some additional definitions of a director.
Taking up a Directorship in a Private
Limited Company
A Director Identification Number is necessary for someone to be a
director of a private limited company (DIN Number). Any person above the age of
18 can apply to the DIN Cell for a DIN Number.
Types of Directors in Company
- Managing
Director
A "Managing Director" is a Director who has been given
significant management authority over the business's affairs under the
authority of the company's articles of association, a contract with the
company, a resolution adopted by its general meeting, or its board of
directors.
- Executive
Director
An Executive Director, often known as a Full-Time Director, is someone
who works for the business full-time.
- Ordinary
Director
A simple director who participates in the business brought before the
board of directors at board meetings is referred to as an "Ordinary
Director." They are neither managing directors nor full-time directors.
- Additional
Director
Between two annual general meetings, the Board of Directors may nominate
an additional director, as long as they abide by the company's articles of
association.
The term of office of any additional Directors shall only last until the
company's next annual general meeting.
A company's total number of directors, including extra directors, cannot
exceed the number of directors set by the articles of association as the
maximum size of the board of directors.
- Alternate
Director
An alternate director is a person chosen by the Board of Directors at a
general meeting to represent the "original director" when he is away
from India for a minimum of three months. Alternate Directors are typically
appointed for Non-Resident Indians (NRIs) or overseas partners of a corporation.
- Professional
Director
Directors who have professional credentials and have no financial stake
in the company are referred to as professional directors. Professionals are
occasionally appointed to the boards of large corporations to use their
managerial skills.
- Nominee
Director
Banks and private equity investors typically impose a condition on the
appointment of their representative on the Board of the concerned Company when
providing financing or equity assistance to a business. These candidates are
referred to as nominee directors.
A nominee director in a One Person Company (OPC) is a person designated
by the OPC's sole director to run the business of the OPC in the event of the
director's decease or incapacitation.
Maximum and Minimum Number of
Directors in Private Limited Company
The only individual who can be appointed as a director of a company is
an Individual (live person).
It is not possible to appoint a body corporate or business entity as a
director of a company. A special resolution may be passed to increase the
number of Directors in a business beyond the maximum of fifteen.
The following are the minimum requirements for directors in a company:
- Private
Limited Company – Minimum two Directors in case of
Private Limited Company
- One
Person Company – Minimum one Director in case of One
Person Company.
Director in Private Limited Company –
Residency Requirement
Nothing in the 2013 Companies Act forbids the appointment of a foreign
national or NRI as a director of a company.
However, Section 149(3) mandates that each firm have at least one
Director who has spent a minimum of 182 days in India throughout the course of
the previous calendar year.
Women Director Requirement in Company
A minimum of one female director must be appointed by listed firms and
limited companies with paid-up share capital of Rs. 100 crore or more or
revenue of Rs. 300 crores or more.
A private limited company is not required to have a female director.
Who Cannot be the Director of a
Company?
There are many norms when choosing a director during company registration online. According to
section 151 of the Companies Act, 1993, the following person can’t be a
director of any company: –
- A
person who is less than the age of 18 years.
- A
person who is considered bankrupt.
- A
person who is prevented from becoming a director or promoter of the
company or is prohibited from taking part in any company processes under
the following given circumstances: –
·
The court disqualifies them.
·
They are prohibited by FMA (Financial
Management and Accountability Act 1997) or Registrar.
·
They have committed any crime.
·
They have been convicted of an
offense concerning the company’s management, formation, or promotion by any
illegal means.
- A
non-natural person can’t be a director of a company.
- A
person who the board members of the company do not accept.
- A
person prevented from becoming a director under the Limited Partnerships
Acts 2008.
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