Company Formation & Administration

Directors4

Every company must have a Board of Directors that is responsible for the conduct of its business. According to the Companies Act, 2013, the minimum number of directors required in the case of private companies is two; and in the case of public companies, it is three. The maximum number of directors a company can have is 15.

Every company (belonging to prescribed classes as listed in the Companies Act, 2013) shall have the following full-time key managerial personnel:

  • Managing Director or Chief Executive Officer, or manager, and in their absence, a whole-time director
  • Company Secretary
  • Chief Financial Officer

Role of Directors

The Companies Act, 2013 empowers the Board to do activities in accordance with the company’s Memorandum and Articles of Association, as the company is authorized to do, unless any law or the Memorandum requires any act to be done by the company by way of resolution of the shareholders in their general meeting.

As the directors are acting as agents of a company, all acts are done by them and contracts entered into by them are binding on the company unless such actions are outside the scope of authority of such directors.

Since directors occupy a fiduciary position and are persons responsible for the management of the affairs of the company, they are subject to duties and liabilities, including penal liabilities in case of default or misconduct on their part, in the circumstances mentioned under the Companies Act, 2013.

Appointment of Directors

  • Unless the Articles provide, individuals who are subscribers to the Memorandum of Association shall be deemed to be the first directors of the company until the directors are duly appointed.
  • Every proposed director shall have a Director Identification Number (DIN).

Disqualification for the appointment of Directors

A person shall not be eligible for appointment as a director of a company if he/she:

  • Is of unsound mind and stands so declared by a competent court;
  • Is undischarged insolvent;
  • Has applied to be adjudicated as an insolvent and his application is pending;
  • Has been convicted by a court of any offense, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for at least six months, and five years have not elapsed from the expiry of the sentence;
  • Has been convicted of any offense and sentenced in respect thereof to imprisonment for seven years or more;
  • Has been disqualified as a director by an order passed by a court or tribunal and the order is in force;
  • Has not paid any calls of any shares held by him, and six months have lapsed from the last day fixed for the payment;
  • Has been convicted of related-party transactions during the last preceding five years; or
  • Has not obtained a Director Identification Number (DIN).

Removal of Directors

  • A company may remove a director before the expiry of the period of his office through an ordinary resolution;
  • On receipt of notice of the resolution, the company shall send a copy of the notice to the concerned director, who shall be entitled to be heard on the resolution at the meeting.
  • A vacancy shall be filled by the company in the meeting in which he was removed by the appointment of another director in his place but a special notice is required. The director so appointed shall hold office until the date up to which his predecessor would have held office if he had not been removed;
  • A director who is removed from office shall not be re-appointed as a director by the Board.

Resignation of Directors

  • A director may resign from office by giving notice to the company, who shall intimate the ROC within 30 days of receiving the notice;
  • The resignation shall be mentioned in the Board’s report in the next general meeting of the company;
  • The director shall also forward his resignation along with specific reasons for the resignation to the ROC within 30 days of departure;
  • The resignation shall take effect from the date on which the notice is received by the company or the date specified by the director in the notice, whichever is later;
  • A director who has resigned shall be responsible for offenses that have occurred during his tenure even after his resignation.
  • 4.The Companies Act, 2013, Ministry of Corporate Affairs, http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf, accessed on 20 September 2020
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Rajiv Rajendran
Executive Director
Corporate Services

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