Companies Act, 2013 Procedure

Procedure for Appointment of Director

Napur Rathore
Nupur Rathore

Published on: May 6, 2020

Introduction

Appointment of Director in a Company shall be pursuant to provisions of Companies Act, 2013. In accordance with the Companies Act 2013, every company shall have a certain number of directors. The minimum number of directors is fixed according to the different types of companies- a public company shall have at least 3 directors, a private company shall have at least 2 and a one-person company shall have at least 1 director. The upper limit is fixed at 15. However, a company needs to pass a Special Resolution if it wants to have more than 15 directors.Members of the Company at General Meeting appoint/re-appoint Directors in case of Director retiring by Rotation of Public Company or Regularize the Director appointed by the Board as an Additional Director. Unless the articles provide for the retirement of all directors at every Annual General Meeting, not less than two-thirds of the total number of directors of a public company shall be persons whose period of office is liable to determination by retirement of directors by rotation and be appointed by the company in General Meeting. One-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third shall retire from office.

Mandatory Requirements for appointment of Director

  1. The individual who will be appointed as a Director shall have an Active DIN. (Section 152(3))
  2. A person shall not be eligible for appointment as a Director of a Company if he is disqualified from being appointed as a Director in the Company as per Section 164(1).
  3. No person who is or has been a director of a company which:
  4. has not filed financial statements or annual returns for any continuous period of three financial years or
  5. has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay the interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company for a period of five years from the date on which the company fails to do so. (Section 164(2)(a))
  6. A person who is not a retiring director in terms of section 152 and is eligible for appointment to the office of a director at any General Meeting, shall be appointed as a Director after fulfilling following conditions:
    • he, or some member intending to propose him as a director, has, not less than fourteen days before the meeting, left at the registered office of the company, a notice in writing under his hand signifying his candidature as a director or
    • as the case may be, the intention of such member to propose him as a candidate for that office, along with the deposit of one lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or to the member, if the person proposed gets elected as a director or gets more than twenty-five percent of total valid votes cast either on a show of hands or on the poll on such resolution.

The Following Procedure is to be followed for "Appointment of a Director"

  1. Convene a Meeting of Board of Directors: (As per section 173 & SS-1)
    • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A Shorter notice can be issued in case of urgent business.
    • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
    • Hold a meeting of Board of Directors of the Company to discuss the agenda and deciding on the name of Proposed Director
    • Pass Board Resolution to consider the Appointment of New Director/Re-appointment of Retiring Directors including Regularization of an Additional Director subject to the approval of members at the general meeting.
    • To fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting along with explanatory statement annexed to the notice as per the requirement of Section 102 of the Companies Act, 2013 and authorize the Director or Company Secretary to sign and issue a notice of General Meeting.
    • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation, Signing and Compilation of Minutes]
  1. Consent and Declaration from the Proposed Director
The Proposed Director has to submit Form DIR-2 (Consent to act as a Director) and Form DIR-8 (Intimation by Director about his disqualification) to the Company either before Board Meeting or during the Board Meeting.
  1. Obtaining DIN and Digital Signature Certificate
    • If the person does not have Digital Signature, he shall obtain Digital Signature from Certifying Authority in India.
    • The person shall have a valid DIN allotted by the Ministry of Corporate Affairs. At present, application for allotment of DIN can be submitted to MCA only through the company where he/she is proposed to be appointed.
    • The Application for DIN is required to be countersigned by a Director of the Company and a copy of resolution approving the proposal of appointment is also to be submitted by the person in Form DIR-3 with MCA with his ID Proof & Address proof, duly digitally signed by him and a director of the company in which the appointee is intended to be appointed as director.
    • Documents for DIR-3 are as follows
      • One Passport Size Photo in JPG/JPEG Format
      • Board Resolution proposing his appointment as director in an existing company
      • Specimen signature duly verified
      • ID Proof- Driving License/Passport/Election Voter ID Card
      • Residence Proof- Utility Bill (Electricity Bill/Telephone Bill)/Bank Statement/Mobile Bill
      • Other Mandatory Attachments- Income Tax PAN (For Indian National), Passport (For Foreign Nationals)
      • Other Attachments- Aadhaar Card
  1. Convene General Meeting: (Section 96, 100 and SS-2)
    • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety-five percent of such part of the paid-up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
    • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
    • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
    • Hold the General Meeting on a fixed day and pass an ordinary resolution for the appointment of new director/re-appointment of the retiring director or regularization of the additional director. Also check the Quorum and check whether the auditor is present, if not. Then Leave of absence is Granted or Not.
    • Issue letter of appointment to the Director of the Company mentioning terms and conditions of appointment and salary to be payable to the Director.
    • Prepare the minutes of General Meeting, get them signed, and compile accordingly. [Refer the procedure for preparation, signing and compilation of minutes of General Meeting].
  1. Filing of Returns with the ROC After the General Meeting, a Return of Appointment of Directorship (Form DIR-12) is required to be filed with Registrar within 30 days of appointment with copy of Ordinary Resolution along with Consent to Act as Director and Declaration about his disqualifications. In case of Companies other than OPC and Small Company, the return is also to be certified by a Company Secretary/Chartered Accountant/Cost Accountant. Following documents will be required as an attachment with Form DIR-12.
    • Certified True Copy of the Ordinary Resolution passed
    • DIR-2 Consent to Act as Director
    • DIR-8 Declaration by Director
    • Letter of Appointment.
  1. Obtain Form MBP-1 from the Appointed Director Obtain the declaration from the Appointed Director regarding his interest in other entities in Form MBP-1 within 30 days of appointment or at the first Board Meeting in which he participates as Director, Whichever is Earlier. (Section 184(1) Read with Section 189(2))
  1. Making Necessary entries in Register of Directors The company should make necessary entries in the Register of Director and Key Managerial Personals.
  1. File Necessary Amendment Application to GST, Tax Authorities  Other regulators The Company is required to make the necessary application for Changes in Director's details in GSTN and Other Certificates, wherever applicable.
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