Directors under Companies Act, 2013

1. Definition:-

As per Section 2(34) of Companies Act 2013 Director means a director appointed to the Board of a Company.

2. Responsibility:-

The board of directors of a company is primarily responsible for:

  • Determining the company’s strategic objectives and policies;
  • Monitoring progress towards achieving the objectives and policies;
  • Appointing senior management;
  • Accounting for the company’s activities to relevant parties, e.g. shareholders.

3. Minimum Directors Required in Company:-

i. One Person Company:-        One Director.

ii. Private Limited Company:-   Two Directors.

iii.Public Limited Company:-     Three Directors.

Maximum 15 directors can be appointed in any format of Company (OPC, Public, Private). By Passing Special Resolution Company can increase the number of Directors beyond 15. Out of appointed directors one director should be resident in India for more than 182 days in previous calendar year.

4. Types of Directors:-

1. Residential Director:- As per Section 149(3) of Companies Act,2013 every company shall at One Director who has stayed in India for a total Period of not less than 182 days in the Previous calendar year.

2. Independent Director:- As per Section 149(6) an independent director in relation to a company, means a director other than a Managing Director, Whole Time Director Or Nominee Director. Companies which have to appoint Independent Director:- As per Rule 4 of Companies (Appointment and Qualification of Directors) Rules,2013 the following class of companies have to appoint at least Two Independent Directors:-

A} Public Companies having Paid up Share Capital-Rs.10 Crores or More;

B} Public Companies having Turnover- Rs.100 Crores or More;

C} Public Companies have total outstanding loans, debenture and deposits of Rs. 50 Crores or More.

Person Qualified for Independent Directorship:-

A) Who, in the opinion of the Board , is a person of integrity and possesses relevant expertise & experience;

B) i) Who is or was not a promoter of the Company or its Holding, Subsidiary or Associate Company(HSA Companies);

ii) Who is not related to Promoters or directors in the company, its HSA companies;

C) Who has or had no Pecuniary (relating to Money) relationship with Company and its HSA company or their promoters, directors during the 2 immediately preceding financial years or during the current financial year;

D) none of whose relatives has or had pecuniary relationship with company, its HSA company or their Promoters, directors -amounting to 2% or more of its gross turnover or total income; -or fifty lakhs or such higher amount as may be prescibed, whichever is lower. During the 2 immediately preceding financial years or during current financial year.

E) Who neither himself nor any of his relative-

1. holds or has held the position of KMP or has been employee of the Company or its HSA companies in any of the 3 financial years;

2.he or his relative  has an employee or proprietor or a partner in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed- as a auditor firm, Company Secretary in practice, Cost Auditor, Legal Consultant of the company or its HSA companies;

3. Holds with relaives 2% or more of the total voting power of the Company;

4. he or his has not be Chief Executive or Director of any Non Profit Organization that receive 25% of its receipt from the Company or HSA Companies or its Promoters or directors or that NGO holds 2% or more of the total voting power of the Company.

F) Who possesses such other qualification as may be prescribed. Tenure of Director:- an independent director hold office for a term up to 5 consecutive years, -Also eligible for reappointment by passing Special Resolution and also require its reappointment in Boards Report. -He shall not hold office for more than 2 Consecutive terms, but shall not be eligible to appoint after expiration of 3 Years of ceasing to become an independent director. Remuneration to Independent Director:- An independent director shall not be eligible for any stock option as per section 149(9) of Act. But they may receive remuneration by way of fee provided under section 197(5) of the Act. Sitting fees for Board meeting and other committee meeting shall not be exceed Rs. 1,00,000 per meeting.

3. Small Shareholders Directors:- A listed Company may have one director elected by small shareholders. May appoint upon notice of not less than 1000 Shareholders or 1/10th of the total shareholderswhichever is lower have a small shareholder director which elected form small shareholder.  

4.Women Director:- As per Section 149 (1) (a) second provision requires certain categories of companies to have At Least One Woman director on the board. Such companies are any listed company, and any public company having-

  1. Paid Up Capital of Rs. 100 crore or more, or
  2. Turnover of Rs. 300 crore or more.

5.Additional Directors: Any Individual can be appointed as Additional Directors by a company under section 161(1) of the New Act.

6.Alternate Directors:- As per Section 161(2) A company May appoint, if the articles confer such power on company or a resolution is passed (if an Director is absent from India for at least three months).

  •  An alternate Director cannot hold the office longer than the term of the Director in whose place he has been appointed.
  • Additionally, he will have to vacate the office, if and when the original Director returns to India.
  • Any alteration in the term of office made during the absence of the original Director will apply to the original Director and not to the Alternate Director.

7.Shadow Director:- A person, who is not appointed to the Board, but on whose directions the Board is accustomed to act, is liable as a Director of the company, unless he or she is giving advice in his or her professional capacity.

8.Nominee Directors:- They can be appointed by certain shareholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government in case of oppression or mismanagement.

9. Difference Between Executive and Non-Executive Director:- An Executive Director can be either a Whole-time Director of the company (i.e., one who devotes his whole time of working hours to the company and has a significant personal interest in the company as his source of income), or a Managing Director (i.e., one who is employed by the company as such and has substantial powers of management over the affairs of the company subject to the superintendence, direction and control of the Board). In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor a Managing Director.

That all about the Director under Companies Act, 2013.

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