Appointment of directors in a Company- During and after incorporation

Companies Act 2013 has re-defined and refined the requirements relating to appointment of a director in an existing company or during the incorporation.

As per section 149(1)(a) of Companies Act 2013, a public and private limited company is required to have 3 and 2 minimum directors respectively. Similarly a One Person Company is required to have only one director.

director appointment

As per section 154 of Companies act 2013, Director Identification number or DIN is a per-requisite for a person to be appointed as a director of a company. If you do not have DIN then we suggest you to get it first before starting the whole process.

A director can be appointed through Articles of association, or by the board of directors or by Tribunal or by members in a general meeting.

Appointment of director at the time of incorporation

As per Section 152(1) of Companies Act 2013, in the absence of regulations for first directors in the articles of association of a company, the subscribers to the Memorandum of Association who are individuals shall be deemed to be the first directors of the company until the directors are dully appointed.

This means, while incorporating your company with Registrar of companies or ROC, in the articles of association, name of all first directors are to be mentioned.

If it’s mentioned in AOA then those names will be considered as first director. If it’s not mentioned then all the subscribers to the MOA will be considered as first director.

However, in case of One Person Company or OPC, an individual being member shall be deemed to be its first director until the member has appointed a director. In case of OPC also, appointment can be done at the time of incorporation or after its formation.

Director’s appointment in General meetings

As per the provisions of section 152(2) of Companies Act 2013, every director shall be appointed by the company in a general meeting.

Section 161 has given power to board of directors to appoint director in certain special cases. This means, except in the case of first director and section 161 cases, director is required to be appointed in general meetings as stated in section 152(2) of Companies Act 2013.

A person proposed to be appointed as a director in general meeting shall furnish DIN and a declaration stating that he is not disqualified to become a director under the Act in the prescribed form. In addition to that, he or she should also produce his or her consent to hold the office as director.

In the case appointment of an independent director, an explanatory statement stating that in the opinion of the Board, he fulfills the conditions specified in Act for such an appointment is to be annexed to the notice.

Also Read: Appointment of Company Auditor- Procedure and provision

Appointment of directors by Board

Board of directors has power under the regulations contained in the Articles of Association of company. As per companies act 2013, board of directors has power to appoint following categories;

Additional director

If the company’s articles of association confer power to its board of directors to appoint additional director then the board under section 161(1) of companies act 2013, may appoint additional director. In such case, such person shall hold office till the date of the next annual general meeting.

Alternate Director

Alternate director can be appointed by the board under section 161(2) of Companies Act 2013, if it’s authorized by the articles of association of the company. If it’s not authorized then director can be appointed in general meeting by an ordinary resolution.

Nominee director

Company’s Board of Director under Section 161 (3) may appoint nominee director as provided in the articles of association or as per the agreement with institutions or by the Central Government or the State Government by virtue of its shareholding in a Government company.

Casual Vacancy

Board of director may fill casual vacancy in the case of public limited companies subject to regulations contained in the articles of the company under section 161(4).

Also Read: How long it takes to register a private limited company in India

General Procedure to be followed for appointment of director

In the first step, you need to check your articles of association or AOA to know the power it has provided for appointment of directors. If such provision is not there in AOA then we suggest you to alter your AOA and it inserted before appointment.

In the second step, you need to contact the person who is getting appointed as director to know whether he or she has a DIN or not. If such person does not have a director identification number then ask him to apply for it in e-form DIR-3 with the approval of a practicing CA or CS or CMA.

Get following documents from the proposed director after getting DIN;

  • Pursuant to rule 8 of companies (Appointment & Qualification of Director) Rules, 2014, get consent in writing to act as a director in form DIR-2.
  • Intimation in form DIR-8 by director in terms of Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that such person is not disqualified u/s 164(2) of Companies Act, 2014.
  • Pursuant to Section 184(1) read with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014, disclosure of Interest in Form MBP-1 from the person getting appointed as director. If the director has no interest then this form has to be submitted with NIL disclosure.

Now call for board meeting and in that board meeting pass resolution for appointment of director. If director is required to be appointed by the general meeting then fix time and place of general meeting and in that general meeting pass resolution for appointment of director. Issue letter of appointment and file e-form DIR-12 and MGT-14 with the registrar of companies or ROC.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.