CS Divesh Goyal

As we are aware that Companies Act, 2013 is already in force from April 01, 2014, and every professionals is trying his/her best to unlock and decode the provisions of Companies Act, 2013. In this regard an Attempts have been made from my side to compile the procedure for appointment of Additional Director in Public Company/ Private Company (Purely Private) taken the route of appointment of Director by Board. 

With the new Companies Act, the law has become more stringent for private companies than for public companies, Moving from the Companies Act 1956 to the Companies Act 2013 is like shifting from your old house to a new one. In the old house, where you have stayed for years, everything would have found its own place – the shoes, the clothes, umbrella, first aid, brooms, and whatever else you need in your household. Your legs can find their own way, even in pitch dark of night – they know the way to the bathroom, to the stairs, they even know where the stairs end.

Directors of a company hold the most crucial position in the Company. With the new Companies Act, 2013 (“New Act“) already in force, their position has become even more significant than ever before. They are now formally included within the definition of “key managerial personnel” or “KMP” under Section 2(51) of the New Act.

As per Section 149(1): Every Company shall have a Board of Directors Consisting of Individuals as director. (It is clear to understand from this line that only an individual can be director of company. Some persons have doubt that other than individual can be director or not). According to this section Only AN INDIVIDUAL can be director of company. {The Board shall consist of individuals not of other persons like firms, LLP, companies, gods or other legal persons.} 

Minimum No. of Directors as per Section 149(1)(a):

  • Three in case of Public Company.
  • Two in case of Private Company.
  • One in case of One Person Company.

Maximum 15 DirectorsL (If company want to appoint more than 15 directors Special Resolution Required to pass in General meeting)- Procedure {Simple Process of Holding of Extra-Ordinary General Meeting, which we use in other Matters also)

New Categories of Directors:

  Resident Director:

As per Section 149 sub section 3 of Companies Act 2013, Board of Directors of a company, must have at least one resident director i.e. (A person who has lived at least 182 days in India in the previous calendar year)

As per General Circular No. 25/2014 The residence requirement would be reckoned from the date of commencement of section 149 of the Act i.e. 1st April, 2014, The first previous calendar year, for compliance with these provisions would, therefore, be Calendar year 2014. The period to be taken into account for compliance with these provisions will be the remaining period of calendar year 2014 i.e. 1st April to 31st December).

  • Therefore, on a proportionate basis, the number of days for which the director(s) would need to be resident in India. During Calendar year.2014, shall exceed 136 days.
  • Regarding Newly Incorporated Companies it is clarified that companies incorporated between 01.04.2014 to 30.09.2014 should have a resident director either at the time of incorporation OR within six months of their incorporation.
  • Companies incorporated after 30.9.2014 need to have the resident director from the date of incorporation itself. 

   Women Director:

As per Section 149 (1) (a) second proviso 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 cr. or more, or
  2. Turnover of Rs. 300 cr. or more.

    Independent Director:

Independent Director is for the first time introduced in the Companies Act, 2013 under section 149(6)   

   Additional Directors: 

Any Individual can be appointed as Additional Directors by a company under section 161 of the New Act.(COMPLETE PROCESS OF APPOINTMENT OF ADDITIONAL DIRECTOR ALONG WITH DRAFT GIVEN BELOW.)

    Nominee Director:

As per Section 161(3). Subject to AOA of company, the Board May appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.( According to term: Subject to AOA of company mean there should be provisions in Articles of Association of Company for appointment of Nominee Director, if there is no provision in Articles of company then alter the provision in AOA).

     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 atleast 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.

Appointment of directors in private companies as per new law:

Practicing Company Secretary

The liberty given to private companies to self-regulate the appointment process has, surprisingly, been completely taken away Under Companies Act-2013. This sounds completely paradoxical, in view of the fact that in case of public companies, they still have the liberty to self-regulate to the extent of one third of the board strength.

Sec 152 (6) (b) provides liberty, but only to public companies, to appoint one third of the total board by a self-regulated process. While there was an exception to private companies in Sec. 255 (2) of the 1956 Act, that exception has been dropped while transporting the provisions into the new Act.

It could not be the case that such was the intent of the lawmaker – there is absolutely no case for imposing more stringent regulations in case of private companies, than in case of public companies.

Section 152 of the New Act governs the appointment of directors. Certain specific requirements for appointment of director as lay down in the New Act are-

If different person are not named as first director in articles of the company, individual subscribers shall be deemed to be first directors. Every director other than first directors of company shall be appointed in general meeting as per Section 152(2). If company Want to appoint a person as director in meeting other then General meeting Company can do this by appointing such person as additional direct. 

ADDITIONAL DIRECTOR: 

Ensure that the director to be appointed by board of directors exercising the power so conferred in them by the Articles of the companyis not such a person who has failed to get appointed as a director in a general meeting. (If A proposal is made in General Meeting for appointment of a person as Director, if resolution got failed not passed in that meeting and that person fails to get appointed as a director in a general meeting, then that person can’t appoint as additional director). The additional director has to be appointed till date of next AGM or last date on which AGM should have been held, whichever is earlier. 

PROCEDURE: 

  • First Check whether Articles (AOA) of the Company contain power/authorization to appoint Additional Director read with Section 161(1) of the Companies Act, 2013. {If there is no provisions in Articles of the Company then Alter the Articles of the company to have enabling clause for appointment of Additional Director.
  • Second Check whether such person have DIN No. or Not. If such person doesn’t have DIN No. then Apply for DIN.
  • Following documents are require from director to appointment him as additional director.
    • Consent in writing to act as Director in Form DIR-2 pursuant to Rule-8 of Companies (Appointment & Qualification of Director) Rules, 2014-
    • Intimation by Director in form DIR-8 in terms of Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that he/ she is not disqualified u/s 164(2) of Companies Act, 2014.- 
    • Disclosure of Interest in Form MBP-1 pursuant to Section 184(1) read with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014. {One thing should be noted MBP-1 should not be dated earlier than date of his/her appointment as Director}. – 

However, if there is nothing to disclose on the part of new Director, even then also require to take form MBP-1 from Director. (NIL disclosure is also a disclosure under section 184(1).

After receiving all the documents from the director:-  

  • Call the Board Meeting.
  • Pass Resolution for appointment of Additional Director.
  • Issue Letter of Appointment.
  • File e-form DIR-12 [Along with CTC+ Consent + Letter of Appointment)
  • File e-form MGT-14[For disclosure of interest in MBP-1]

Now this person will be Additional Director Till AGM of company. If company want to appoint him as director then regularize the person as director in General Meeting by Share holder Resolution. File form DIR-12 for Change in Designation of Director along with ordinary resolution. 

IF THE SECTION IS VIOLATED

Since the 8-lakh odd companies, sitting with more than 16-lakh directors, may not even be aware of this change of law, what is the provision gets violated? There you have section 159 to take care of – which provides for a jail up to six months, of course with/without a fine too!

(Author is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com for suggestion, Comment and Queries )

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36 responses to “Procedure for Appointment Of Directors – Companies Act, 2013”

  1. Rashmi says:

    Can I file DIR-12 for appointment of a new director and death of existing director having different dates of resolution in one single form?

  2. Amit Choudhary says:

    Can we appoint an additional director with effect from a future date? (Like we had a board meeting on 29th March 2017 and in that meeting an additional director appointed with effect from 01st April 2017, is it possible?)

  3. Ashish Jain says:

    very nice and informative article

  4. Shibalik Choudhury says:

    Dear Sir,

    We have a private company and recently, one of director’s son wanted to became new director of the company. Is there is new rule that Director’s son can’t became new director of the company. In case if there is any new rule please provide me the new guidelines about this act, according to the Company act. .

    Yours faithfully
    Shibalik Choudhury

  5. Srinivas says:

    In a Private Limited, a Additional Director is appointed as per AOA and is to hold office up to the Next AGM. In case, in the AGM, the resolution to regularise his appointment is fails to pass, he ceases to be Director of the Company. Should e-forms be filled with MCA.

  6. Sharvan Bhanwariya says:

    aarav legal solution private limited ….

    Director : Abhishek Gaur

    Cont. No. 9896222944

  7. Ezhilarasan Thirunavukkarasu says:

    In the Absence of Enabling Provision in AOA, One of my client Public Company appointed Additional Directors in the Board and subsequently ratified in the AGM in the past. Now in your above Article, we found Enabling Clause is must in AOA. Now we are ready to amend our AOA.. Please advice us for avoiding any penalty.

  8. Narendra kumar verma says:

    Dear sir
    I want to join a pvt ltd company.That company is operated by 2 directors.What are the legal procedure.plz suggest me
    Thanks

  9. khushboo jasani says:

    Dear sir,
    if I had appoint subsequent director in Board meeting and not appoint in annual general meeting so that director can I appoint in extra ordinary general meeting please help me in this regard

  10. nitin mali says:

    I am the Additional director of one of the private company and there is no MOU or AOA so how much is the percentage of the profit I m holding in the company?

  11. Sameer says:

    We are a new pvt ltd company with 2 directors who are the only shareholders. In first AGM, these directors will retire then how to appoint new directors…

  12. shreyashi says:

    indeed a helpful article….

  13. Joy Sinha says:

    If NRI is director of tech startup in Gurgaon, do YOU offer India Resident Director services (to comply with 2 directors req). DO you know any firm who offer India Resident Director services and fees?

  14. vijay savaliya says:

    Hello,
    I want to know that can CA in practice become a Non-Executive director of PVT LTD as per recent provision of CO. Act,2013.
    and if yes then under which section n by which resolution- General or Special resolution?
    and Pvt Ltd have registered in Mumbai but now it want to held EGM in surat for appointment of Non-Executive director of PVt Ltd. can it do so n if yes then intimation is required or not?n within what time?

    please I need ur help for this so give your valuable reply.

    Thank you,

  15. vb says:

    can an under 18 be appointed as director of company?

  16. Sunita says:

    Can woman director be appointed without DIN and through circular resolution?

  17. Sanil says:

    @Bidyut Thakur.. The removal of a director can be done only in a general meeting. So, your company has to convene a general meeting to remove the problematic director, the remaining members can acquire the shares of the removed director (at a price as mutually decided between them) and then your new director will have to be appointed in the next general meeting. Keep in mind that the removed director can apply to the government for mismanagement of the company under the Companies Act, 2013. This is my personal view based on my experience. You can considering taking a legal counsels opinion on this matter too..

  18. Levita High says:

    How long can the process take to appoint a director? Also, is the appoitment effective as of the date of the resolution or once the documents are filed?

  19. Bidyut Thakur says:

    We are a very small private ltd company with three directors with equal ownership. We want to appoint an Additional Director and regularize him as a Director subsequently. The idea is that this new Director will bring in capital into the company and shares will be allotted to him subsequently. However, one of the Directors is refusing to induct the new director as he does not want his share in the company to be diluted, neither he is in a position to fund further. The problem is, without additional funding, we might have to close down the business.

    Can this be decided by two directors only, off course, in a broad meeting?

    Best Regards

  20. Danish Reza says:

    Can Executive Director be appointed as Additional Director??

  21. Amit Garg says:

    Sir please informed the requirement of additional director in company ?

  22. jay hankare says:

    I am confusing about sec.152(6). For public co.- retirement of director – not less than 2/3rd of director shall retire by rotation at each AGM. What is this means ?

  23. Ramesh Dayal Purohit says:

    Dear Sir,
    We have a private limited company in which we have appointed two additional directors in 2010 and re-appointed as Director for regularize in the next AGM.

    But till date at MCA site showing both as Additional Directors, now what is the remedies to regularize the all the Additional Directors to Director.
    We will appreciate if you suggest the procedure.

    REGARDS

    Ramesh Dayal Purohit

  24. praveen says:

    what is the procedure for the appointment of a director in a private limited co. as per new companies Act

  25. Chetan says:

    Dear Sir,

    can elaborate what is difference between the Executive Director and Non Executive Director, Appointment of Additional Director as Executive Director as different from the Appointment as NON Executive Director,

    if appointment of Additional Director AS Executive director please explain the process for the PVT Limited company.

  26. JIO says:

    I have Private Limited Co. in which we have two directors. Now if i want to appoint two more directors then which type of directors category i can appoint?
    I mean to be appointed directors as an additional or regular?

    Resolution should be passed at BM or EGM?

  27. George says:

    What is the difference between a regular director and an additional director?
    Accorning to the new companys act, if a director is an NRI how often he needs to be in India to retain his directorship, I was appointed as a director in 6 May 2014, when do I have to be India to retain the directorship, will I loose my directorship if I delay till July/August 2015

  28. anil says:

    for appointment of additional director you shall have to pass board resolution or resolution by circulation . and if you wanna appoint regular director than in general meeting.

  29. Sree Vidya says:

    appointment of a person as MD of a Pvt Company

  30. Teja says:

    We have Private Limited Co in which we have two directors and our resident director resigned company, currently we need appoint new director but the person we are looking to appoint as new director is our current employee for our UK Branch residing in UK, but she holds Indian Nationality.
    is there any specific rules and regulations to appoint new director

    I appreciate if you let me know can we appoint new director who is currently working with us in UK branch?

    if so is there any specific requirements that we need to consider.
    we need info ASAP, can you please get bacjk to me

    Thanks
    Teja

  31. sneha gera says:

    please tell me the answer of this query if you received same query i wanna asked???

    best Regards:
    sneha gera
    snehagera01@gmail.com

  32. Anuj Modi says:

    I have Private Limited Co and NBFC Company (Ltd but not listed) in which we have two directors and three director. Now if i want to appoint One more directors then which type of directors category i can appoint?
    I mean to be appointed directors as an additional or regular?
    Resolution should be passed at BM or EGM?
    What is the complete procedure for appointing the same under new companies Act,2013.
    I appreciate if you will mail me the specimen of requisite resolution and Form for completing the procedure.
    It’s bit urgent so please do the needful ASAP.

    With Regards
    Anuj Modi
    9062555923
    anujmodi.ca@gmail.com

  33. Alkesh Kukadiya says:

    I have Private Limited Co. in which we have two directors. Now if i want to appoint two more directors then which type of directors category i can appoint?
    I mean to be appointed directors as an additional or regular?

    Resolution should be passed at BM or EGM?

    What is the complete procedure for appointing the same under new companies Act,2013.

    I appreciate if you will mail me the specimen of requisite resolution and Form for completing the procedure.

    It’s bit urgent so please do the needful ASAP.

    Thanks & regards,
    Alkesh Kukadiya
    alkesh1488@gmail.com

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