Appointment of Nominee director under Companies Act, 2013

Meaning  of Nominee director under Companies Act, 2013

A director nominated by any financial institution in accordance with the requirements of any legislation now in effect, or of any agreement, or appointed by any Government, or any other person to represent its interests is defined as a nominee director under Section 149 (7) of the Companies Act, 2013. A Nominee Director is a member of a company’s Board of Directors who has been appointed to the Board of Directors by financial institutions, banks, or investors.

It’s also worth noting that a company’s Nominee Director cannot be considered as an independent director.

According to Section 161(3), the Board may appoint any person as a Director who is nominated by any institution in accordance with the provisions of any law currently in force or of any agreement, or by the Central Government or the State Government by virtue of its shareholding in a Government company, subject to the Article of the Company

Prerequisites for Appointment of Nominee director under Companies Act, 2013

• When a financial institution considers or decides to appoint a nominee director, the appointment should be done in accordance with any applicable legislation or the conditions of the company’s agreement.
• The director can be nominated by the central or state governments, as well as anybody else having the legal authority to do so under the applicable laws.
• After appointing a Nominee Director, the total number of Directors in the Company cannot exceed the maximum limit.
• The person who will be appointed as a Nominee Director must have an active DIN number.

Procedure  for Appointment of Nominee director under Companies Act, 2013

The Appointment of Nominee Director can be done in two ways:

i. By passing of Resolution in Board Meeting, OR

ii. By passing of Resolution through Circulation

i. By passing of Resolution in Board Meeting

• 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.
• Hold a meeting of the Company’s Board of Directors to consider the agenda and choose a Nominee Director.
• After selecting the individual to be appointed as a Nominee Director, pass a Board Resolution.
• Issue a letter of appointment to the Company’s Nominee Director, including the terms and conditions of the appointment as well as the remuneration to be paid to him.
• Authorize the Company Secretary or any Director to sign and submit the required document with the Registrar of Companies, as well as to perform any other actions, deeds, or things necessary to put the Board’s resolution into effect.
• Prepare and distribute Draft Minutes to all Directors for comment within 15 days after the Board Meeting’s end, via hand/speed post/registered post/courier/e-mail.

OR

ii. Appointment of Nominee Director by passing resolution through Circulation

• Before the draft Resolution is circulated to all of the Directors, the Chairman of the Board or, in his absence, the Managing Director or, in their absence, any Director other than an Interested Director shall decide whether the Board’s approval for a particular business shall be obtained by means of a Resolution by circulation.
• The prepared Resolution, along with all relevant papers, will be delivered the same day to all Directors’ registered postal addresses by Speed Post/E-mail/By Hand/Registered Post/Courier or any other approved method.
• The Resolution should describe all aspects of the proposal, including the material facts that explain the proposal’s purpose, scope, and ramifications, as well as its nature.
• The Directors will have seven days to respond from the date of distribution.
• The Chairman should hold the Resolution by Circular under consideration at a Board Meeting if a minimum of 1/3rdDirectors desires to decide the Resolution under circulation in a Board Meeting.
• When a majority of the Directors who are eligible to vote accept the Resolution, it is considered approved.
• Resolutions passed by circulation will be acknowledged at a later Board meeting, and the wording of the resolution, together with any disagreement or abstention, will be recorded in the Minutes of that meeting.
• Consent and Declaration from the Proposed Director– Before or during the Board Meeting, the Proposed Director must submit Form DIR-2 (Consent to Act as a Director) and Form DIR-8 (Intimation by Director regarding his disqualification) to the Company.
• Filing of Returns with the ROC– Within 30 days following the Board meeting, a Return of Appointment of Directorship (Form DIR-12) must be submitted with the Registrar, together with a copy of the Board Resolution, Consent, and Declaration. A Company Secretary/Chartered Accountant/Cost Accountant must also certify the return in the case of companies other than OPC and Small Companies. The following documents must be included to Form DIR-12 as an attachment:

1. • Certified True Copy of the Board Resolution passed
   • DIR-2 Consent to Act as Director
   • DIR-8 Declaration by Director
   • Letter of Appointment.

• Obtain Form MBP-1 from the Appointed Director– Within 30 days of appointment or at the first Board Meeting in which he participates as a Director, get the Appointed Director’s declaration on Form MBP-1 detailing his stake in other companies.(Section 184(1) Read with Section 189(2))
• Making Necessary entries in Register of Directors– In the Register of Directors and Key Managerial Personnel, the company should make the appropriate entries.

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