The supreme executive authority controlling the management and affairs of a Company vests in the team of directors of the Company, collectively known as its Board of Directors. At the core of the corporate governance practice is the Board of Directors which oversees how the management serves and protects the long-term interests of all the stakeholders of the Company.
In accordance with the Section 2 (34) of the Companies Act, 2013 “director” means a director appointed to the Board of a Company. Accordingly, a director is a person appointed to perform the duties and functions of director of a Company in accordance with the provisions of the Companies Act, 2013.
NUMBER OF DIRECTORS IN A COMPANY
Section 149(1) of the Companies Act, 2013 requires that every Company shall have a minimum number of 3 directors in the case of a public company, 2 directors in the case of a private company, and 1 director in the case of a One Person Company. A Company can appoint maximum 15 fifteen directors however; it may appoint more than fifteen directors after passing a special resolution in general meeting.
CONCEPT OF ADDITIONAL DIRECTOR
In accordance with the Section 161(1) of the Companies Act, 2013, a Company may appoint any person as Additional Director, other than the person who has failed to get appointed in the general meeting.
There might be a situation where the Board of Directors of the Company intends to appoint a person on Board however; it is not possible to convene general meeting for seeking approval of the members, then in that case we can appoint a person as Additional Director in the Company till the next annual general meeting. Also, any act done by the Additional Director shall not be null and void, if the same is in accordance with the Memorandum and Articles of Association of the Company along with the provisions of the Companies Act, 2013.
An Additional Director can be appointed by the Board of Directors if such power is conferred on them by the articles of association and if not, then the articles of association can be amended accordingly. Such Additional Directors hold office only up to the date of next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.
DIRECTOR VS. ADDITIONAL DIRECTOR
Practically, we have seen that people in general do not understand the difference between appointing a Director and Additional Director on Board. Accordingly, here are some point of differences with regards to appointment of Director and an additional Director on the Board of the Company:
- An additional director can be appointed by Board Resolution in a board meeting whereas a Director shall only be appointed in a general meeting by passing an ordinary resolution by the members.
- Additional Director is appointed in accordance with the Section 161(1) of the Companies Act, 2013 whereas a Director is appointed as per Section 152 of the Companies Act, 2013.
- There shall be provisions in the articles of association of the Company regarding appointment of Additional Director.
- An Additional Director can be appointed vide resolution by circulation whereas a Director cannot.
- Tenure of an Additional Director shall be till the date of next Annual General Meeting only whereas the tenure of Director is general till five years until anything contrary is mentioned in the resolution for such appointment.
COMMON MISTAKES WHILE FILING IN EFORM DIR-12
- We need to first understand and be clear whether we are appointing Director or Additional Director as accordingly, the concerned tab has to be selected diligently.
- The “category” has to be selected very carefully as whether the Director to be appointed belong to the promoters, is a professional, independent Director or small shareholder Director. Under this, people generally get confused as they assume category “professional” means CA, CS, CMA, advocates or any other like; however, it is important to understand that being a Director itself being a professional as separate provisions are there for independent Director, small shareholder Director and promoter.
- The mandatory attachment in eForm DIR-12 is consent to appoint as Director (i.e. Form DIR-2); however, it is recommended to attach the certified true copy of the resolution appointing the Director along with the appointment letter, if any.
- We have seen people just attaching the consent for appointment as Director in format DIR-2 and not attaching the proofs of identity and residence. However, it is important to note that in the format of DIR-2, in accordance with the Section 152(5) of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment of Qualification of Directors) Rules, 2014, it is mandatory to attach proof of identity and residence.
- It is nowhere allowed to attach any resolutions or consent to act as Director or any document, whatsoever, in SD mode or by copy pasting signature in a word, PDF or JPEG file. Accordingly, it is always advisable to get the documents signed legally and not following any shortcuts, whatsoever may be the situation as the same may lead to penal provisions.
{The author i.e. Kajal Goyal is a Company Secretary in Practice at Kajal Goyal and Associates and founder of Alliance Professionals and can be reached at (M) +91-9999952595 and (E) [email protected]}
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