Directors play a pivotal role in the governance and management of companies in India, overseeing, controlling, and directing various aspects of a company’s operations. This article provides insights into the different types of directors as defined by the Companies Act, 2013, and elucidates their multifaceted roles within an organization.
What Are Directors?
The term “Directors” collectively refers to the members of a company’s Board of Directors who bear the responsibility of supervising, managing, and directing the company’s operations. They act as stewards for the company’s assets and finances and represent it in various business transactions.
Different Types of Directors in a Company
The following are the different types of Directors in a Company in India:
1. Executive Directors: He or she works as the company’s director full-time. The company has higher expectations of them. In all interactions between the company and its employees, they must be effective and careful.
2. Non-Executive Directors: He or she is a non-working director who does not take part in the company’s daily operations. They may get an invitation to take part in the development of plans or policies. They push the executive directors to come up with choices and solutions that are in the best interests of the business.
3. Shadow Directors: A person who is not appointed to the Board but whose orders the board is used to acting on is liable as a director of the company unless he or she is giving advice in his or her professional function.
4. Certified Directors: Professional directors are non-executive directors recruited by the company who are experts in different fields. In their areas of expertise, they give advice to the board.
5. Managing directors: The company’s managing director has the power to make decisions. A managing director is required for any public company or subsidiary of a public company with a share capital of more than five crore rupees.
6. Residents Directors: According to the law, every company must appoint a director who has spent at least 182 days in India during the course of the previous calendar year.
7. Additional Directors: An additional director is appointed at a board meeting by the adoption of a board resolution or a resolution by circulation. The appointment of additional directors is limited to the period following the company’s subsequent Annual General Meeting (AGM). The director is deemed to have resigned on the final day of the general meeting’s scheduled date if the AGM is not called. An additional director cannot be someone who hasn’t previously served on the board of directors.
8. Initial Director: The first directors’ names appear in the Articles of Association (AOA). In accordance with Regulation 60 of Table F of the Companies Act, 2013, the subscriber to the memorandum or a majority of them shall choose the name of the first directors in writing.
9. Nominee director: A director may be appointed to the board of directors by any financial institution, the state or federal government, financial institutions, some shareholders, third parties through contracts, or any other person who has a claim to his interest. The appointment of a nominee director is necessary for any loan agreement or government investment in a government company. The Board has the authority to designate a Nominee director, subject to the conditions of the Articles of Association.
10. Alternate Director: An alternate director is one of the different sorts of director of a private limited company. If a director is away or out of the country for longer than three months, the company may appoint another director in his place. This kind of director is known as an alternate director. He can be appointed if the provisions of the AOA allow it or if a resolution is presented at a general meeting.
11. Rotational Directors: Private Companies are not obliged by law to appoint rotational directors unless specifically stated in the articles of association. Directors are nominated by the shareholders at a general meeting if the AOA (Article of Association) is silent about it.
A corporation can only operate through its directors, who have been referred to as the brains of the company. All of these directors serve as ambassadors for their companies, and their contributions are essential for the success of the company. The Board of Directors now has certain rights under the Act, 2013 enabling them to commit to the company fully.
The Act provides numerous restrictions in addition to the right to avoid abuse of these authorities. Directors hold a variety of roles and authority within companies. A transparent system is easier to maintain when powers are separated. The division of control also promotes efficiency and prevents the abuse of power.