Directors play a crucial role in guiding a company toward growth and success. The Companies Act 2013, a significant piece of legislation in India, establishes a clear framework for the appointment and removal of directors, ensuring transparency, accountability, and effective corporate governance. This article explores the provisions related to the appointment and removal of directors under the Companies Act 2013.

Appointment of Directors

Directors can be appointed through various means, as outlined below:

Types of Directors

The Act categorizes directors into different types, including executive, non-executive, independent, nominee, and additional directors. Their roles and responsibilities vary based on their classification.

First Directors

The initial directors of a company are typically specified in its articles of association. If not mentioned, the subscribers to the memorandum of association assume the role of first directors until a formal appointment is made.

Appointment by Shareholders

Directors are primarily appointed by shareholders during the Annual General Meeting (AGM). The process involves proposing a resolution for the appointment, followed by shareholder voting.

Appointment by the Board

The board of directors has the power to appoint additional, alternate, and nominee directors. However, such appointments are usually temporary and require shareholder approval at the next AGM.

Independent Directors

Independent directors are selected for their expertise and are responsible for ensuring objective decision-making within the board. Their appointment process is more rigorous and necessitates a selection committee with a majority of independent directors.

Women Directors

To encourage gender diversity, the Act mandates that certain categories of companies must have at least one woman director on their board.

Resident Director

Every company must have at least one director who has resided in India for a minimum of 182 days in the preceding calendar year.

Director Identification Number (DIN)

Any individual seeking appointment as a director must obtain a DIN, which is issued by the Ministry of Corporate Affairs.

Consent and Declaration

A prospective director must provide written consent to act in the role and declare that they are not disqualified under the provisions of the Act.

Documents Required to Appoint a Director

  • Ø  PAN card of the director
  • Ø  Identification proof, such as Voter ID, driving license, Aadhaar card, etc
  • Ø  Proof of residence, such as utility bills, rental agreement, etc
  • Ø  Passport size photograph
  • Ø  Digital Signature Certificate (DSC)

The eligibility criteria to be a company director

The following are the eligibility criteria to become a director:

  • Ø  The individual should be above 21 years
  • Ø  The individual should not have an unsound mind
  • Ø  The individual should not be an undischarged bankrupt or adjudged an insolvent
  • Ø  The individual should not be sentenced by a court and convicted for more than six months


Removal of Directors

A company may remove a director through the following methods:

By Shareholders

Shareholders have the authority to remove a director by passing an ordinary resolution, except in cases where the director has been appointed by the Tribunal or when private company articles prescribe a different procedure.

By the Board

The board of directors can remove a director under specific circumstances, such as prolonged absence without notice, being declared of unsound mind, conviction of a criminal offence, or failure to attend board meetings for a stipulated period.

Disqualification

A director may be automatically disqualified under the conditions outlined in the Companies Act, including insolvency, conviction of a crime, or involvement in fraudulent activities.

 

Resignation

A director may voluntarily step down by submitting a written resignation to the board. The resignation becomes effective either on the date specified in the notice or when it is received by the company.

Vacation of Office

A director's position is deemed vacated if they are disqualified, resign, or are removed from office.

Filling of Vacancy

If a director is removed, the resulting vacancy may be filled either by the board or by shareholders, depending on the nature of the removal.

Recording and Reporting

The company must document the removal of a director in the meeting minutes and formally notify the Registrar of Companies (ROC) regarding the change in directorship.