Procedure for Appointment and Resignation of the Directors as per Companies Act, 2013

Directors play a crucial role in the governance and management of a company. The appointment and resignation of directors are significant events that are regulated by the Companies Act, 2013 in India. The Act outlines specific procedures and requirements that companies must follow when appointing or accepting the resignation of a director. In this article, we will explore the procedure for the appointment and resignation of directors as per the Companies Act, 2013.

Who is the Director of the Company as per Companies Act, 2013?

According to the Companies Act, 2013, a Director is an individual appointed to the board of directors of a company. The board of directors is responsible for the overall management and administration of the company and is entrusted with the duty of making strategic decisions to ensure its growth and success. Directors act as fiduciaries and are expected to act in the best interests of the company and its stakeholders.

The Act defines a Director as “any person occupying the position of a director, by whatever name called.” This means that regardless of the title given to the position, any individual who performs the functions of a director is considered a director under the law. The Companies Act, 2013 recognizes various types of directors, including managing directors, whole-time directors, executive directors, non-executive directors, independent directors, and nominee directors, among others.

Qualifications of Directors

To ensure competence and accountability, the Companies Act, 2013 sets certain qualifications and eligibility criteria for individuals aspiring to become directors. Key qualifications include:

• Minimum Age: A person must be at least 18 years old to become a director.
• Director Identification Number (DIN): Every director must obtain a DIN from the Ministry of Corporate Affairs. It serves as a unique identifier for a director and is mandatory for appointment or reappointment as a director.
• Disqualification: The Act also specifies various disqualifications that may prevent an individual from becoming a director. These include factors such as bankruptcy, conviction of certain offenses, being declared of unsound mind, etc.

Roles and Duties of Directors

Directors are entrusted with several key roles and responsibilities, which primarily revolve around the best interests of the company and its stakeholders. Some of the fundamental duties of directors include:

• Fiduciary Duty: Directors are expected to act honestly, in good faith, and in the best interests of the company.
• Duty of Care: Directors are required to exercise reasonable care, skill, and diligence while discharging their duties.
• Duty to Avoid Conflict of Interest: Directors must avoid situations where their personal interests conflict with those of the company.
• Compliance and Governance: Directors must ensure compliance with legal and regulatory requirements, maintain proper books of accounts, and prepare financial statements.
• Strategic Decision-Making: Directors play a pivotal role in formulating and executing the company’s strategic objectives and policies.

Documents Required for Appointment of Director as per Companies Act, 2013

The appointment of a director is a crucial step in the functioning of a company. Under the Companies Act, 2013, certain documents are required to be submitted to the Registrar of Companies (RoC) for the appointment of a director. These documents help ensure compliance with the legal and regulatory framework governing companies in India. Here are the key documents needed for the appointment of a director:

• Consent to Act as Director: The proposed director must provide a written consent to act as a director of the company. This document demonstrates the individual’s willingness to assume the responsibilities associated with the directorship.
• Director Identification Number (DIN): Every director must obtain a DIN, which is a unique identification number assigned by the Ministry of Corporate Affairs (MCA). The DIN application form, along with the necessary supporting documents, must be submitted to the MCA for obtaining the DIN.
• Digital Signature Certificate (DSC): A director must have a valid DSC to sign electronic documents and filings. The DSC is issued by certifying authorities approved by the MCA. The director needs to submit the DSC application form along with the required identity and address proofs.
• Appointment Letter: The company must issue an appointment letter to the proposed director, stating the terms and conditions of the appointment. This letter serves as a formal offer of directorship and provides clarity on the director’s roles, responsibilities, remuneration, and other relevant terms.
• Board Resolution: The board of directors of the company must pass a resolution approving the appointment of the director. The resolution should be duly signed and documented as per the prescribed format.
• Declaration of Disqualification: The proposed director must submit a declaration stating that they are not disqualified from being appointed or continuing as a director. This declaration helps ensure that the individual meets the eligibility criteria as per the Companies Act.
• Disclosure of Interest in Other Entities: The director must disclose their interest in any other companies or entities. This information is essential to avoid conflicts of interest and to comply with disclosure requirements under the Companies Act.
• Affidavit of Non-Acceptance of Deposits: The proposed director needs to provide an affidavit stating that they have not accepted any public deposits in contravention of the law. This affidavit helps establish compliance with the provisions related to acceptance of deposits by directors.
• Identity and Address Proofs: The director must submit copies of identity and address proofs such as passport, Aadhaar card, voter ID card, or driving license. These documents are necessary for verification and establishing the director’s identity and residential address.
• Other Statutory Documents: Depending on the nature of the appointment, additional documents may be required. For example, if the director is appointed as an independent director, a separate declaration confirming compliance with the independence criteria must be submitted.

Appointment of Directors

The following is the procedure for Appointment of Director in a Company:

• Obtain Director Identification Number (DIN): The first step in appointing a director is to ensure that the individual has a valid Director Identification Number (DIN). Every individual who intends to become a director in a company is required to apply for a DIN from the Ministry of Corporate Affairs (MCA).
• Conduct a Board Meeting: A board meeting must be convened to discuss and approve the appointment of a director. The board of directors needs to pass a resolution recommending the appointment of the proposed director. The resolution must be duly recorded and documented in the minutes of the meeting.
• Obtain Consent and Declaration: Before appointing a director, the proposed individual must provide their written consent to act as a director of the company. They are also required to furnish a declaration stating that they are not disqualified to become a director under the Companies Act, 2013.
• File the Appointment Form: Once the board has approved the appointment, the company is required to file the necessary forms with the Registrar of Companies (ROC) within 30 days of the appointment. The company must file Form DIR-12, which includes details such as the director’s name, DIN, date of appointment, and other relevant information.
• Update the Register of Directors:The company’s register of directors needs to be updated with the new director’s details, including their name, address, DIN, and other relevant particulars. The register should be maintained at the company’s registered office or at any other place approved by the board.

Resignation of Director from a Company

The Companies Act, 2013, which is the primary legislation governing companies in India, provides a framework for the appointment, resignation, and removal of directors. Resignation of a director is covered under Section 168 of the Act and is subject to certain procedures and requirements to ensure transparency and compliance.

Essential Requirements for the Director Resignation under the Companies Act, 2013

The following conditions must be met in order to follow the Companies Act, 2013 procedure for resignation of a director:

• A director’s resignation becomes effective on the later of the day the company receives the notification or the date specified by the director in the notice.
• Even after his retirement, the former director is still liable for the crimes committed during his tenure.

Director’s Resignation Manner

According to Section 168(1) of the Companies Act, 2013, a director may resign from his or her position by giving the company written notice of his or her intent to do so. The Board shall then take note of the resignation, and the company shall notify the Registrar in the manner, within the timeframe, and in the form necessary, as the case may be. The company shall also include the resignation’s details in its report of directors that is laid before the general meeting that follows. Additionally, within thirty days of resigning in the proper way, a director may send a copy of his resignation to the Registrar along with a list of his reasons for leaving.

In general, a director may resign by giving written notice to the company. The company will then notify the Registrar of Companies of the resignation and provide all relevant information at the ensuing public meeting.

Effective Date of Director’s Resignation

The most recent of the following two dates shall be used as the resignation’s effective date:

• The date the notice is delivered to the company, or
• The date the director specifies in the notice.

The procedure of Resignation of Director under Companies Act 2013

The following procedure should be followed by the Director to proceed with its Resignation:

• Intimation to the Board: A director who wishes to resign must first inform the Board of Directors about their intention to resign. The resignation should be tendered in writing, either in physical or electronic form.
• Board Meeting: The Board of Directors is required to convene a meeting to acknowledge and accept the director’s resignation. The board should pass a resolution to this effect and record the same in the minutes of the meeting.
• Intimation to ROC: Within 30 days from the date of resignation, the company must intimate the ROC about the director’s resignation by filing the necessary forms, such as Form DIR-12. The company should also attach a copy of the resignation letter and the minutes of the board meeting.
• Vacancy and Appointment: Upon the resignation of a director, a vacancy arises. The company must fill this vacancy within a prescribed period. If the number of directors falls below the minimum required as per the Act, the company must convene a general meeting to appoint new directors within three months.

Important Points to Consider Regarding Appointment and Resignation of Directors as per Companies Act, 2013

The appointment and resignation of directors play a crucial role in the governance and management of companies. In India, the Companies Act, 2013 provides guidelines and regulations governing the process of appointing and resigning directors. Understanding these provisions is essential for both companies and individuals involved in directorship roles. In this article, we will discuss some important points to consider regarding the appointment and resignation of directors as per the Companies Act, 2013.

• Director Identification Number (DIN): Before being appointed as a director, an individual must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). The DIN serves as a unique identification for directors and is mandatory for all individuals seeking directorship positions in companies.
• Maximum Number of Directors: According to the Companies Act, 2013, a company can have a maximum of 15 directors. However, this limit can be increased by passing a special resolution in a general meeting.
• Independent Directors: Certain companies are required to appoint independent directors to ensure transparency and unbiased decision-making. As per the Act, certain criteria must be met for a director to qualify as an independent director. Independent Directors play a vital role in the governance of companies and provide an objective perspective.
• Appointment of Directors: The appointment of directors can be made through various means, such as by the shareholders, the Board of Directors, or through proportional representation. The process of appointment may differ based on the type of director being appointed, such as managing director, whole-time director, or nominee director.
• Director Disqualification: The Act specifies certain grounds on which a person may be disqualified from being appointed or continuing as a director. These grounds include non-compliance with filing requirements, involvement in fraud, or being declared insolvent. It is crucial for companies to ensure that the individuals being appointed as directors are not disqualified under these provisions.
• Resignation of Directors: Directors can resign from their positions by providing a notice in writing to the company. The resignation takes effect from the date on which the notice is received by the company or the specified future date mentioned in the notice. The company must intimate the Registrar of Companies (RoC) about the resignation within 30 days of receiving the notice.
• Board Meetings and Quorum: Board meetings are essential for making important decisions regarding the company’s affairs. The Act prescribes the minimum number of directors required to be present at a board meeting to constitute a quorum. It is important for companies to ensure that the quorum requirements are met for valid decision-making.
• Statutory Compliance: Companies must comply with the statutory requirements related to the appointment and resignation of directors. This includes filing necessary forms and documents with the RoC within the specified timelines. Non-compliance can result in penalties and legal consequences.
• Duties and Liabilities of Directors: Directors have certain duties and responsibilities towards the company, shareholders, and other stakeholders. They are expected to act in good faith, exercise due diligence, and act in the best interest of the company. Directors should be aware of their fiduciary duties and the potential liabilities associated with their role.
• Succession Planning: Companies should have a well-defined succession plan in place to ensure a smooth transition of directors. Succession planning helps companies identify and groom potential candidates for directorship positions, reducing disruption and ensuring continuity in leadership.

Conclusion

The Appointment and Resignation of directors are critical processes that impact the governance and operation of a company. Following the proper procedures ensures transparency, compliance with legal requirements, and smooth transition periods. It is advisable for companies to seek professional advice and adhere to the applicable laws and regulations governing the appointment and resignation of directors. By doing so, companies can maintain good corporate governance practices and foster a healthy and efficient boardroom environment.

Connect to the experts at Legal Window for the Appointment and Resignation of the Company’s Directors may be accomplished by simply adhering to a set of procedures while offering the greatest support, on-time delivery, and the highest level of customer satisfaction. Contact our staff by phone at 072407-51000 or by email at [email protected].