Appointment of Director

This presentation briefly explains the concept of "Appointment of Director"

1. Legal Aspects of Business Appointment of Director Presented By: Nawaz Sharif 19020841184 Shubhangi Pant 19020841201

2. Who is the DIRECTOR ?? Acc. To the Sec.2(13) of INDIAN COMPNIES ACT 1956 , may be defined as an individual who directs ,controls or manages the affairs of the company . The directors of the company collectively are referred to as “board of directors” or “board ”.

3. Number of Director Every company should have a minimum number of directors :-> 3 directors in case of Public company 2 directors in case of Private company 1 director in case of One Person company 1 director in case of Women Director 1 director in case of Resident Director

4. continued…….. A company can appoint maximum 15 directors A company can appoint more than 15 directors after passing special resolution (SR ) in general meeting . Deadline to fulfil these requirement is 1 year according to companies act 2013

5. Maximum Tenure Max term of 5 consecutive years Eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Directors Report

6. Types of Directors:- Residential Director:-  As per Section 149(3) of Companies Act,2013 every company shall at one director who has stayed in India for a total Period of  not less than 182 days in  the Previous calendar year. Independent Director:-  As per section 149(6) an independent director in relation to a company, means a director other than a Managing Director, Whole Time Director Or Nominee Director. Companies which have to appoint Independent Director:- As per Rule 4 of  Companies (Appointment and Qualification of Directors) Rules,2013   :-

7. Continued.. Nominee Directors:-  They can be appointed by certain shareholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government in case of oppression or mismanagement . De facto Directors :- A de facto director is a person who has not been validly appointed or who is disqualified but who in effect occupies the position of, and acts as if he were, a director . Alternate Directors:- Alternate directors are persons who are nominated by a director to act in their absence. An alternate director can only be appointed with the agreement of a majority of the directors.

8. A director shall For the first time, duties of directors have been specified in the Act. ( i ) Act in accordance with the company’s Articles (ii) Act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company (iii) Exercise his duties with due and reasonable care, skill & diligence.

9. A director shall not: ( i ) Involve in a situation where he may have direct or indirect interest (ii) Achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives (iii) Shall not deal in insider trading of shares of the Company

10. Continued… Not to involve ‘self’ or ‘self benefited entity’ as supplier or customer or in other nature Not to have competing business with that of company

11. Director Identification Number DIN essential for appointment as Directors Application to Central Government for DIN to be filed Director to inform DIN to company Company to inform DIN to Registrar Of Companies. Two DIN not permissible

12. Appointment of Directors In public or a private company, a total of two-thirds of directors are appointed by the shareholders. The rest of the one-third remaining members are appointed with regard to guidelines prescribed in the Article of Association . In the case of a private company, their Article of Association can prescribe the method to appoint any and all directors. In case the Articles are silent, the directors must be appointed by the shareholders . The Companies Act also has a clause that permits a company to appoint two-thirds of the company directors to be appointed according to the principle of proportional representation. This happens if the company has adopted this policy.

13. Ways of Appointment of Directors Way # 1. Appointment of Directors by Signatures to the Memorandum : ( Sec. 254 and Clause 64 of Table A ): The Articles of a company usually name the first directors by their respective name or prescribe the method of appointing them Way # 2. Appointment of Directors by Company in the General Meeting : ( Secs. 255 to 257, 263 and 264): Section 255 provides that subsequent directors shall be appointed by the company in general meeting. In the case of a public company or a private company which is a subsidiary of a public company, unless the Articles provide for the retirement of all directors at an annual general meeting, at last two-thirds of the total number of directors shall be liable to retire by rotation and shall be appointed by the company in general meeting.

14. Continued.. Way # 3. Appointment of Directors by Board of Directors (Secs. 260, 262 and 313): In the following cases, the Board of Directors may appoint the directors : ( i ) Additional Directors: Section 260 of the Companies Act empowers the Board to appoint additional directors and Articles of every company also confer this power to the Board. ( ii) Casual Director: The Companies Act empowers the Board to appoint the casual director subject to any regulation in the Articles. The casual vacancy in the office of the director may exist due to retirement, resignation, insolvency or any other reason ( iii) Alternate Director: The Board is empowered to appoint the alternate director if the original director remains absent for more than three months from the date on which the meeting is ordinarily held.

15. Continued.. Way # 4. Appointment of Directors by Third Parties (Sec. 255): The articles may permit the third parties (Vendor , Banking Company, Finance Corporation and Debenture holders) for the appointment of director as their nominee, but the number of directors so appointed should not exceed one- third of the total number of directors and they are not liable to retire by rotation. Way # 5. Appointment of Directors by Proportional Representation (Sec. 265): Directors are appointed individually either by show of hands or by ballot unless the Articles otherwise provide. If the Articles permit, a system of proportional representation may be adopted for the appointment of directors. Way # 6. Appointment of Directors by the Central Government (Sec. 408): According to Sec. 408, the Central Government may appoint the directors but not more than two in number and for the period not exceeding 3 years.

16. Appointment of Managing Directors A managing director must be an individual (a real person) and can be appointed for a maximum period of five years. A managing director of a pre-existing company can be appointed as a managing director of another company as long as the board of directors of the first company are aware and approve of this new appointment.

17. Conditions for Appointing Directors He or she should not have been sentenced to imprisonment for any period, or a fine imposed under a number of statutes. They should not have been detained or convicted for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974. He or she should have completed twenty-five (25) years of age, but be less than the age of seventy (70) years. However, this age limit is not applicable if the appointment is approved by a special resolution passed by the company in general meeting or the approval of the Central Government is obtained.  They should be a managerial person in one or more companies and draws remuneration from one or more companies subject to the ceiling specified in Section III of Part II of Schedule XIII. He or she should be a resident of India. ‘Resident’ includes a person who has been staying in India for a continuous period of not less than twelve (12) months immediately preceding the date of his or her appointment as a managerial person and who has come to stay in India for taking up employment in India or for carrying on business or vocation in India.

18. Removal of Directors The company in general meeting A company can remove a director from the board before his term of office expires. They can pass a resolution in a general meeting upon special notice . Removal by the Government  A director can be removed from office under advice from Central Government. The Central Government chooses to use this power on the recommendation of the Company Law Board/National Company Law Tribunal . Removal by Company Law Board/National Company Law Tribunal  The Company Law Board or the National Company Law Tribunal may remove a director from the board. If found guilty of any inappropriate conduct like fraud, harassment, oppression or any other justifiable cause, he will be removed.

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