Who Can And Cannot Be A Director Of A Company?
In India, a private limited company is one of the most popular business structures. The Directors of a private limited company are crucial to the incorporation and post-incorporation processes. We discuss every facet of being a director in a private limited company in this post.
Meaning of Director in Private Limited Company
The Companies Act of 2013 defines a "Director" as a person appointed to a company's board of directors after company registration online.
A group of people chosen by a company's shareholders to run its business is referred to as the board of directors. A company must only operate via the agency of natural individuals because it is an artificial legal person formed by law.
It is only capable of acting via people, and the Directors are primarily responsible for this. Therefore, a group of people known as the "Board of Directors" is given the responsibility of managing the corporation.
One who supervises, controls, or manages; a person chosen by the shareholders of a company to direct the company's policies. A person appointed or elected by the law, authorised to manage and direct the affairs of a company. These are some additional definitions of a director.
Taking up a Directorship in a Private Limited Company
A Director Identification Number is necessary for someone to be a director of a private limited company (DIN Number). Any person above the age of 18 can apply to the DIN Cell for a DIN Number.
Types of Directors in Company
A "Managing Director" is a Director who has been given significant management authority over the business's affairs under the authority of the company's articles of association, a contract with the company, a resolution adopted by its general meeting, or its board of directors.
An Executive Director, often known as a Full-Time Director, is someone who works for the business full-time.
A simple director who participates in the business brought before the board of directors at board meetings is referred to as an "Ordinary Director." They are neither managing directors nor full-time directors.
Between two annual general meetings, the Board of Directors may nominate an additional director, as long as they abide by the company's articles of association.
The term of office of any additional Directors shall only last until the company's next annual general meeting.
A company's total number of directors, including extra directors, cannot exceed the number of directors set by the articles of association as the maximum size of the board of directors.
An alternate director is a person chosen by the Board of Directors at a general meeting to represent the "original director" when he is away from India for a minimum of three months. Alternate Directors are typically appointed for Non-Resident Indians (NRIs) or overseas partners of a corporation.
Directors who have professional credentials and have no financial stake in the company are referred to as professional directors. Professionals are occasionally appointed to the boards of large corporations to use their managerial skills.
Banks and private equity investors typically impose a condition on the appointment of their representative on the Board of the concerned Company when providing financing or equity assistance to a business. These candidates are referred to as nominee directors.
A nominee director in a One Person Company (OPC) is a person designated by the OPC's sole director to run the business of the OPC in the event of the director's decease or incapacitation.
Maximum and Minimum Number of Directors in Private Limited Company
The only individual who can be appointed as a director of a company is an Individual (live person).
It is not possible to appoint a body corporate or business entity as a director of a company. A special resolution may be passed to increase the number of Directors in a business beyond the maximum of fifteen.
The following are the minimum requirements for directors in a company:
Private Limited Company – Minimum two Directors in case of Private Limited Company
One Person Company – Minimum one Director in case of One Person Company.
Director in Private Limited Company – Residency Requirement
Nothing in the 2013 Companies Act forbids the appointment of a foreign national or NRI as a director of a company.
However, Section 149(3) mandates that each firm have at least one Director who has spent a minimum of 182 days in India throughout the course of the previous calendar year.
Women Director Requirement in Company
A minimum of one female director must be appointed by listed firms and limited companies with paid-up share capital of Rs. 100 crore or more or revenue of Rs. 300 crores or more.
A private limited company is not required to have a female director.
Who Cannot be the Director of a Company?
There are many norms when choosing a director during company registration online. According to section 151 of the Companies Act, 1993, the following person can’t be a director of any company: –
A person who is less than the age of 18 years.
A person who is considered bankrupt.
A person who is prevented from becoming a director or promoter of the company or is prohibited from taking part in any company processes under the following given circumstances: –
· The court disqualifies them.
· They are prohibited by FMA (Financial Management and Accountability Act 1997) or Registrar.
· They have committed any crime.
· They have been convicted of an offense concerning the company’s management, formation, or promotion by any illegal means.
A non-natural person can’t be a director of a company.
A person who the board members of the company do not accept.
A person prevented from becoming a director under the Limited Partnerships Acts 2008.