Who is a director?

A director is a person who is elected by the shareholders of the company to manage the company operations as per the rules of the Articles of Association and Memorandum of Association. The person who wants to be a company’s director should have a DSC (Digital Signature Certificate) and a DIN (Director Identification Number).

Types of Directors

For a company, several categories of directors are identified that highlight their roles and various responsibilities. The following are the most common types of directors:

• Executive Directors: These types of directors are actively engaged in the daily work management of the company. Usually, they play executive roles such as – Chief Operating Officer, Chief Executive Officer, and Chief Financial Officer.
• Non-Executive Directors: These types of directors generally do not engage in the daily management of the company and provide individual supervision to the board and management of the company.
• Independent Directors: These directors are mainly responsible for protecting the interests of shareholders of the company.
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Common Reasons for Adding / Changing Directors in a Company

There are a few important reasons for adding or changing its directors in a company-

• Introducing New Talent to the Board: For a company’s development, it becomes a necessary step to introduce new talent to the board of directors. This inclusion assists the company face new challenges and other requirements excellently that come with the
  company’s expansion.
• Preventing Ownership Dilution: The primary role of directors is to manage the daily operations. The appointment of additional directors helps shareholders to assign additional operational responsibilities without laying down their strategic control.
• Resolving Inefficiency of Existing Directors: If existing directors are insufficient or unable to manage daily requirements due to problems like health conditions, family concerns, or retirement, then a company may choose new directors to maintain the efficiency of the company.

• Complying with Statutory Requirements: The Companies Act 2013 instruct companies to maintain a particular number of directors. In case, the required number of directors is lower than the minimum due to retirement or death. Then, new directors should be appointed as soon as possible to comply with the legal requirements of the company.

Required Eligibility for a Director

An individual is considered eligible for a director of a company if he meets the following required criteria –

• The minimum age for a director is 18 years old and no minor individual is allowed to become the director.
• The individual should not be disqualified on the base of the provisions of the Company Act 2013.
• There should be mutual confirmation of the Board of Directors, the individual, and the shareholders for the appointment of the new director.

Important Documents for Appointment of Director

• PAN Card
• Identification Proof: such as Driving License, Aadhaar Card, Voter ID, etc.
• Proof of Residence: The director’s residential address proof, such as water and electric bills, rental agreements, etc.
•  Passport Size Photograph
•  A DSC (Digital Signature Certificate)

Steps for Appointing/Adding a Director to a Company

Here is the step-by-step process for adding or appointing a new director to a company – 

1. Review the Articles of Association

The first step in appointing a new director is to review the Articles of Association (AOA) of the company. It should include a specific clause that allows the appointment/addition of directors in the company. If this provision is not present in the current AOA, then it should be changed to insert a clause that permits new directors for the company.

2. Conduct a General Meeting

The company should conduct an annual general meeting and pass a resolution for appointing a director. In case, there is a need to appoint a director in the half year, the company can decide on a director’s appointment by passing a resolution during an Extraordinary General Meeting (EGM). After the appointment, the company should file the resolution in the MGT-14 form with the ROC within 30 days of passing the resolution.

3. Apply for DIN & DSC

When the company passes a resolution for appointing a director in an annual general meeting or extraordinary general meeting, then the selected individual should apply for a DIN (Director Identification Number) and DSC (Director Signature Certificate).

When the DIN is obtained, the presumed director should provide their DIN including a declaration to the company. This declaration states that they are qualified to be a director following the Companies
Act, 2013.

4. Obtain Consent from the Prospective Director

Once the DIN is received, the proposed individual for the director position should submit a DIR-2 form. This form is an official consent that expresses the interest of the proposed individual to serve in this role. Without submitting consent through a DIR-2 form, an individual cannot be appointed as a company director or take charge of the responsibilities of the director’s office.

5. Issue a Letter of Appointment to the Director

The company provides a formal Appointment Letter to the newly appointed director upon completing the necessary steps. This letter includes the terms and conditions of the appointment, responsibilities, different roles, and salary of the director.

6. File Forms DIR-2 and DIR-12 with the ROC

After passing the resolution for the director’s appointment and the submission of Form DIR-2 by an individual, the company officially appoints that individual as a company director. The company is required to file Form DIR-2 and Form DIR-12 with the ROC within 30 days of the appointment. These forms contain the details of specific points related to the director’s appointment.

7. Make Important Entries in the Register of Directors

The company should enter the important information in the Register of Directors.

8. Filing Amendment Applications with GST and Tax Authorities

When a new director is appointed, the company should file the essential applications to update the details of the new director with different regulatory management. This step is necessary as it ensures compliance with regulatory and tax requirements of the company.