Guide for Director

  • Introduction
    Director may be defined as an individual who directs, controls or manages the affairs of the Company. A director is a person who is appointed to perform the duties and functions of a company in accordance with the provisions of the Company Act, 2013. Board of Directors” or “Board”, in relation to a company, means the collective body of the directors of the company
  • Minimum and Maximum Number of Directors
    Every company is required to have at least certain number directors in its board.Likewise it is not supposed to appoint directors beyond a certain maximum number. These conditions are given under the Companies Act, 2013 and rules made thereunder.

    • Minimum 2 (two) directors in case of Private Limited Company.
    • Minimum 3 (three) directors in case of Public Limited Company.
    • In the case of one person Company minimum 1 (one) director.
    • A Company can have a maximum of 15 (fifteen) Directors. It may appoint more than 15 directors after passing a Special Resolution in the General Meeting of Shareholders.
      Certain exemptions are given for Section 8 Company / Government Company / Specified IFSC Public Company

  • Digital Signature Certificate (DSC)
    As the whole process remains online, so before doing anything the person intending to become a director must obtain a digital signature certificate (DSC)
  • Director Identification Number (DIN)
    That’s the mandatory requirement for becoming director in a CompanyAny person intending to become a director in a new Company is required to apply for the allotment of Director Identification Number only through SPICe eform at the time of incorporation.Any person intending to become a director in an existing company shall have to make an application in e-Form DIR-3 for allotment of DIN.
  • Age Limit
    To become a director of the company there is no specified age limit. As per the Companies Act, 2013 provides that no company shall appoint or continue the employment of any person as managing director, whole-time director or manager who is below the age of twenty-one years or has attained the age of seventy years. Provided that for appointment of a person who has attained the age of seventy years may be made by passing a special resolution or by such other provisions as applicable under the Companies Act, 2013.
  • Nationality of the Director
    There is no such provision regarding nationality of Directors. A person from any nationality can become the director of the company provided that every company shall have at least one Director who has stayed in India for a total period of not less than 182 days in the previous financial year.
  • Disqualification of a Director
    Disqualification of directors is a way of restricting a person from becoming a director or determining the conditions in which he/ she cannot be appointed as a director of a company. Furthermore, being disqualified as a company director means that he/ she cannot be appointed as the director of any company within the time period specified/ stated by the court or tribunal

  • A director so appointed may either be executive director or non-executive director.
    An Executive Director can be either a Whole-time Director of the company (i.e., one who devotes his whole time of working hours to the company and has a significant personal interest in the company as his source of income), or a Managing Director (i.e., one who is employed by the company as such and has substantial powers of management over the affairs of the company subject to the superintendence, direction and control of the Board). They are generally responsible for overseeing the administration, programs and strategic plan of the organization. Other key duties include fund raising, marketing, and community out reach. The position reports directly to the Board of Directors.In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor a Managing Director.
  • A director to the Board may be appointed as :
    First Director • Resident Director • Women Director • Independent Director • Alternate Director • Additional Director • Small Shareholder Director • Nominee Director • Casual Vacancy
  • Composition of Board of Directors for Listed Entities
    In addition to the above, listed entity will have to be in compliance with Regulation 17 of SEBI LODR Regulations regarding the composition of Board of Directors

  • To act in accordance with the articles of the company;
  • To 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 interest of the company, its employees, shareholders and other stakeholders;
  • To exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment;
  • A director of a company shall not involve in a situation in which he may have a direct or indirect conflicts of interest;
  • A director of a company shall not make or attempt to make undue gain or advantage either to himself or relatives, partners or associates; and
  • A director of a company shall not assign his office and any assignment so made shall be void.

  • Every director should attend the Board meeting of the Company; he shall automatically be vacated from the office of directorship if he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board
  • The Directors must lay the financial statements for approval and adoption at the annual general meeting of the shareholders (Section 129);
  • The directors are responsible for devising proper systems to ensure compliance with the provisions of all applicable laws and to ensure that such systems are adequate and are operating effectively (Section 134);
  • Director needs to ensure that the company complies with obligations relating to corporate social responsibility provided under Section 135;
  • The board is responsible for appointing first auditors (Section 139);
  • A director needs to disclose his interest in a contract with the company (Section 184);
  • A director or any other person in whom the directors are interested should not directly or indirectly accept any loan or any security or any guarantee from the Company in which he holds Directorship.
  • A director is prohibited from engaging in forward dealing of securities (Section 194);
  • The board is responsible for the appointment of whole-time key managerial personnel (Section 203);
  • The directors are responsible for issuance of notice and holding of board meetings and general meetings etc
  • KYC of Directors – Every individual who has been allotted a Director Identification Number (DIN) shall ensure that his KYC is submitted to the Central Government on an annual basis.

  • The directors control the company’s affairs and act as its agent. A company is a legal person; hence the directors are not personally liable for acting on behalf of it. They have a fiduciary relationship with the company and its shareholders. However, if a director acts beyond his power, he can be held personally liable.
  • Personal Liability:
    • Tax liability
    • Company Debts
    • Fraudulent business conduct
    • Default in payment of the share application money
    • Failure to acquire qualification of shares
    • Share application money payment
    • Liability to pay for qualification shares.
  • Civil or Criminal Liability:
    • The directors are guilty of negligence,
    • The directors committed breach of trust,
    • There has been misfeasance,
    • The director has acted ultra vires and the funds of the company have been applied for such an act,
    • Cheque Dishonour , Labour Law offenses and such other criminal liability under the Companies Act or Common Law.