ADDITION OF A DIRECTOR
- Board Approval: Director is added through a board or shareholder resolution.
- Consent Needed: The person must give written consent to act as a director.
- ROC Filing: Form DIR-12 must be filed within 30 days of appointment.
- Eligibility Check: The person must not be disqualified under company law.
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Definition of Director
A Director is part of the collective body known as the Board of Directors. A Director controls, manages, and directs the day-to-day affairs of a company. Directors are regarded as trustees and agents of the company about its property, assets, and finances. In essence, the Board of Directors manages the company on behalf of the shareholders, and all major decisions are taken at board meetings.
As per the Companies Act, 2013, the minimum number of directors required in a company is:
- Public Limited Company – 3
- Private Limited Company – 2
- One Person Company (OPC) – 1
The maximum number of directors is:
- Public Limited Company – 15
- Private Limited Company – 15
- One Person Company (OPC) – 1
Note: A company may appoint more than 15 directors by passing a special resolution.
Types of Directors
Executive Director
Responsible for the day-to-day operations of the company and actively involved in decision-making related to specific business areas
Non-Executive Director
Not involved in daily operations but contributes by offering strategic advice, oversight, and expertise.
Independent Director
A type of non-executive director who has no financial or other material relationship with the company. Independent directors are mandatory in certain companies as per the Companies Act, 2013.
Need for Appointment of a Director
Directors may be appointed in several scenarios, including:
- To Meet Statutory Requirements
Companies must maintain the minimum number of directors as prescribed by law. If a director resigns and the number falls below the required minimum, a new appointment becomes mandatory. - To Bring in New Skills
To ensure effective governance and business development, companies often appoint directors with specialized knowledge and expertise. - Better Management of Operations
Additional directors help distribute workload and enhance operational efficiency. - Strengthening the Board
A strong board ensures business continuity in unforeseen circumstances, such as resignation, incapacity, or death of a director.
Modes of Appointment of a Director
A director can be appointed by:
The modes of appointment of a director refer to the various legal and procedural methods through which a person can be appointed as a director of a company. These are generally governed by company law in a given jurisdiction (e.g., Companies Act, 2013 in India; Companies Act 2006 in the UK; or relevant corporate statutes in other countries).
- Provisions in the Articles of Association (AOA)
- Shareholders in the General Meeting
- The Board of Directors
- The Central Government
- Nomination by lenders under specific conditions
Procedure for Appointment of Director
- Check the Articles of Association (AOA)
Confirm whether the AOA authorizes the appointment of an additional director. If not, amend the AOA accordingly. - Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)
If the proposed director does not have a DIN, apply using Form DIR-3 with the Ministry of Corporate Affairs (MCA), along with a valid DSC. - Board Approval
If the appointee already has a DIN, pass a resolution at the Board Meeting for appointment as an Additional Director. File Form DIR-12 with the ROC within 30 days of the resolution.
Documents Required for Director Appointment
- Appointment Letter issued by the company
- Board Resolution approving the appointment
- DIR-2 – Consent to act as Director
- DIR-8 – Declaration of non-disqualification under Section 164(2)
- MBP-1 – Disclosure of interest by the Director
FAQ
Who is a Director?
A Director is a member of the Board of Directors responsible for managing and directing the company’s affairs.
What is the maximum number of Directors in a Company?
15 in both Private and Public Companies, unless increased through a special resolution. For OPCs, the maximum is 1.
Is it mandatory to appoint a director if one resigns?
Not always. However, the company must maintain the minimum number of directors at all times. If the resignation leads to falling below the required minimum, the appointment of a new director becomes mandatory.
Can a Director be appointed without a DIN?
No. A valid Director Identification Number (DIN) is mandatory before appointment..
What if a person already has a DIN?
The Board can appoint such a person directly via Board Resolution. Form DIR-12 must be filed with the ROC within 30 days.