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Appointment & Resignation of Director
Directors play a crucial role in the governance and management of a company. The appointment and resignation of directors are significant events that are regulated by the Companies Act, 2013 in India. The Act outlines specific procedures and requirements that companies must follow when appointing or accepting the resignation of a director.
TaxGuider specialises in navigating the intricacies of the director appointment and removal or resignation process, ensuring full compliance with legal standards and meticulous attention to detail.
Who is the Director of the Company?
As per the Companies act 2013, there is no exhaustive definition of the word ‘director”. A director is an important person of the company who is appointed to execute the duties and functions of the director of a company according to the provisions of the Companies Act, 2013[1]. Section 2 (34) of the act mentioned that ‘director” means a director placed to work with the Board of Directors.
As per Section 2 (10) of the Companies Act, 2013, a ‘Board of Directors” or ‘Board” that is associated with a company means the collective members of the directors of the company. At the core of the corporate organization, the Board of Directors supervises the management working and secures the long term interests of all the Company’s stakeholders.
Documents Required for Appointment of Director as per Companies Act, 2013
- Consent to Act as Director: The proposed director must provide a written consent to act as a director of the company. This document demonstrates the individual’s willingness to assume the responsibilities associated with the directorship.
- Director Identification Number (DIN): Every director must obtain a DIN, which is a unique identification number assigned by the Ministry of Corporate Affairs (MCA). The DIN application form, along with the necessary supporting documents, must be submitted to the MCA for obtaining the DIN.
- Digital Signature Certificate (DSC): A director must have a valid DSC to sign electronic documents and filings. The DSC is issued by certifying authorities approved by the MCA. The director needs to submit the DSC application form along with the required identity and address proofs.
- Appointment Letter: The company must issue an appointment letter to the proposed director, stating the terms and conditions of the appointment. This letter serves as a formal offer of directorship and provides clarity on the director’s roles, responsibilities, remuneration, and other relevant terms.
- Board Resolution: The board of directors of the company must pass a resolution approving the appointment of the director. The resolution should be duly signed and documented as per the prescribed format.
- Declaration of Disqualification: The proposed director must submit a declaration stating that they are not disqualified from being appointed or continuing as a director. This declaration helps ensure that the individual meets the eligibility criteria as per the Companies Act.
- Disclosure of Interest in Other Entities: The director must disclose their interest in any other companies or entities. This information is essential to avoid conflicts of interest and to comply with disclosure requirements under the Companies Act.
- Affidavit of Non-Acceptance of Deposits: The proposed director needs to provide an affidavit stating that they have not accepted any public deposits in contravention of the law. This affidavit helps establish compliance with the provisions related to acceptance of deposits by directors.
- Identity and Address Proofs: The director must submit copies of identity and address proofs such as passport, Aadhaar card, voter ID card, or driving license. These documents are necessary for verification and establishing the director’s identity and residential address.
- Other Statutory Documents: Depending on the nature of the appointment, additional documents may be required. For example, if the director is appointed as an independent director, a separate declaration confirming compliance with the independence criteria must be submitted.
Appointment of Directors
- Obtain Director Identification Number (DIN): The first step in appointing a director is to ensure that the individual has a valid Director Identification Number (DIN). Every individual who intends to become a director in a company is required to apply for a DIN from the Ministry of Corporate Affairs (MCA).
- Conduct a Board Meeting: A board meeting must be convened to discuss and approve the appointment of a director. The board of directors needs to pass a resolution recommending the appointment of the proposed director. The resolution must be duly recorded and documented in the minutes of the meeting.
- Obtain Consent and Declaration: Before appointing a director, the proposed individual must provide their written consent to act as a director of the company. They are also required to furnish a declaration stating that they are not disqualified to become a director under the Companies Act, 2013.
- File the Appointment Form: Once the board has approved the appointment, the company is required to file the necessary forms with the Registrar of Companies (ROC) within 30 days of the appointment. The company must file Form DIR-12, which includes details such as the director’s name, DIN, date of appointment, and other relevant information.
- Update the Register of Directors: The company’s register of directors needs to be updated with the new director’s details, including their name, address, DIN, and other relevant particulars. The register should be maintained at the company’s registered office or at any other place approved by the board.
Resignation of Director under Companies Act 2013
- Intimation to the Board: A director who wishes to resign must first inform the Board of Directors about their intention to resign. The resignation should be tendered in writing, either in physical or electronic form.
- Board Meeting: The Board of Directors is required to convene a meeting to acknowledge and accept the director’s resignation. The board should pass a resolution to this effect and record the same in the minutes of the meeting.
- Intimation to ROC: Within 30 days from the date of resignation, the company must intimate the ROC about the director’s resignation by filing the necessary forms, such as Form DIR-12. The company should also attach a copy of the resignation letter and the minutes of the board meeting.
Vacancy and Appointment: Upon the resignation of a director, a vacancy arises. The company must fill this vacancy within a prescribed period. If the number of directors falls below the minimum required as per the Act, the company must convene a general meeting to appoint new directors within three months.
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