Appointment and Resignation of Directors: Easy Procedure

Narendra Kumar

04 Feb, 2019

A company is an artificial person having a legal entity in contemplation of law. It has no physical existence neither soul nor body of its own. It cannot act in its own competency. It can only work with the help of a natural person. Hence, the persons who are in charge of the management of the affairs of an Appointment and Resignation of Directors are termed as directors. So, today in this article we will tell you about the procedure of appointment and registration of all directors on the same date.

Who is the Director of the Company?

The Companies act 2013 does not contain an exhaustive definition of the term “director”. A director is a person who is appointed to perform the duties and functions of the director of a company in accordance with the provisions of the Companies Act, 2013^[1]. Section 2 (34) of the act prescribed that “director” means a director appointed to the Board of Directors.

Under Section 2 (10) of the Companies Act, 2013 a “Board of Directors” or “Board” in relation to a company means the collective body of the directors of the company. At the core of corporate governance, the Board of Directors oversees the management working and protects the long term interests of all the stakeholders of the Company.

A. Appointment of Director under section 152 of the Companies act 2013

The first directors of the company are usually mentioned in the companies’ articles. If not, then subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed. Furthermore, in the case of a One Person Company, an individual being a member shall be deemed to be its first director until the director(s) are duly appointed by the member according to the provisions of Section 152.

1. What is the Minimum Number of directors in a company?

Section 149(1) of the Companies Act, 2013 requires that every company shall have a minimum number of 3 directors in the case of a public company, 2 directors in the case of a private company, and one director in the case of a One Person Company. A public company can appoint a maximum of 15 fifteen directors. In addition, a company may appoint more than 15 directors after passing a special resolution in general meeting and approval of Central Government is not required.

A director can hold a maximum number of directorships including any alternate directorship of a person are 20.  In the case of any public company or private company that either holding or subsidiary company of a public company shall be limited to 10 directorships.

Every listed company shall appoint at least 1 woman director in the Board of Directors within one year from the commencement of the second proviso to Section 149(1) of the Act. Similarly, every other public company having a paid-up share capital of Rs. 100 crores or more or a turnover of Rs. 300 Crore or more as on the last date of latest audited financial statements, shall also appoint at least one woman director within 1 year from the commencement of the second proviso to Section 149(1) of the Act.

1. Types of Director appointed in the company-

The following are the types of director in a company –

1. Managing Director – they are empowered with the full power and charge for the running of the company.
2. Executive Director/ Whole Time Director – they manage the day o day to working of the company. Thus, the Managing Director and Whole-time Director are more accountable and Responsible for the company.
3. Non- Executive Director– they are not into day to day decision making or working.
4. Nominee Director – these are not the actual director but are appointed by the PE/VC investors or banks who have given the loans or shareholders in case of a listed company to represent their interests.
5. Independent Director – they are appointed in the company to guide and ensure good governance.

B. Appointment or Resignations of all Directors at the same time

It is an extremely rare case where all directors of a company resign at the same point of time and in such a situation the resignation of a director is treated as a call taken by the director of a company. There are two scenarios of appointment and Resignation of Director which is as follows-

• Resignation of Director

1. Procedure for the Resignation of the director – in Normal Case

Under section 168 of the Companies Act, 2013 the procedure of resignation of the director is as discussed.

A notice is to be served by the director of the company mentioning the reason for resignation in it specifically. Form DIR- 11 has to be filed by the Director under his digital signature.

Read our article:Change in Directors of Producer Company

The road being taken by the company after the resignation notice –

• After receiving the notice the company have to pass a board resolution in General Meeting and have to intimate the RoC by filing the DIR -12 form mentioning the reason of resignation, Proof of Dispatch and a Notice that is sent to the company within the 30 days from the date of receiving resignation along with the requisite fees as per the Rule 15 of Companies Rules, 2014 with required documents. The company also has to publish the notice on the official website.
• In case, when the resignation letter specifically mentions the approval of the board and the Article of association is silent then the approval will be accepted.

1. Procedure for the Resignation of the director – when all director resign at the same time

• All the members of the board may resign at the same time by serving the notice to the company in the prescribed This scenario can be seen rarest of rare in which the majority of directors resign at the same time because most of the companies are usually run by the family. The Procedure is the same for the resignation of the director which is discussed in the above case.
• A return containing such particulars and documents as may be directed, of the directors and the key managerial personnel shall be filed with the Registrar within 30 days of receiving of the resignation

1. Reasons behind the Resignation of the Director –

• Appointment of Director

When one director or all directors resign at the same time the company doesn’t stop working and new directors get appointed who are expected to carry forward the legacy of the company by maintaining goodwill.

Section 168(3) of the Companies Act, 2013 states that when all the director of a company resign from the Board, the promoter or the central Government in the absence of a promoter shall appoint the required number of directors who are going to hold that seat until the new director will be appointed In a general meeting.

If accompany is empty-handed with no new appointed director than the shareholder of the company comes into the picture as they may have the authority to appoint a new director. According to the Companies Act, 2013 there is no vested power of the shareholders to appoint directors and this power has been delegated to the Board of members of the company.

The company where all directors have resigned faces a lot of difficulties while filing the forms for the appointment of new directors. Therefore, the appointment of directors through e- forms cannot be done as the MCA issued a clarification vide General Circular No. 3/2015 dated March 3^rd, 2015 which states that the RoC may allow any of one of the resigned directors who has an authorized signature of the company to file thee- form as applicable and subject to compliance of other provision of the act of 2013.

Explain the Procedure for the appointment of Director in the Company-

As per the Internal Circular of the MCA dated 6^th October 2017, the following should be followed as per the Standard Operating Procedure for the appointment of a new director for the vacant board of Non- compliant companies in accordance with the terms of section 164(2):

Section 168(3) of the Companies Act, 2013 states that when all the director of a company resign from the Board, the promoter or the central Government in the absence of a promoter shall appoint the required number of directors who are going to hold that seat until the new director can be appointed In a general meeting.

• Notice and Explanatory Statement

The notice issued includes a resolution to appoint a minimum number of directors and also includes the general authority to such appointees for any compliances and representation that they make on the company’s behalf.  

Every person who proposed to get appointed or appointed as a director of the company in general meeting or otherwise shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this act and he has willfully given his consent to hold the office as director and such consent has been filed with the registrar within 30 days of his appointment.

• Under the Annual General Meeting

For Public Company

In the case of a public company, the company secretary has to issue a notice to call for a general meeting in which the new director will be appointed. In the case where there is no company secretary the promoter or a member of the board may take the needful action. The resolution needs to be passed by a minimum number of members as required to constitute a public company.

For Private Company

In the case of private, a promoter or any member of the board can issue a notice to call the general meeting in which the new director is appointed. The resolution needs to be passed by a minimum number of members as required to constitute a private company.

Conclusion

Facing appointments or resignation of directors at the same time is quite difficult for the company and the procedure also involves the deep study of case laws and rules and regulations. We at Enterslice will help you with the appointment and resignation of a director.

Read our article:Disqualification of Directors or Resignation or Removal