Appointment of regular director in private company
This query is : Resolved
09 January 2016
Please suggest how can we appoint regular Director in Private company. Also provide resolution format. urgent
11 January 2016
As we are aware that Companies Act, 2013 is already in force from April 01ST, 2014, and every professionals is trying his/her best to unlock and decode the provisions of Companies Act, 2013. In this regard an attempts have been made from my side to compile the procedure for appointment of Additional Director in Public Company/ Private Company (Purely Private) taken the route of appointment of Director by Board.
With the new Companies Act, the law has become more stringent for private companies than for public companies, Moving from the Companies Act 1956 to the Companies Act 2013 is like shifting from your old house to a new one. In the old house, where you have stayed for years, everything would have found its own place – the shoes, the clothes, umbrella, first aid, brooms, and whatever else you need in your household. Your legs can find their own way, even in pitch dark of night – they know the way to the bathroom, to the stairs, they even know where the stairs end.
Directors of a company hold the most crucial position in the Company. With the new Companies Act, 2013 (“New Act“) already in force, their position has become even more significant than ever before. They are now formally included within the definition of “key managerial personnel” or “KMP” under Section 2(51) of the New Act.
As per Section 149(1): Every Company shall have a Board of Directors Consisting of Individuals as Director. (It is clear to understand from this line that only an individual can be director of company. Some persons have doubt that other than individual can be director or not). According to this section ONLY AN INDIVIDUAL can be director of company. {The Board shall consist of individuals not of other persons like firms, LLP, companies, gods or other legal persons.}
Minimum No. of Directors as per Section 149(1)(a):
Three in case of Public Company.
Two in case of Private Company.
One in case of One Person Company.
Maximum 15 Directors (If company want to appoint more than 15 directors SPECIAL RESOLUTION Required to pass in General meeting)- Procedure {Simple Process of Holding of Extra-Ordinary General Meeting, which we use in other Matters also)
Appointment of directors in private companies as per new law:
Practicing Company Secretary, GOYAL DIVESH & ASSOCIATES
The liberty given to private companies to self-regulate the appointment process has, surprisingly, been completely taken away Under Companies Act-2013. This sounds completely paradoxical, in view of the fact that in case of public companies, they still have the liberty to self-regulate to the extent of one third of the board strength.
Sec 152 (6) (b) provides liberty, but only to public companies, to appoint one third of the total board by a self-regulated process. While there was an exception to private companies in Sec. 255 (2) of the 1956 Act, that exception has been dropped while transporting the provisions into the new Act.
It could not be the case that such was the intent of the lawmaker – there is absolutely no case for imposing more stringent regulations in case of private companies, than in case of public companies.
Section 152 of the New Act governs the appointment of directors. Certain specific requirements for appointment of director as lay down in the New Act are-
If different person are not named as first director in articles of the company, individual subscribers shall be deemed to be first directors. Every director other than first directors of company shall be appointed in general meeting as per Section 152(2). If company wants to appoint a person as director in meeting other then General meeting Company can do this by appointing such person as Additional Director U/s 161(1) of Companies Act, 2013.
ADDITIONAL DIRECTOR:
Ensure that the director to be appointed by board of directors exercising the power so conferred in them by the Articles of the company is not such a person who has failed to get appointed as a director in a general meeting. (If A proposal is made in General Meeting for appointment of a person as Director, if resolution got failed not passed in that meeting and that person fails to get appointed as a director in a general meeting, then that person can’t appoint as additional director). The additional director has to be appointed till date of next AGM or last date, on which AGM should have been held, whichever is earlier.
PROCEDURE:
First Check whether Articles (AOA) of the Company contain power/authorization to appoint Additional Director read with Section 161(1) of the Companies Act, 2013. {If there is no provisions in Articles of the Company then Alter the Articles of the company to have enabling clause for appointment of Additional Director.
Second Check whether such person have DIN No. or Not. If such person doesn’t have DIN No. then Apply for DIN.
(FOR PROCEDURE OF APPLICATION OF DIN CLICK ON GIVEN LINK: http://www.simpletaxindia.net/2014/07/procedure-to-obtaining-din-director.html) and
(My coming Article Series- 38 will be on Procedure for application of DIN mail me at csdiveshgoyal@gmail.com . . . . . . . . .)
Third following Documents Are Requiring from Director to appoint him as Additional Director.
Consent in writing to act as Director in Form DIR-2 pursuant to Rule-8 of Companies (Appointment & Qualification of Director) Rules, 2014- FORMAT Get by mail to me at
csdiveshgoyal@gmail.com . . . . . . .
Intimation by Director in form DIR-8 in terms of Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that he/ she is not disqualified u/s 164(2) of Companies Act, 2014.- FORMAT Get by mail to me at
csdiveshgoyal@gmail.com. . . . . .
Advisable to take disclosure of Interest in Form MBP-1 pursuant to Section 184(1) read with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014. {One thing should be noted MBP-1 should not be dated earlier than date of his/her appointment as Director}. - FORMAT Get by mail to me at.
csdiveshgoyal@gmail.com. . . . . .
However, if there is nothing to disclose on the part of new Director, even then also require to take form MBP-1 from Director. (NIL disclosure is also a disclosure under section 184(1).
Fourth after receiving all the documents from the director:-
Call the Board Meeting.
Pass Resolution for appointment of Additional Director.
Issue Letter of Appointment.
File e-form DIR-12 [Along with DIR-2 + Letter of Appointment+ DIR-8+ Interest in other entities.)
Make necessary entries in the Register of Directors along with their Shareholding, if any, maintained u/s 170 of Companies Act, 2013.
Now this person will be shown as Additional Director till AGM of company. His tenure will be upto AGM of Company.
Board resolution for taking note of Disclosure of Interest and filing of form MGT.14
Form MBP.1 given by the Additional Director, towards disclosure of interest u/s 184, should be taken note of by the Board of Directors through a separate Board Resolution in next Board Meeting (In the First Board Meeting after appointment of Additional Director).
Hence it is duty of the company to pass board resolution to take note of disclosure of interest by Director and file a copy of that board resolution in MGT.14 within 30 days of passing board resolution as desired by section 117(3) of Companies Act, 2013.
IF THE SECTION IS VIOLATED
Since the 8-lakh odd companies, sitting with more than 16-lakh directors, may not even be aware of this change of law, what is the provision gets violated? There you have section 159 to take care of – which provides for a jail up to six months, of course with/without a fine too!
APPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANY:
If company wants to appoint additional director then there is need to regularize such person in the General Meeting of Company.
By following above mentioned procedure a person can be appointed as additional director of company but to appoint him as permanent director of company procedure as given below:
As per Section 160 (1) of Companies Act, 2013:
If he, or some member intending to propose him as a director, steps involved. (He denotes “Additional Director”).
• Other Person or additional director himself at lease 14 days before the General Meeting left at the registered office of the company,
A Notice in writing under his hand signifying candidature as a director.
Along with the deposit of Rs. 1,00,000/- (Rupees One Lakh) rupees.
• The company shall, at least seven days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office:
by serving individual notices, on the members through electronic mode to such members who have provided their e-mail addresses to the company for communication purposes, -
in writing to all other members
by placing notice of such candidature or intention on the website of the company, if any
Note: Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid, if the company advertises such candidature or intention, at least seven days before the meeting at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district”.
After completion of above process:
The company will pass “Ordinary Resolution” for appointment of such person as directors of the Company.
File e-form DIR-12 for change in designation of director within 30 days of passing of Ordinary Resolution.
With the new Companies Act, the law has become more stringent for private companies than for public companies, Moving from the Companies Act 1956 to the Companies Act 2013 is like shifting from your old house to a new one. In the old house, where you have stayed for years, everything would have found its own place – the shoes, the clothes, umbrella, first aid, brooms, and whatever else you need in your household. Your legs can find their own way, even in pitch dark of night – they know the way to the bathroom, to the stairs, they even know where the stairs end.
Directors of a company hold the most crucial position in the Company. With the new Companies Act, 2013 (“New Act“) already in force, their position has become even more significant than ever before. They are now formally included within the definition of “key managerial personnel” or “KMP” under Section 2(51) of the New Act.
As per Section 149(1): Every Company shall have a Board of Directors Consisting of Individuals as Director. (It is clear to understand from this line that only an individual can be director of company. Some persons have doubt that other than individual can be director or not). According to this section ONLY AN INDIVIDUAL can be director of company. {The Board shall consist of individuals not of other persons like firms, LLP, companies, gods or other legal persons.}
Minimum No. of Directors as per Section 149(1)(a):
Three in case of Public Company.
Two in case of Private Company.
One in case of One Person Company.
Maximum 15 Directors (If company want to appoint more than 15 directors SPECIAL RESOLUTION Required to pass in General meeting)- Procedure {Simple Process of Holding of Extra-Ordinary General Meeting, which we use in other Matters also)
Appointment of directors in private companies as per new law:
Practicing Company Secretary, GOYAL DIVESH & ASSOCIATES
The liberty given to private companies to self-regulate the appointment process has, surprisingly, been completely taken away Under Companies Act-2013. This sounds completely paradoxical, in view of the fact that in case of public companies, they still have the liberty to self-regulate to the extent of one third of the board strength.
Sec 152 (6) (b) provides liberty, but only to public companies, to appoint one third of the total board by a self-regulated process. While there was an exception to private companies in Sec. 255 (2) of the 1956 Act, that exception has been dropped while transporting the provisions into the new Act.
It could not be the case that such was the intent of the lawmaker – there is absolutely no case for imposing more stringent regulations in case of private companies, than in case of public companies.
Section 152 of the New Act governs the appointment of directors. Certain specific requirements for appointment of director as lay down in the New Act are-
If different person are not named as first director in articles of the company, individual subscribers shall be deemed to be first directors. Every director other than first directors of company shall be appointed in general meeting as per Section 152(2). If company wants to appoint a person as director in meeting other then General meeting Company can do this by appointing such person as Additional Director U/s 161(1) of Companies Act, 2013.
ADDITIONAL DIRECTOR:
Ensure that the director to be appointed by board of directors exercising the power so conferred in them by the Articles of the company is not such a person who has failed to get appointed as a director in a general meeting. (If A proposal is made in General Meeting for appointment of a person as Director, if resolution got failed not passed in that meeting and that person fails to get appointed as a director in a general meeting, then that person can’t appoint as additional director). The additional director has to be appointed till date of next AGM or last date, on which AGM should have been held, whichever is earlier.
PROCEDURE:
First Check whether Articles (AOA) of the Company contain power/authorization to appoint Additional Director read with Section 161(1) of the Companies Act, 2013. {If there is no provisions in Articles of the Company then Alter the Articles of the company to have enabling clause for appointment of Additional Director.
Second Check whether such person have DIN No. or Not. If such person doesn’t have DIN No. then Apply for DIN.
(FOR PROCEDURE OF APPLICATION OF DIN CLICK ON GIVEN LINK: http://www.simpletaxindia.net/2014/07/procedure-to-obtaining-din-director.html) and
(My coming Article Series- 38 will be on Procedure for application of DIN mail me at csdiveshgoyal@gmail.com . . . . . . . . .)
Third following Documents Are Requiring from Director to appoint him as Additional Director.
Consent in writing to act as Director in Form DIR-2 pursuant to Rule-8 of Companies (Appointment & Qualification of Director) Rules, 2014- FORMAT Get by mail to me at
csdiveshgoyal@gmail.com . . . . . . .
Intimation by Director in form DIR-8 in terms of Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that he/ she is not disqualified u/s 164(2) of Companies Act, 2014.- FORMAT Get by mail to me at
csdiveshgoyal@gmail.com. . . . . .
Advisable to take disclosure of Interest in Form MBP-1 pursuant to Section 184(1) read with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014. {One thing should be noted MBP-1 should not be dated earlier than date of his/her appointment as Director}. - FORMAT Get by mail to me at.
csdiveshgoyal@gmail.com. . . . . .
However, if there is nothing to disclose on the part of new Director, even then also require to take form MBP-1 from Director. (NIL disclosure is also a disclosure under section 184(1).
Fourth after receiving all the documents from the director:-
Call the Board Meeting.
Pass Resolution for appointment of Additional Director.
Issue Letter of Appointment.
File e-form DIR-12 [Along with DIR-2 + Letter of Appointment+ DIR-8+ Interest in other entities.)
Make necessary entries in the Register of Directors along with their Shareholding, if any, maintained u/s 170 of Companies Act, 2013.
Now this person will be shown as Additional Director till AGM of company. His tenure will be upto AGM of Company.
Board resolution for taking note of Disclosure of Interest and filing of form MGT.14
Form MBP.1 given by the Additional Director, towards disclosure of interest u/s 184, should be taken note of by the Board of Directors through a separate Board Resolution in next Board Meeting (In the First Board Meeting after appointment of Additional Director).
Hence it is duty of the company to pass board resolution to take note of disclosure of interest by Director and file a copy of that board resolution in MGT.14 within 30 days of passing board resolution as desired by section 117(3) of Companies Act, 2013.
IF THE SECTION IS VIOLATED
Since the 8-lakh odd companies, sitting with more than 16-lakh directors, may not even be aware of this change of law, what is the provision gets violated? There you have section 159 to take care of – which provides for a jail up to six months, of course with/without a fine too!
APPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANY:
If company wants to appoint additional director then there is need to regularize such person in the General Meeting of Company.
By following above mentioned procedure a person can be appointed as additional director of company but to appoint him as permanent director of company procedure as given below:
As per Section 160 (1) of Companies Act, 2013:
If he, or some member intending to propose him as a director, steps involved. (He denotes “Additional Director”).
• Other Person or additional director himself at lease 14 days before the General Meeting left at the registered office of the company,
A Notice in writing under his hand signifying candidature as a director.
Along with the deposit of Rs. 1,00,000/- (Rupees One Lakh) rupees.
• The company shall, at least seven days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office:
by serving individual notices, on the members through electronic mode to such members who have provided their e-mail addresses to the company for communication purposes, -
in writing to all other members
by placing notice of such candidature or intention on the website of the company, if any
Note: Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid, if the company advertises such candidature or intention, at least seven days before the meeting at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district”.
After completion of above process:
The company will pass “Ordinary Resolution” for appointment of such person as directors of the Company.
File e-form DIR-12 for change in designation of director within 30 days of passing of Ordinary Resolution.
12 January 2016
Dear We want to appoint Regular Director and not additional Director. Can we do it. Can we call GM for appointment of director.If yes please provide also BR for appointment of Director in GM.
14 January 2016
Yes you can directly appoint the person as regular director by passing an ordinary resolution in general meeting. Please find below desired resolution:
To appoint Mr. Mohit Jain (DIN: 00000000) as a Director and in this regard to consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) and re-enactment thereof for the time being in force), and Article ______ of the Articles of Association of the Company, Mr. Mohit Jain (DIN: 00000000) be and is hereby appointed as a Director of the Company with immediate effect.
RESOLVED FURTHER THAT Mr. Rakesh Pradhan, (DIN: 00000000), Director of the Company, be and is hereby authorized to sign and file Form DIR-12 and all other documents incidental thereto with the Registrar of Companies, National Capital Territory of Delhi & Haryana, and to do all such acts, deeds and things as may be necessary to give effect to this resolution.”
Thanks
To appoint Mr. Mohit Jain (DIN: 00000000) as a Director and in this regard to consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) and re-enactment thereof for the time being in force), and Article ______ of the Articles of Association of the Company, Mr. Mohit Jain (DIN: 00000000) be and is hereby appointed as a Director of the Company with immediate effect.
RESOLVED FURTHER THAT Mr. Rakesh Pradhan, (DIN: 00000000), Director of the Company, be and is hereby authorized to sign and file Form DIR-12 and all other documents incidental thereto with the Registrar of Companies, National Capital Territory of Delhi & Haryana, and to do all such acts, deeds and things as may be necessary to give effect to this resolution.”
Thanks
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25 January 2016
Thank you for reply
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