As we are aware that Companies Act, 2013 is already in force from April 01, 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):
a. Three in case of Public Company.
b. Two in case of Private Company.
c. 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)
New Categories of Directors:
Resident Director:
As per Section 149 sub section 3 of Companies Act 2013, Board of Directors of a company, must have at least one resident director i.e. (Aperson who has lived at least 182 days in India in the previous calendar year)
As per General Circular No. 25/2014 The residence requirement would be reckoned from the date of commencement of section 149 of the Act i.e. 1st April, 2014, The first previous calendar year, for compliance with these provisions would, therefore, be Calendar year 2014. The period to be taken into account for compliance with these provisions will be the remaining period of calendar year 2014 i.e. 1stApril to 31st December).
• Therefore, on a proportionate basis, the number of days for which the director(s) would need to be resident in India. During Calendar year.2014, shall exceed 136 days.
• Regarding Newly Incorporated Companies it is clarified that companies incorporated between 01.04.2014 to 30.09.2014should have a resident director either at the time of incorporation OR within six months of their incorporation.
• Companies incorporated after 30.9.2014 need to have the resident director from the date of incorporation itself.
Women Director:
As per Section 149 (1) (a) second proviso requires certain categories of companies to have At Least One Woman director on the board. Such companies are any listed company, and any public company having-
1. Paid Up Capital of Rs. 100 cr. or more, or
2. Turnover of Rs. 300 cr. or more.
Independent Director:
Independent Director is for the first time introduced in the Companies Act, 2013 under section 149(6)
ARTICLE ON INDEPENDENT DIRECTOR CAN BE VISIT BY GIVEN LINK-
http://www.simpletaxindia.net/2014/08/independent-directors-requirement.html
Additional Directors:
Any Individual can be appointed as Additional Directors by a company under section 161 of the New Act. (COMPLETE PROCESS OF APPOINTMENT OF ADDITIONAL DIRECTOR ALONG WITH DRAFT GIVEN BELOW.)
Nominee Director:
As per Section 161(3). Subject to AOA of company, the Board May appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.( According to term: Subject to AOA of company mean there should be provisions in Articles of Association of Company for appointment of Nominee Director, if there is no provision in Articles of company then alter the provision in AOA).
Alternate Directors:
As per Section 161(2) A company May appoint, if the articles confer such power on company or a resolution is passed (if an Director is absent from India for atleast three months).
• An alternate Director cannot hold the office longer than the term of the Director in whose place he has been appointed.
• Additionally, he will have to vacate the office, if and when the original Director returns to India.
• Any alteration in the term of office made during the absence of the original Director will apply to the original Director and not to the Alternate Director.
Appointment of directors in private companies as per new law:
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 Want to appoint a person as director in meeting other then General meeting Company can do this by appointing such person as additional director.
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)
• Following documents are require from director to appointment 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.
• 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.
• 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.
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).
After receiving all the documents from the director:- FORMAT Get by mail to me
• Call the Board Meeting.
• Pass Resolution for appointment of Additional Director.
• Issue Letter of Appointment.
• File e-form DIR-12 [Along with CTC+ Consent + Letter of Appointment)
• File e-form MGT-14[For disclosure of interest in MBP-1]
Now this person will be Additional Director Till AGM of company. If company want to appoint him as director then regularize the person as director in General Meeting by Share holder Resolution. File form DIR-12 for Change in Designation of Director along with ordinary resolution.
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!
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules under the Companies Act, 2013. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written consent of the author
Regards,
CS Divesh Goyal
PRACTICING COMPANY SECRETARY
csdiveshgoyal@gmail.com
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