Process of Appointment of Director

PROCESS OF APPOINTMENT OF DIRECTOR

ROC BACK OFFICE Section 167(3)

There is confusion in mind of professionals that if all the directors of company are disqualified. Then “how to appoint new directors in the Company ? And many other questions came into mind like:

1. Who is having authority to appoint New Director?
2. As all the directors disqualified then whose DSC will affix on the form?
3. Which Section of Companies Act, 2013 states about the same.
4. What’s the process for appointment of new Director?

In words, if all the directors of company disqualified u/s 164 or vacant office due to any reasons than there will be no director in the Company. However, as per companies act there is limit of minimum no. of directors in the company. Therefore, Company has to appoint new Director and the power for appointment of Director in above situation given in Section 167 of Companies Act, 2013 (Extract given below)

“Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section (1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting.”

Note: As per section 167(3) in the above mentioned situation “Promoters” shall appoint the required number of Directors.

Quick Bites:

Who is Promoters under Companies Act, 2013?

(69) "promoter" means a person

(a) who has been named as such in a prospectus or is identified by the company in the annual return

Referred to in section 92; or

(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(c) In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;”

STEP I: Identify Promoters of Company

First Step in the process is to identify promoters of Company. As per definition generally promoter can be identify form following sources:

• If name of such person mentioned as promoter in Annual Return (i.e. MGT-7)
• If as shareholder or director such person having control over Company.

Note: In general shareholders of Company are considered as promoters as they are having control over business of Company.

STEP II: Decide Person to be appointed as Directors of Company:

Promoters of Company shall identify persons for appointment as Director. Promoters shall take following documents / information from the selected persons:

• DIN of such Directors (DIN is mandatory to appoint as Director of Company)
• Consent of directors being appointed through DIR-2
• Intimation in respect of disqualification through DIR-8
• Interest in other entities in MBP-1
• Identity proofs of the new directors
• Affidavit from new directors being appointed affirming that the name/s of the companies/LLPs in which they are directors and that they are not disqualified to act as Directors.

STEP III: Calling of General Meeting:

After obtaining of above mentioned documents company required to hold General Meeting for passing of resolution u/s 152 for appointment of Directors. As all the directors of company become disqualified they can’t call EGM. Therefore, as per Section 100 shareholder of Company shall call the extra ordinary General Meeting.

1. They will send requisition for same to the Directors and at registered office of Company. (as directors already disqualified)
2. Shareholders (i.e. promoters) shall call for Extra Ordinary General Meeting

Note: Process of calling and holding of EGM shall be same as called and held by Board of Directors. Like:

• Sections 101, 102 etc sections shall be followed.
• Secretarial Standard 2 shall be followed. Etc.

STEP IV: Documents of EGM to be submit with ROC:

After holding of EGM and passing of special resolution for appointment of new directors. Promoters required preparing / maintaining following below mentioned documents:

• Copy of Notice issued to call the general meeting by promoters
• Proof of dispatch of notice along with names of the promoters/ shareholders and their shareholding with copy of share certificates.
• Attendance sheet of the said EGM for appointment of new directors.
• Minutes of said Meeting.

STEP V: Other Documents required SUBMITTING with ROC:

• Certificate from an Auditor that the new Directors being appointed are having valid DIN’s and are not disqualified due to any provisions under Companies Act and are qualified to act as Directors under Companies Act.
• Affidavits from all the disqualified directors citing the name of the Company due to which they were disqualified.
• Filed copy of DIR-12.

STEP VI: Submission of Documents with ROC:

Note: Documents required to be submit with ROC shall be in relation to appointment of one Director only. Because, one director has been updated on MCA website by ROC and company can file DIR-12 of other director by using DSC of director updated by ROC.

Quick Bites:

How to submit documents with ROC?

There are two ways to submit above mentioned documents with ROC.

• Submit above mentioned documents in e-form GNL-1 with DSC of Professional.
• Submit hard copy of above mentioned documents in physical with ROC.

STEP VII: Updating of name of Director by ROC:

ROC will check/ verify all the above mentioned documents. If ROC satisfies with the documents then it will update name of one directors in its record and update same on MCA website.

STEP VIII: Filing of e-form DIR-12 with ROC:

After updating of name of above director, company shall file DIR-12 for appointment of other director and use DSC of First Director.

List of Documents required to be submitting with ROC:

1. Copy of Notice issued to call general meeting by the promoters.
2. Proof of dispatch of notice along with names of the promoters/ shareholders and their shareholding with copies of share certificates.
3. Attendance sheet of the said EGM for appointment of new Directors .
4. Consent of Directors being appointed through DIR-2, intimation in respect of disqualification through DIR-8 and interest in other entities in MBP-1, identity proofs if the new Director being appointed.
5. Minutes of the said meeting
6. Certificate from an Auditor that the new Directors being appointed are having valid DINs and are not disqualified due to any provision under Companies Act and are qualified to act as Directors under Companies Act.
7. Affidavits from all the Disqualified directors citing the name of the Company due to which they were disqualified.
8. Affidavits from new Directors being appointed affirming that the names of the companies/LLPs in which they are Directors and that they are not disqualified to act as Directors.

Also company should submit the covering letter specifying the case of the company clearly about facts of the case proposing the name of one director to be updated through