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First directors as non-executive directors

S G Shet (Finance Controller) (26 Points)

20 September 2017

Hi CAClub India Team,

I have a query whether a First Director can be an Non-Executive Director i.e. out of 2 First Directors, one intends to be a Non-Executive Director.

Awaiting your inputs on this query.

Thanks & Regards,

S G Shet

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5 Replies

Sudhir Todkar (CS Professional) (1021 Points)
Replied 20 September 2017

Yes, it's not mandatory that first directors should be executive directors only.

Atlest one director should be resident director who stayed in India for total period of not less than 182 days in previous calender year.

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Kalpesh Veer (PCS) (795 Points)
Replied 21 September 2017

Yes, the first director can be a non-executive director.

S G Shet (Finance Controller) (26 Points)
Replied 21 September 2017

Hi Sudhir and Sandeep,

Thanks for your clarification response. The Companies Act '13 is so gargantuan !!!

Our CA is telling that intially both the First Directors would be considered as Non-Executive Directors. Its only when a private limited Co. is incorporated and setup the 1st Board Meeting, it has to submit a form mentioning who would be the Executive and Non-Executive Director. Is that true?

Thanks & Regards,

S G Shet

Sudhir Todkar (CS Professional) (1021 Points)
Replied 21 September 2017

Executive directors are employees of the company. They have a thorough knowledge of the company and they manage the day-to-day operations. In basic terms, the executive directors run the company and deal with the preparation of an implementation of the strategic plans and business plans of the company.

The non-executive directors do not have executive responsibilities and generally focus on board matters. As they are not involved in the day-to-day running of the company, they should be objective and have a more independent perspective of the business. They should have the same access to information as the executive directors and should constructively challenge management when required to ensure the company meets agreed goals and objectives

Now coming to your query: So at the time filling Spice-32 Form do we not mention the designation of the director as an executive or non-executive director.

Venkat Hegde (CA) (86 Points)
Replied 28 September 2017

In my opinion, both of first directors can be non-executive directors. They can remain non executive even after incorporation if they wish to. However, only practical point to be considered would be that, non executive directors are not entitled to receive remuneration and they are entitled for only sitting fees.