Appointment and Resignation of Director

Overview of Appointment and Resignation of Director

It is right that Directors are the working brains of any company, and they are the managerial staff who manage, control and administer the company operations and services. The rotation of directors takes place in two ways – either by choosing the new director or by withdrawing the present. The attempt to change directors is always to ensure an optimum blend of experts and shareholders on board for the concern of the company. The approval of the resignation of the director lies with the parts of the Board of Directors, whereas the appointment of directors should be made through the approval of shareholders. Whether it is an appointment, resignation or removal, the change that does not take effect continuously; then the intimation is made to MCA or Ministry of corporate affairs.

Who is the Director of the Company?

As per the Companies act 2013, there is no exhaustive definition of the word 'director”. A director is an important person of the company who is appointed to execute the duties and functions of the director of a company according to the provisions of the Companies Act, 2013[1]. Section 2 (34) of the act mentioned that 'director” means a director placed to work with the Board of Directors.
As per Section 2 (10) of the Companies Act, 2013, a 'Board of Directors” or 'Board” that is associated with a company means the collective members of the directors of the company. At the core of the corporate organization, the Board of Directors supervises the management working and secures the long term interests of all the Company’s stakeholders.

The Eligibility Criteria to be a Director

There are no specified designated qualifications mentioned or followed to become a director of the company, but an individual should follow the following mentors be a director of the company:

As per the law, a specific natural person only can become a director of any company.

• Determination Of Nationality

  There is no confinement. However, a minimum of one Indian director in the company is compulsory.

• Age Demarcation

  There is no specified fixed age to become a director, but it is necessary for the individual to be skilled to enter into any company contract. Furthermore, in a matter of 'managing director,' 'independent' director or 'full-time' director of an authorized company, the person qualifies to be a director if he or she is 21 years old and is not above 70 years old officially.

• Limit Of Valid Directorship

  At a time, any individual can only be a director of 20 separate companies and out of these 20 companies, ten can be public limited companies.

• DIN Needed

  To qualify to be the director of the company, the individual must obtain a Director Identification Number. The main purpose behind obtaining a DIN is to make ensured that fake directors do no dupery, and in case the person has any black mark such as criminal activity, they can be caught using this unique number.

Ineligibility

• Unsound Mind Or Bankrupt Person

  Any individual who has an unstable mind or is fumbling to make decisions on his own without any second thought cannot be appointed as a director of the company. This includes children, mentally disabled persons, and those with unstable mental faculties. Moreover, individuals or insolvent people who have held bankruptcy claims in a court of law are not qualified to be acting directors.

• Criminal Background

  If the individual has a criminal record or lawful claims and was doomed to confinement for more than seven years, then that individual cannot be a director of the company.

• Pending Overdue Returns

  If the recommended person has not met previous returns in any of the past years, he or she shall be banned from becoming the director.

Classes of Directors Appointed in the Company

• Managing Director: They are issued with the complete power and charge for the full operation of the Company.
• Executive Director: They run the everyday working and operations of the Company, and they are more responsible and efficacious for the Company.
• Non-Executive Director: They are not into day-to-day work, judgment making, or business operations.
• Nominee Director: They are not the primary directors but are selected by the PE/VC investors or banks who have offered the loans or shareholders in case of a recognized company to represent their interests.
• Independent Directors: They are chosen in the Company to oversee and ensure sound governance.