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Appointment and Resignation of Director

It is believed that Directors are the brain and backbone of any company and they are the company head staff who control, manage and administer the whole business operations and services. The procedure of appointment or resignation of Director or replacement of directors of the company takes place in two ways – either by the withdrawal of the present or by choosing the new director. Get the best brains, that is directors on board with a replacement of directors with Kanakkupillai.

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Appointment and Resignation of Directors in India

The appointment and resignation of directors are important processes that impact the overall functioning of a company. Directors are the strategic heads of the company who are responsible for guiding the company’s operations and decision-making. In India, these processes are governed by the Companies Act, 2013, which ensures that companies operate within a framework of corporate governance, compliance, and accountability. The law provides specific guidelines on who can be appointed as a director, the eligibility criteria, and the procedures for both appointing and resigning. These include obtaining a Director Identification Number (DIN), filing forms with the Registrar of Companies (ROC), and complying with certain legal and procedural requirements. Effective management of the appointment and resignation process is essential for ensuring that the corporate governance of the company remains intact and the company does not face unnecessary penalties.

Who is the Director of a Company?

Under the Companies Act, 2013, the term "director" refers to an individual who is appointed to a company's board of directors to manage and oversee its affairs. Though the Companies Act, 2013 does not explicitly provide a detailed definition of a director, Section 2(34) defines a director as someone appointed to the company's board. The board is collectively responsible for managing and governing the company.

Types of Directors

Companies can appoint different types of directors based on the company's structure and needs:

Managing Director (MD): The MD is fully responsible for managing the company’s day-to-day affairs and operations.
Executive Director (ED): An Executive Director is involved in the company's daily operations and may hold specific portfolios, such as finance or operations.
Non-Executive Director (NED): NEDs do not engage in the daily management but provide strategic oversight and advice.
Independent Director: These directors are not involved in the day-to-day management but serve to ensure that the company adheres to governance practices. They are independent of the company’s operations and are expected to offer unbiased guidance.
Nominee Director: Appointed by shareholders or lenders, these directors represent the interests of a specific group, such as private equity investors or financial institutions.

Eligibility Criteria for Becoming a Director

There are no specific academic qualifications required to become a director of a company in India. However, certain conditions must be met:

1. Natural Person

Only a natural person can be appointed as a director. This means that artificial persons, such as companies or associations, cannot be directors.

2. Indian Nationality Requirement

The Companies Act, 2013 does not explicitly mandate that all directors be Indian citizens, but at least one Indian resident director must be on the board.

3. Age Requirement

As per the Companies Act, 2013 and the SEBI LODR Regulations, the minimum and maximum age of directors of the company is as follows:

Director Type	Company Type	Minimum Age	Maximum Age
Managing Director (MD), Whole-Time Director (WTD), or Manager	Non-Listed Companies	21 years	70 years
Independent Director (ID)	Non-Listed Companies	18 years	No Limit
Independent Director (ID)	Listed Companies	21 years	75 years
Non-Executive Director (NED)	Non-Listed Companies	18 years	No Limit
Non-Executive Director (NED)	Listed Companies	18 years	75 years
Other Directors (Non-MD, Non-WTD, Non-Manager)	Non-Listed Companies	18 years	No Limit
Other Directors (Non-MD, Non-WTD, Non-Manager)	Listed Companies	18 years	No Limit

4. Limit on Directorships

A person can hold directorships in a maximum of 20 companies, of which only 10 can be public companies.

5. Director Identification Number (DIN)

Before being appointed as a director in a company, a person must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).

Disqualification of Director

Specific individuals are disqualified from becoming directors:

Unsound Mind or Insolvency: Individuals declared as mentally unsound by a court or those declared insolvent cannot serve as directors in a company
Criminal Convictions: A person who has been convicted and sentenced to imprisonment for more than six months is not eligible to become a director.
Non-filing of Returns: Individuals who have failed to file financial returns of previous companies they were associated with may not be eligible to become a director.
Bankruptcy: Individuals who have been declared bankrupt are not eligible to serve as directors.

Documents Required for Appointment and Resignation of Director

Various documents are required for both appointing and resigning a director:

1. For Director Appointment:

PAN Card of the director
Proof of identity such as a Passport, Voter ID, Aadhar
Proof of address such as Aadhar, Passport, Voter ID
Recent Passport-Sized Photograph
Director Identification Number (DIN)
Digital Signature Certificate (DSC)
Disclosure of Interest in the form MBP-1
Form DIR-2: Consent to act as a director
Form DIR-8: Intimation of not being disqualified under Section 164 of the Companies Act, 2013.
Form DIR-12: To be filed with the Registrar of Companies (ROC)

2. For Director Resignation:

Resignation Letter from the Director
Form DIR-11: Notice of Resignation from the Director
Form DIR-12: Intimation of resignation of the director to the ROC
Copy of the resignation notice submitted to the board
Written approval in the Board Resolution of the resignation
Acknowledgement of the resignation from the Registrar of Companies (ROC)

NOTE: If the director is a foreign national, additional documentation such as apostilled copies of identification and proof of address may be required.

Appointment of Directors in India

The appointment of a director can take place in two major events:

1. At the Time of Incorporation:

First Directors: The first directors are appointed during the company registration. These directors are usually the signatories to the Memorandum of Association (MOA).
According to the Companies Act,2013, the first directors do not need to have a Director Identification Number (DIN) at the time of incorporation; however, they must apply for one after the company is incorporated.
Form DIR-12, giving particulars about the first directors, must be filed with the Registrar of Companies (RoC) within 30 days of the company's incorporation.

2. Subsequent Appointment:

After the company is incorporated, the Board of Directors can appoint additional directors according to its requirements.
Form DIR-12, giving particulars about the first directors, must be filed with the Registrar of Companies (RoC) within 30 days of the appointment of directors.

Procedure for Appointing a Director

1. Board Resolution: A board meeting is convened to discuss and approve the appointment of a new director.

2. Shareholder Approval: Depending on the type of appointment and the company's Articles of Association, shareholder approval may also be necessary. Approval is obtained through an Ordinary or Special Resolution passed at a General Meeting.

3. Intimation to Registrar of Companies (RoC): After the appointment of the director, the following form needs to be filed with the Ministry of Corporate Affairs (MCA):

Form DIR-12: This form informs the RoC about the new appointment of the Director(s). It must be filed within 30 days of the appointment.
Form DIR-2: Consent to act as a director.
Form DIR-8: Declaration of non-disqualification.

4. Obtain Director Identification Number (DIN): DIN is mandatory for all directors under the Companies Act, 2013.DIN can be applied for using Form DIR-3. A PAN card, proof of identity, proof of address, and a passport-sized photograph of each director must be attached to the form.

5. Issue Appointment Letter: The company issues a formal appointment letter to the new director, outlining the terms and conditions of their appointment.

6. Update the Company Records: After the appointment, the company needs to maintain the Register of Directors and Key Managerial Personnel (KMP).

Resignation of a Director in India

As per Section 168(1) of the Companies Act, 2013, a director may resign from their office by giving a written notice to the company. Upon receipt of such notice, the board must take note of the resignation, and the company is required to intimate the Registrar of Companies (RoC). The director's resignation becomes effective on the date the company receives the notice or on the date specified in the notice, whichever is later.

Reasons for Resignation

Directors may resign due to various reasons, including:

Personal Reasons: Health issues or personal circumstances may require a director to step down.
Disputes with the Board: Conflicts of interest of the director with the other board members or disagreements on company strategy may prompt a director to resign.
Corporate Reasons: Discontent with company policies, financial instability, or ethical concerns
Career Opportunities: A director may resign to take up more lucrative or challenging opportunities elsewhere.
Mismanagement or Unethical Practices: If a director feels that the company is engaging in unlawful or unethical practices, they may resign to protect their reputation and legal standing.

Procedure for Resignation of Director

1. Submit the Resignation

The director intending to resign must submit a written notice to the company. This notice should include:

Effective Date of Resignation.
Reasons for resignation (optional but advisable)

Upon receiving the resignation notice, the company should:

Acknowledge receipt of the resignation.
Schedule a Board Meeting to take note of the resignation.

2. Board Meeting and Resolution

In the board meeting, the directors should

Acknowledge the resignation of the director.
Pass a Board Resolution recording the resignation and its effective date.

NOTE: The resignation and board resolution are documented in the minutes of the meeting.

3. Filing with Registrar of Companies (RoC)

The company must file Form DIR-12 with the RoC within 30 days of the date of resignation. This form should include:

Details of the director's resignation.
Board Resolution acknowledging the resignation.

4. Update Company Records

The Company is mandated to update its Register of Directors and Key Managerial Personnel to reflect the changes made.

Impact of Registration of Directors

The resignation becomes effective on the date the company receives the resignation notice or any later date specified in the notice.
The resigning director remains liable for any actions or omissions that occurred during their tenure.
The company must update the Register of Directors and Key Managerial Personnel to reflect the resignation.
If resignation results in fewer than the minimum required directors, the company must appoint new directors to comply with legal requirements.
A director may withdraw their resignation before it becomes effective, provided the board agrees to the withdrawal.

Why Choose Kanakkupillai for Director Appointment and Resignation in India?

When it comes to appointing or resigning directors, it's not just about filling out the form; it's about ensuring your business complies with the legal requirements outlined in the Companies Act, 2013. At Kanakkupillai, we provide:

In-Depth Knowledge of Company Law: We have experience handling director appointments and resignations, ensuring full compliance with all provisions of the Companies Act, 2013. Whether it is a new appointment, a resignation, or filling casual vacancies, we ensure that everything is done according to the law.
Complete Documentation: We handle the entire process for you, from drafting the necessary documents to submitting forms like DIR-12. We ensure that all documents are prepared accurately and filed with the Registrar of Companies (RoC) in a timely manner.
Customized Solutions: We understand that every business is different and thus has different needs. Whether you are a private limited company, a public limited company, or a subsidiary, we offer tailored support that fits your company’s structure and specific needs.
Ongoing Compliance Assistance: Our support does not end with the filing. After the appointment or resignation, we help ensure that your company’s records are correctly updated, and we assist with any additional filings required by the Ministry of Corporate Affairs (MCA).

Frequently Asked Questions

What role does the Director Identification Number (DIN) play in the appointment of a director in India? +

A Director Identification Number (DIN) is mandatory for all directors. It is used to track compliance and file documents with the Ministry of Corporate Affairs (MCA). Directors must obtain a DIN before their appointment.

Can a foreign national be appointed as a director of an Indian company? +

Yes, a foreign national can be appointed as a director of an Indian company, but certain conditions apply. The individual must have a valid Director Identification Number (DIN) and must comply with all regulatory requirements. However, at least one director must be a resident Indian.

How can a company ensure that its directors remain compliant with the eligibility criteria under the Companies Act, 2013? +

A company should verify that directors meet the eligibility requirements, such as being natural persons, having a valid DIN, and not being disqualified due to insolvency or criminal conviction. Regular checks ensure ongoing compliance.

What is the process for appointing an independent director in a listed company under Indian law? +

The appointment of an independent director in a listed company requires board approval and a special resolution from shareholders. Form DIR-12 must be filed with the Registrar of Companies (RoC) to formalize the appointment.

What is the role of an Independent Director in a company? +

An independent director is not involved in the company's day-to-day management. They provide unbiased advice, ensure the company adheres to legal and ethical standards, and protect the interests of shareholders.

What happens if the company fails to file the resignation of a director with the Registrar of Companies (RoC) within 30 days? +

Failure to file Form DIR-12 within 30 days of resignation can result in a fine of ₹5,000 to ₹50,000 for the company.

Can a director resign voluntarily without any board meeting or approval? +

Yes, a director can resign by submitting a written notice. However, the board must acknowledge the resignation, and the company must inform the Registrar by filing Form DIR-12.

What is the impact on a company if a director’s resignation leaves it with fewer than two directors? +

A private limited company must have at least two directors. If one resigns and the company has fewer, new directors must be appointed immediately.

Are there any penalties for a director if they fail to resign in accordance with the prescribed procedures? +

If a director fails to follow the proper resignation procedure, such as not filing Form DIR-11 or not notifying the company correctly, they may face a fine of ₹5,000 to ₹50,000.

Can a director resign from a company if they are involved in ongoing litigation or legal proceedings? +

Yes, a director can resign during ongoing litigation, but they remain liable for actions taken during their tenure. Resignation does not absolve them from past responsibilities or legal proceedings. They may still face legal action if their actions during their tenure led to non-compliance.