CENTRAL UNIVERSITY OF SOUTH

BIHAR

SCHOOL OF LAW AND GOVERNANCE

Project Work Of Company Law
Topic-Directors:MeaningLegal Position,
Appointment& Re-appointment

Name : archit virendra sharma

Course : B.Sc. LLB. (Hons.)
Semester : 7th
Enrollment No. : CUSB1513115022
Submitted To : Dr. P.K. Das
 ACKNOWLEDGEMENT
It is a great pleasure for me to present the final draft of the project topic. I
am very much obliged to my revered teacher Dr. Pradeep Kumar Das
(Associate Professor of Central University of South Bihar, Gaya who has
given me a task to complete the project work. I am very much helped by
him regarding the formation of this final project.
I express my heartfelt indebtedness to Dr. Pradeep Kumar Das who
showed me the path and helped me to understand the project topic. It was
not possible for me to make the final project if I was not being helped by
him. He acted as my mentor and also a guide to help me to understand the
whole of the provision and provided me with the proper synopsis of the
project work.
I would like to express my gratitude towards my parents for their kind co-
operation and encouragement which help me in completion of this final
draft.
My thanks and appreciations also go to my colleague in developing the
project and people who have willingly helped me out with their abilities.

Thanks

INDEX
Sr. no. CONTENTS Pg no.
01. Introduction 04
02. Meaning of Directors 05
03. Who may be appointed as directors? 06
04. Qualifications and disqualifications of directors 07
& number of directors
05. Legal Position
 Director as agent 08-09
 Director as trustee 10
 Director as managing partners 11
 Director as officers 11
 Director as employees 11
 Director as organs of company 12
06. Kinds of Directors 13
07 . Appointment
 Provisions related to appointment 14-15
 Appointment of Ist Director 17
 Appointment of directors at general 17
meeting
 Appointment by Board of Directors 18-19
 Resident Director 19
 Independent Director 19-20
10. Re-appointment of Directors 21
11. Conclusion 22

INTRODUCTION
The Companies Act, 2013 does not contain an exhaustive definition of the term “director”.
The Companies Act does not precisely define the term ‘director’. Section 2 (34) of the Act
prescribed that “director” means a director appointed to the Board of a company. The
supreme executive authority controlling the management and affairs of a company vests in
the team of directors of the company. At the core of the corporate governance practice is of
Directors which oversees how the management serves and protects the long term interests of
all the stakeholders of the Company. Directors of a company hold the most crucial position in
the Company. With the new Companies Act, 2013 already in force, their position has become
even more significant than ever before.

A director is a person appointed to perform the duties and functions of director of a company
in accordance with the provisions of the Companies Act, 2013. The directors are the persons
elected by the shareholders to direct, conduct, manage or supervise the affairs of the
company. They are individuals that are elected as, or elected to act as, representatives of the
stockholders to establish corporate management related policies and to make decisions on
major company issues. They act on the basis of resolutions made at directors’ meetings, and
derive their powers from the corporate legislation and from the company’s AOA.The success
of the company depends, to a very large extent, upon the competence and integrity of its
directors. As the company’s agents, they can bind the company with valid contracts entered
into with third-parties such as buyers, lenders, and suppliers. They are the trustees for the
firm and whether appointed validly or not, they are individually and collectively liable for the
acts and/or negligence of the firm. Unlike stockholders, directors cannot vote by proxy and,
unlike employees, they cannot absolve themselves of their responsibility for the
delegated duties. It is, therefore, necessary that management of companies should be in
proper hands.
The board of directors are brain of company as the company is only body.

Bath v. Standard Land Company1

A company is an artificial being. It has no physical existence of its own. It can work through
only human agency that is directors and collectively known as board of directors.

Directors perform functions in different position. There are various legal position of directors.
It is difficult to define the exact legal position of directors. They have been described as a
company’s ‘directing mind and will’. They are the human agents of a company tasked with
its management. Although the office they hold also resembles that of a trustee or a managing
partner, directors remain creatures of statute, occupying a position ‘peculiar to themselves’.
The appointment of directors is accordingly strictly regulated by the act. There are now
special provisions for preventing management by undesirable persons. A director apart from
being the agent and trustee of the company, can also be treated as officer of the company,
hence an employee for purposes specified in the Act. 

1
[1910] 2 CH 408
MEANING OF A DIRECTOR:

Section 2(13) of the Companies Act, 1956 defines a ‘director’ as including “any person
occupying the position of a director by whatever name called “. Thus, it is not the name by
which a person is called but the position he occupies and the functions and duties which he
discharges that determine whether in fact He is a director or not.

Section 2 (34) of the Companies Act, 2013

This act prescribed that “director” means a director appointed to the Board of a company.

In Re, Forest of Dean Coal Mining Co.,

It was stated that function is everything; name matters nothing. So long as a person is duly
appointed by the company to control the company’s business and authorised by the articles to
contract in the company’s name and on its behalf, he functions as a director. A company is
indeed a person but juridical person and the directors as a body endow the juridical person
with human face that can act and react.

According to Sec. 2(30) of the Act,

“A director is the officer of the company.”

According to Sec.303 Explanation (1),

“Any person, in accordance with whose directions or instructions, the Board of Directors of
the company is accustomed to act, shall be deemed to be director of the company.”

Under the scheme of the Companies Act, the company itself and its directors or the Board of
directors are primary agents of the company to transact its operations. The Companies Act
specifies where the company itself is to act both as principal and the agent and where the
Board of directors is to act on its behalf. In respect of the properties and assets of the
company the directors or the Board of directors act as Trustees. Therefore, the directors have
different attributes in relation to the company depending upon the facts of each
case. Directors apart from being trustees for the assets and properties of the company are also
the agents of the company as it is the directors, collectively as Board, act on behalf of the
company on all matters except those specifically reserved for the company to act. However, it
may be noted that even though the directors for certain purposes can be considered as the
agent of the company, yet in respect of such matters for which the directors (i.e., the Board)
are empowered to take a decision, the company in any manner, including in the general
meeting, cannot direct the directors to take a particular decision. A director is a person
appointed to perform the duties and functions of director of a company in accordance with the
provisions of the Companies Act, 20132.

Who may be appointed as a Director?

2
www.lawoctopus.com
Section 149 of the Companies Act provides that only an individual can be appointed as
director. Thus, no body corporate, association or firm can be appointed director of a
company. However, no person shall be appointed as a director of the company unless he has
been allotted a Director Identification Number (DIN) or such other number as may be
prescribed under section 153. Section 153, as amended by the Companies (Amendment) Act,
2017 provides that the Central Government may prescribe any identification number which
shall be treated as Director Identification Number for the purposes of this Act [Section
152(3)].

Section 153 requires that every individual intending to be appointed as director of a company
shall make an application for allotment of Director Identification Number to the Central
Government in such form and manner and along with such fees as may be prescribed.
However, Central Government may prescribe any other Identification number as a DIN.

Application for allotment of Director Identification Number before appointment in an

existing company:

As per the Companies (Appointment and Qualification of Directors) Amendment Rules,

2018,

(a) Every applicant, who intends to be appointed as director of an existing company shall
make an application electronically in Form DIR-3, to the Central Government for allotment
of a Director Identification Number (DIN) along with such fees as provided under the
Companies (Registration Offices and Fees) Rules, 2014. However, in case of proposed
directors not having approved DIN, the particulars of maximum three directors shall
be mentioned in Form No. INC-32 and DIN may be allotted to maximum three proposed
directors through Form INC-32.

(b) Form DIR-3 shall be signed and submitted electronically by the applies“1t using his or
her own Digital Signature Certificate and shall be verify digitally by a company secretary in
full time employment of the company Or by the managing director or director or CEO or
CFO of the company in which the applicant is intended to be appointed as director in an
existing company.

The Central Government shall, within one month from the receipt of the application under
section 153, allot a Director Identification Number to an applicant in such manner as may be
prescribed [Section 154].

No individual, who has already been allotted a Director Identification Number. Under section
154, shall apply for, obtain or possess another Director Identification Number [Section 155].

Contravention of section 155 will make the director punishable with imprisonment for a term
which may extend to six months or with fine which may extend to fifty thousand rupees and
where the contravention is a continuing one, with a further fine which may extend to five
hundred rupees for every day after the first during which the contravention continues [Section
159].

Company is required to inform DIN of a director to the Registrar within 15 days [Section
157]3.
3
“Taxmann”, Company Law and Practise, 23rd edition 2018( pg no-436)
Qualifications for Directors:

The Companies Act has not prescribed any academic or professional qualifications for
directors. Also, the Act imposes no share qualification on the directors. So, unless the
company’s articles contain a provision to that effect, a director need not be a shareholder
unless he wishes to be one voluntarily. But the articles usually provide for a minimum share
qualification.

Disqualifications of a Director:

Section 164(1) of the Companies Act, 2013 provides that a person shall not be eligible for
appointment as a director of a company, if -

(a) he is of unsound mind and stands so declared by a competent court;

(b) he is an undischarged insolvent;

(c) he has applied to be adjudicated as an insolvent and his application is pending;

(d) he has been convicted by a court of any offence, whether involving moral turpitude or
otherwise, and sentenced in respect thereof to imprisonment for not less than six months.
However, this disqualification will last only up to five years from the date of expiry of the
sentence.

But, if a person has been convicted of any offence and sentenced in respect thereof to
imprisonment for a period of seven years or more, he shall not be eligible to be appointed as
director in any company4.

Number of Directors:

Every public company by virtue of Sec. 43 A, shall have at least three directors, private
company shall have at least two directors [Sec. 252]. Subject to this minimum number of
directors, the articles may fix the minimum and maximum number of directors for its board
of directors. The company in the general meeting may by ordinary resolution, increase or
reduce the number of its directors within the limit fixed in that behalf by the articles.
[Sec.258] In the case of a public company or a private company which is a subsidiary of a
public company any increase which is beyond the limit fixed by articles must be approved by
the Central Government and such an increase shall become void if disapproved by the Central
Government. However, no approval of Central Government shall be required if the increase
in the number of directors does not exceed twelve. [Sec. 259]

This provision is not applicable to a Government Company and to a private company which
is not a subsidiary to a public company.

LEGAL POSITION OF DIRECTORS:

The Act does not define the position/status of directors, and it is difficult to define the exact
legal position of the directors of a company. Although, the directors have been referred as the
4
www.legalserviceindia.in
trustees, or the managing partners of the company, but in real sense they are none of them.
Directors may be considered as the agent, trustees or managing partner for a particular
moment and for the particular purpose.

Bowen, L.J. observed,

“Directors are described sometimes as managing partners. But each of these expressions is
used not as exhaustive of their powers and responsibilities, but as indicating useful points of
view from which they may for the moment and for the particular purpose be considered.”

The legal position of directors can be better explained in the following manner:
1. Directors as Agent.
2. Directors as Trustees.
3. Directors as Managing Partners.
4. Directors as employees.

1) DIRECTORS AS AGENT:

The company being an artificial person cannot manage its affairs itself but the management
of the company is entrusted to some human agency known as directors. They are the selected
representatives of the shareholders. They run the business on behalf of the shareholders and
may be termed as the agent of the company. Directors may correctly be described as agents
of the company. Cairns, LJ observed: “The company itself cannot act in its own person; it can
only act through directors, and the case is, as regards those directors, merely the ordinary case
of principal and agent”. The ordinary rules of agency will, therefore apply to any contract or
transaction made by them on behalf of the company. Where the directors contract in the name
and on behalf of the company it is the company which is liable on it and not the directors.
Thus, where chief executive of company executed promissory note and borrowed amount for
company’s sake, it could not be said that amount was borrowed by him in his personal
capacity – Kirlampudi Sugar Mills Ltd. v, G. Venkata Rao5.

Directors as agents make the company liable even for contempt of court [Vineet Kumar
Mathur v. Union of Jndia]. However, directors incur a personal liability in the following
circumstances:

5
[2003]42 SCL 798 (AP)
 1. where they contract in their own names;
2. where they use the company’s name incorrectly, g., by omitting the word ‘Limited*;
3. where the contract is signed in such a way that it is not clear whether it is the principal
(the company) or the agent who is signing; and
4. where they exceed their authority, g., where they borrow in excess of the limits
imposed upon them – Weeks v. Propert6

In the case of Forguson vs. Wislon, Cairns L.J. stated the position of the directors as, “They
are merely agents of the company. The company itself cannot act in its own persons for it has
no person, it can act ‘only through directors’ and the case is, as regards those directors,
merely the ordinary case of principal and agent, for whenever an agent is liable, those
directors would be liable. Where the liability would attach to the principal and the principal
only, the liability is the liability of the company.”

In Great Eastern Railway vs. Turner, it was held that the directors are agents in the
transaction which they enter into on behalf of the company.

The directors must act in the name of the company and within the scope of their authority. If
the directors enter into a contract which is beyond their powers but within the powers of the
company, the company, like any other principal, may ratify it. Where the directors enter into
a contract which is ultra vires the company, the company cannot ratify it and neither the
company nor the directors are liable on it. However the directors may be held liable for
breach of implied warranty of authority7.

2) DIRECTORS AS TRUSTEE:

A trustee is a person in whom is vested the legal ownership of the assets which they
administer for the benefit of another or others. Directors are regarded as trustee of the
6
[1873] LR 8 CP 427

7
C R Datta, on the Company Law ,Lexisnexis Butterworths, edition 6th , year 2008
company's assets, and of the powers that vest in them because they administer those assets
and perform duties in the interest of the company and not for their personal advantage.

In Ramaswamy Iyer v. Brahmayyam 8, the Madras High Court held that “The directors of a
company are trustees for the company, and with reference to their power of applying funds of
the company and for misuse of the power they could be rendered liable as trustees and on
their death the cause of action survives against their legal representatives". 

Besides, almost all the powers of directors, e.g., of allotting shares, making calls, forfeiting
shares, accepting or rejecting transfers, etc., are powers in trust. “They have been made liable
to make good money which they have misapplied, upon the same footing as if they were
trustees." Fiduciary capacity, within which directors have to act, enjoins upon them a duty to
act on behalf of a company with utmost good faith, utmost care and skill and due diligence
and in interest of company they represent- Dale & Carrington Investment (P.) Ltd. v. RK
Prathapan.9

The directors are the trustees in respect of powers entrusted to them. They must exercise
these powers bonafied and for the benefit of the company as a whole10.

Examples of such powers are as follows:

(a) The power of employing the funds of the company;

(b) The power to declare dividend in the general meeting;

(c) The power to make call;

(d) The power of forfeiting shares;

(e) The power of receiving payment of call in advance;

(f) The power of approving the transfer of shares;

(g) The power of accepting the surrender of shares;

(h) The power of issuing the unissued shares of the company and making allotments thereof.

The position of directors as Trustee can be briefly stated as under:

(i) They are not trustees in the legal sense of the term.

8
[1966] 1 Comp. LJ 107 (Mad.)
9
[2004] 54 SCL 601 (SC)
10
C R Datta, on the Company Law ,Lexisnexis Butterworths, edition 6th , year 2008
(ii) They occupy a fiduciary position in relation to the company and they are considered
trustees with respect to the company’s property and money.

(iii) They are also trustees as regards powers entrusted to them. They must exercise these
powers bonafied in the interest of the company and they are accountable for secret profits
made by them, if any.

(iv) They are not trusted of individual shareholders.

3) DIRECTORS AS MANAGING PARTNERS:

The persons holding this view consider a company as large partnership, directors being
charged with the responsibility of managing the affairs. The other shareholders are virtually
dormant partners. By virtue of the various provisions in the Memorandum and Articles, they
enjoy vast powers of management and act as the supreme policy and decision making
body. Directors have been described as the managing partners because, on the one hand, they
are entrusted with management and control of the affairs of the company, and on the other
hand, they are usually important shareholders of the company.

However, directors are not partners in the ordinary partnership law sense in as much as the
liability of a partner is unlimited whereas the liability of a director as a member is limited to
the value of shares held by him (except in the case of unlimited companies). Further unlike a
partner, director has no authority to bind the other directors and shareholders11.

4) POSITION OF DIRECTORS AS OFFICERS:

Under Sec. 2 (30) of the Companies Act, the directors are the officers of the company. As
officers, they may be held liable if the provisions of the Companies Act have not been fully
complied with by them.

5) POSITION OF DIRECTORS AS EMPLOYEES:

The directors may be considered as the employees of the company also, because they work
under a special contract of service with the company and are paid remuneration accordingly 12.
Ordinarily, a director is elected by the shareholders in general meeting, and once so elected;
he enjoys well-defined rights and powers under the Act or the articles. Even the shareholders
who elect them cannot interfere with their rights or powers except under certain
circumstances. An employee appointed by the company under a contract of service is a
servant of the company. He does not enjoy any powers other than those vested in him by the
employer, who can always direct his actions and interfere in his work.

11
“Taxmann”, Company Law and Practise, 23rd edition 2018( pg no-440)

12
Avatar Singh, Company Law, 17th edition,2018
In Lee Behrens & Co., Re13, it was observed that directors are elected representatives of the
shareholders engaged in directing the affairs of the company on its behalf. As such directors
are agents of the company but they are not employees or servants of the company. However,
there is nothing in law to prevent a director from accepting employment under the company
under a special contract which he may enter into with the company – R.R. Kothandaraman v.
CIT (1957).

Accordingly, where a director accepts employment under the company under a separate
contract of service, in addition to the directorship, he is also treated as an employee or servant
of the company. He shall, in such a case, be entitled to remuneration and other benefits
admissible to employees, in addition to his remuneration as Director under the Act. Besides,
directors are also treated as officers of the company for certain matters and are bracketed with
the manager, secretary, etc. for this purpose. As ‘officers in default’, they are liable to certain
penalties for failure to comply with the provisions of the Act.

6. POSITION OF DIRECTORS AS ORGANS OF COMPANY:

Directors have also been treated, in judicial decisions, organs of the company for whose
action the company is to be held liable just as a natural person is liable for the actions of his
limbs14.

In Bath vs. Standard Land Co., Neville J. stated, “The board of directors are the brain and
the only brain of the company which is the body and the company can and does act only
through them.”

Considering the above discussion, Gessel said: “Directors are described as trustees, agents
or managing partners, not as exhausting their powers or responsibilities, but as
indicating useful points of view.”
Thus, it is clear from the above discussion that directors are neither the agents, nor the
trustees, nor managing partners, nor officers, nor employees of the company but they stand in
a fiduciary position towards the company for the powers and company’s property under their
control.

KINDS OF DIRECTORS:
Under the Companies Act, 1956, the following kinds of directors are recognized:

1) Ordinary Directors

13
[1932] 2 Comp. case 588

14
Avatar Singh, Company Law, 17thedition,2018
Ordinary directors are also referred to as simple directors who attends Board meeting of a
company and participate in the matters put before the Board. These directors are neither
whole time directors nor managing directors.

2) Whole-time/Executive Directors

Whole-time Director or Executive Director includes a director in the whole-time employment

of the company.

3) Additional Directors

Additional Directors are appointed by the Board between the two annual general meetings
subject to the provisions of the Articles of Association of a company. Additional directors
shall hold office only up to the date of the next annual general meeting of the company.
Number of the directors and additional directors together shall not exceed the maximum
strength fixed for the Board by the Articles.

4) Alternate Director

An Alternate Director is a person appointed by the Board if so authorised by the Articles or

by a resolution passed by the company in the general meeting to act for a director called "the
original director" during his absence for a period of not less than three months from the State
in which meetings of the Board are ordinarily held. Generally, the alternate directors are
appointed for a person who is Non-resident Indian or for foreign collaborators of a company.

5) Professional Directors

Any director possessing professional qualifications and do not have any pecuniary interest in
the company are called as "Professional Directors". In big size companies, sometimes the
Board appoints professionals of different fields as directors to utilise their expertise in the
management of the company.

6) Nominee Directors

The banks and financial institutions which grant financial assistance to a company generally
impose a condition as to appointment of their representative on the Board of the concerned
company. These nominated persons are called as nominee directors15.

APPOINTMENT OF DIRECTORS:

Provisions related to appointment in the act16

15
http://www.caclubindia.com/experts/appointment-of-director
16
Bare Act: Company Law 2013, professional publications
152. (1) Where no provision is made in the articles of a company for the appointment of the
first director, the subscribers to the memorandum who are individuals shall be deemed to be
the first directors of the company until the directors are duly appointed and in case of a One
Person Company an individual being member shall be deemed to be its first director until the
director or directors are duly appointed by the member in accordance with the provisions of
this section.

(2) Save as otherwise expressly provided in this Act, every director shall be appointed by the
company in general meeting.

(3) No person shall be appointed as a director of a company unless he has been allotted the
Director Identification Number under section 154 7[or any other number as may be
prescribed under section 153.]

(4) Every person proposed to be appointed as a director by the company in general meeting or
otherwise, shall furnish his Director Identification Number 7[or such other number as may be
prescribed under section 153] and a declaration that he is not disqualified to become a
director under this Act.

2&5[(5) A person appointed as a director shall not act as a director unless he gives his
consent to hold the office as director and such consent has been filed with the Registrar
within thirty days of his appointment in such manner as may be prescribed:]

1[Provided that in the case of appointment of an independent director in the general meeting,
an explanatory statement for such appointment, annexed to the notice for the general meeting,
shall include a statement that in the opinion of the Board, he fulfils the conditions specified in
this Act for such an appointment.]

3,4&6[(6) (a) Unless the articles provide for the retirement of all directors at every annual
general meeting, not less than two-thirds of the total number of directors of a public company
shall—

(i) be persons whose period of office is liable to determination by retirement of directors by

rotation; and

(ii) save as otherwise expressly provided in this Act, be appointed by the company in general
meeting.
(b) The remaining directors in the case of any such company shall, in default of, and subject
to any regulations in the articles of the company, also be appointed by the company in
general meeting.

(c) At the first annual general meeting of a public company held next after the date of the
general meeting at which the first directors are appointed in accordance with clauses (a) and
(b) and at every subsequent annual general meeting, one-third of such of the directors for the
time being as are liable to retire by rotation, or if their number is neither three nor a multiple
of three, then, the number nearest to one-third, shall retire from office.

(d) The directors to retire by rotation at every annual general meeting shall be those who have
been longest in office since their last appointment, but as between persons who became
directors on the same day, those who are to retire shall, in default of and subject to any
agreement among themselves, be determined by lot.

(e) At the annual general meeting at which a director retires as aforesaid, the company may
fill up the vacancy by appointing the retiring director or some other person thereto.

Explanation.—For the purposes of this sub-section, “total number of directors” shall not
include independent directors, whether appointed under this Act or any other law for the time
being in force, on the Board of a company.

4&6[(7) (a) If the vacancy of the retiring director is not so filled-up and the meeting has not
expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day
in the next week, at the same time and place, or if that day is a national holiday, till the next
succeeding day which is not a holiday, at the same time and place.

(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and
that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall
be deemed to have been re-appointed at the adjourned meeting, unless—

(i) at that meeting or at the previous meeting a resolution for the re-appointment of such
director has been put to the meeting and lost;

(ii) the retiring director has, by a notice in writing addressed to the company or its Board of
directors, expressed his unwillingness to be so re-appointed;

(iii) he is not qualified or is disqualified for appointment;

(iv) a resolution, whether special or ordinary, is required for his appointment or re-
appointment by virtue of any provisions of this Act; or

(v) Section 162 is applicable to the case.]

Explanation.—for the purposes of this section and section 160, the expression “retiring
director” means a director retiring by rotation. ]

The discussion on appointment of a director may be dealt with under the

following heads:

According to Section 253, only an individual can be the director of a company. No company
or firm or association can be appointed as a director. A proviso has been added to the section
by the amendments of 2006 which says that no company is to appoint or appoint individual as
a director unless he has been allotted a Director Identification Number under S.266-B.

1. Appointment of first Directors, 

2. Appointment at general meeting, 

3. Appointment by the Board of Directors,

4. Appointment of Resident Director, 

5. Appointment of Independent directors 

1) APPOINTMENT OF FIRST DIRECTORS:[SECTION 152]

The first directors are usually appointed by name in the articles or in the manner provided
therein. Where the articles do not provide for the appointment of first directors, the
subscribers to the memorandum, who are individuals, shall be deemed to be the first directors
of the company until the directors are duly appointed. In case of a One Person Company an
individual being member shall be deemed to be its first director until the director or directors
are duly appointed by the member in accordance with the provisions of this section. 

Where, for any reason, for example, death, the persons named in the list of first directors do
not assume office, it will be necessary for the subscribers of the Memorandum (who will then
be the only members) to convene a meeting for the appointment of directors. To the extent to
which the articles do not make any other provisions in that behalf, subscribers who would be
entitled to requisition a meeting may call the meeting. Notice of the meeting must be served
on every subscriber in the manner in which notices are required to be served by the Act. 
No appointment without DIN: No person shall be appointed as a director of a company
unless he has been allotted the Director Identification Number (DIN) under section 154 [Sub-
section (3)]17. 

2) APPOINTMENT OF DIRECTORS AT GENERAL MEETING:

According to section 152(2) every director shall be appointed by the company in general
meeting except where the Act provides otherwise. Sub-section (6) of section“ 152 provides
that unless the articles provide for the retirement of all directors at every annual general
meeting, not less than two-thirds of the total number of directors of a public company shall

(1) be persons whose period of office is liable to determination by retirement of directors by

rotation3; and 

(ii) be appointed by the company in general meeting except where otherwise expressly
provided in this Act. 

The remaining directors in the case of such a company (i.e. public company) shall, in default
of, and subject to any regulations in the articles of the company, also be appointed by the
company in general meeting. The aforesaid requirement of section 152(6) shall not apply to: 

(a) a Government company in which entire paid up share capital is-held by the Central
Government or by any State Government(s) or by the Central Government and State
Government(s); 

(b) A subsidiary of a Government company, as aforesaid, in which entire paid up share

capital is held by that Government Company Vide MCA Notification dated 5.6.2015. 

Appointment of directors in case of a private company In case of a private company if the

articles are silent as to the appointment of directors, or do not specifically provide for
appointment of directors otherwise than in a general meeting, then the directors are to be
appointed in general meeting by the shareholders- Calcutta High Court in the case of Swapan
Das Gupta v. Navin Chand Suchanti18. 

17
C R Datta, on the Company Law ,Lexisnexis Butterworths, edition 6th , year 2008

18
[1988] 3 Comp. LJ 76 (Cal)
Appointment of a director other than a retiring director [Sec. 257]-

Section 257 provides for the procedure of appointment of a person other than retiring
director. If any person other than the retiring director wishes to stand for directorship or any
member proposes a person for directorship, he must signify his intention to do so by giving
14 days’ notice to the company before the general meeting and the company must inform the
members not later than seven days before the general meeting either by individual notices or
by advertisement of this fact in at least two newspapers circulating in the place where its
registered office is located of which one must be in English and the other in the regional
language of that place. Also, the candidate or the member who intends to propose him
as director has to deposit a sum of Rs. 500 which shall be refunded to such person or the
member, as the case may be, if the candidate succeeds is being elected. In case such person is
not elected as director, he or the member, as the case may be, will not be entitle to the refund
of Rs. 500 and the amount deposited shall stand forfeited by the company.

3) APPOINTMENT BY BOARD OF DIRECTORS:

The Board of directors can exercise the power to appoint directors in the following cases19: 

a. Additional Directors 

b. Filling up the Casual Vacancy

c. Alternate Directors

d. Nominee Directors 

a. Appointment of additional Directors: The articles of a company may confer on its

Board of Directors the power to appoint any person as an additional director at any
time. However, a person who fails to get appointed as a director in a general meeting
cannot be so appointed. It may thus be noted that without a power given by the
Articles, the Board cannot appoint additional directors. The section applies to all
companies, public as well as private Needle Industries (India) Ltd. v. Needle
Industries Newey (India) Holdings Ltd.20.

b. Filling up casual vacancies: Section 161(4), as amended by the Amendment Act,

2017, empowers the Board to fill casual vacancies in the case of any Company
including a private company. A casual vacancy is one that arises otherwise than by
retirement or the expiration of the time fixed for an appointment. Thus, lithe office of
any director appointed by the company in general meeting is vacated before his term
of office expires in the normal course, the resulting casual vacancy may, subject to
any regulations in the articles of the company, be filled by the Board Of Directors at a
meeting of the Board. 

19
“Taxmann”, Company Law and Practise, 23rd edition 2018( pg no-442-443)

20
AIR 1981 SC 1298
 c. Alternate directors: The Board of directors of a company may, if so authorised by its
articles or by a resolution passed by the company in general meeting, appoint an
alternate director to act for a director during his absence for a period of not less than
three months from India. However, a person holding any alternate directorship for any
other director in the company shall not be appointed. Again a person who is already a
director of the company cannot be appointed as an alternate director for another
director in the same company. No person shall be appointed as an alternate director
for an independent director unless he is qualified to be appointed as an independent
director under the provisions of this Act. An alternate director is not an agent of the
original director. 

d. Nominee directors: There may be occasions when directors represent certain third
parties in the Board. This usually happens when the Government, foreign
collaborators, holding companies, and financial institutions or other lenders, etc.,
nominate a director to represent their interest on the Board. The phenomenon of
nominee directors has become an important feature of the modem Indian corporate
scenario. It is primarily because of the role of the various lending institutions like
banks, mutual funds, public financial institutions, State financial corporations, etc.

4) APPOINTMENT OF RESIDENT DIRECTOR:

For the first time the Companies Act, 2013 has introduced the concept of resident director.
Sub-section (3) of section 149 provides that every company shall have at least one director
who stays in India for a total period of not less than one hundred and eighty-two days during
the financial year. However, in case of a newly incorporated company the requirement shall
apply proportionately at the end of the financial year in which it is incorporated. 

5) APPOINTMENT OF INDEPENDENT DIRECTORS:

Who is an Independent Director?

Section 149(6) of the Companies Act, 2013 defines independent director as under21: 

An independent director in relation to a company, means a director other than a managing

director or a whole-time director or a nominee director,

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise
and experience; 

(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate
company; 

(ii) who is not related to promoters or directors in the company, its holding. subsidiaiy or
associate company; 
21
“Taxmann”, Company Law and Practise, 23rd edition 2018( pg no-449)
(c) who has or had no pecuniary relationship with the company, its holding. subsidiary or
associate company, or their promoters, or directors, during the two immediately preceding
financial years or during the current financial year. However, remuneration not exceeding
10% of his total income or such amount as may be prescribed will not be considered as a
disqualification for appointment as independent director.

Sub-section (4) of section 149 requires every listed public company to have at least one-third
of the total number of directors as independent directors and the Central Government may
prescribe the minimum number of independent directors in case of any class or classes of
public companies. The Central Government vide Rule 4 of Companies (Appointment and
Qualification of Directors) Rules, 2014 has prescribed as follows: 

The following class or classes of companies shall have at least two directors as independent
directors

a) the Public Companies having paid up share capital of ten crore rupees or more; or 

b) the Public Companies having turnover of one hundred crore rupees or more; or 

c) the Public Companies which have, in aggregate, outstanding loans, debentures and
deposits, exceeding fifty crore rupees. 

However, in case a company covered under this rule is required to appoint a higher number
of independent directors due to composition of its audit committee, such higher number of
independent directors shall be applicable to it. Any intermittent vacancy of an independent
director shall be filled-up by the Board at the earliest but not later than immediate next Board
meeting or three months from the date of such vacancy, whichever is later22.

22
“Taxmann”, Company Law and Practise, 23rd edition 2018( pg no-450)
Woman director on the Board

 For the purposes of second proviso to sub-section (1) of section 149 the following class of
companies shall appoint at least one woman director within the period indicated against each
of them, as under23:-

(i) every listed company – within one year from the commencement of second proviso to sub-
section (1) of section 149;

(ii) every other company having a paid–up share capital of one hundred crore rupees or more
within three years from the commencement of second proviso to sub-section (1) of section
149;

RE-APPOINTMENT:
The re-appointment of directors should not be automatic. The board should plan progressive
way in general meeting. The directors who held office are subject to retirement by rotation.
The directors to be re-appointed must be submitted for re-election. A director who retires at
annual general meeting if willing to act may be re-appointed.

Automatic Re-appointment of Directors retiring by rotation

As per Section 256 of the Companies Act, 1956, at every Annual General Meeting of a Public
Limited Company 1/3rd (one-third) of the Directors, whose period of office is liable to
determination by retirement of directors by rotation under Section 255, are liable to retire by
rotation. These Directors, who are liable to retire by rotation, generally gets re-appointed in
the AGM by offering themselves for re-appointment or if any member make a requisition to
the Company for their re-appointment. But there are some situations where even though they
are not re-appointed in an AGM, but still they can continue their office, this is known as
Automatic Re-appointment. The provisions relating to Automatic/Deemed Re-appointment of
Retiring Directors at the Annual General Meeting of a Public Limited Company are cited in
the clause (b) of the Sub-section 4 of the Section 256.

The Automatic Re-appointment of the Retiring Directors happens in the following

3(three) situations, if an Annual General Meeting ends:

(1) Without filling up the vacancy of the retiring director by his re-appointment; or

(2) Without filling up the vacancy of the retiring director by appointment of another person in
place of the retiring director; or

23
Avatar Singh, Company Law, 17th edition,2018
(3) Without passing a resolution to the effect that the vacancy of the retiring director be not
filled.

If any of the above situations does not happen in an AGM, then the AGM will stand
adjourned till the same day in the next week, at the same time and place. If at the adjourned
meeting also, the place of the retiring director is not filled up and that meeting also has not
expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been
re-appointed at the adjourned meeting.

CONCLUSION:

Thus at last it can be said that directors play very important role in company. As company is
artificially created being, it has no sense of its own. So there is requirement of human agency
for the performance of its acts. Directors play that role in company of carrying on company
business. However position of director is controversial in nature. Sometimes they are
regarded as trustee, sometimes as agent, sometimes as managing partners, sometimes as
employees. But the trust is that they hold fiduciary relation with company. The appointment
of directors is accordingly strictly regulated by the act. There are now special
provisions for preventing management by undesirable persons.
BIBILIOGRAPHY:

BOOKS:

 CR Datta on the Company Law ( edition 6th , year 2008 )

LexisnexisButterworths
 Taxmaan’s Companies Act 2013, Volume 2
 Avatar singh company law, 17thedition,2018

Web Sources: 

 jstor.com
 www.legalserviceindia.in
 www.lawoctopus.com
 http://www.caclubindia.com/experts/appointment-of-director