Types of Directors

Lecture 2
Teaching Seminar | Corporate Law
 First Director
• On incorporation, the first directors of a company are appointed by giving their details in the
application to register a new company and indicating their consent to act as the directors of the
company. (LexisNexis)
• The first directors of most of the companies are named in their articles. Regulation 60 of Table F
provides that the number of the directors and the names of the first directors shall be determined in
writing by the subscribers of the memorandum or a majority of them.
• Section 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.
 Women Directors
• Second Proviso to section 149(1) read with Rule 3 of Companies (Appointment and Qualification of Directors) Rules,
2014, prescribes the following class of companies shall appoint at least one woman director- (i) every listed company; (ii)
every other public company having :-
• (a) paid–up share capital of one hundred crore rupees or more; or
• (b) turnover of three hundred crore rupees or more .
• A period of six months from the date of company’s incorporation, has been provided to enable the companies incorporated
under Companies Act, 2013 to comply with this requirement.
• The tenure of the appointment of a woman director is till the next Annual General Meeting (AGM) from the date of
appointment. She is entitled to a re-appointment at the general meeting. However, the tenure of a woman director is
liable to retirement by rotation as per Section 152(6) of the Act as applicable to other directors. She can also resign
at any time by giving notice to the company.
• Penalty for Non-Compliance: Section 172 of the Act lays down that the company and every officer in default will be
punished with a fine that shall not be less than Rs.50,000 but may extend up to Rs.5,00,000.
 Procedure to Appoint Women Directors
• Proposed candidate has to submit her consent to act as a director in the company in the prescribed Form
DIR-2 and Form DIR-8 (Intimation of Disqualification).
• The company should conduct a general meeting and obtain the shareholders’ approval for the
appointment of the woman director through a resolution.
• After the appointment of the woman director by passing a resolution in the general meeting, the company
should file the following forms with the ROC:
• (i) Form MGT-14 within 30 days of passing the resolution of appointment in the general meeting.
• (ii) Form DIR-12 regarding the particulars of the appointment of a woman director within 30 days of
such appointment.
• (iii) The company should make the required entries in the director and key managerial personnel register
and the register of contracts in which the woman director is interested in the Form MBP-4.
 Resident Director
• Section 149(3) of the Companies Act, 2013 provides that every Company shall have at least
one director who has stayed in India for a total period of at least 182 days during the
financial year.
• Resident director cannot act as the director of any other company.
• In view of the COVID-19 outbreak, the Ministry of Corporate Affairs (‘MCA’) vide General
Circular No. 11/2020, dated 24th March 2020 and General Circular No. 36/2020 dated 20th
October 2020, had relaxed the residency requirement of 182 days in a year and that the non-
compliance of minimum residency in India for a period of at least 182 days in a year, by at
least one director in every company, under section 149 of the Companies Act, 2013 was not
treated as non-compliance for the financial year 2019-20 and 2020-2021 respectively.
 Alternate Directors
• According to section 161(2) of the Companies Act, a company’s Board of Directors
may appoint a person who is not a person holding any alternate directorship for any
other director in the company or holding directorship in the same company to act as an
alternate director for a director during his absence from India for a period of not less
than 3 months.
• The Board of Directors can only appoint Alternate Directors if the Articles of
Association (AOA) allow it or if the Company passes a resolution at a General Meeting.
• Any of the disqualifications listed in Sections 164 and 165 of the Companies Act, 2013
should not apply to the person sought to be the Alternate Director.
 Procedure to Appoint Alternate Director
• Check the Article of Association of the Company
• Form DIR-2 (Consent to Act as a Director) and Form DIR-8 (Intimation by Director about his
Disqualification) must be submitted to the Company by the proposed Alternate Director.
• Obtain Form MBP-1 from the Proposed Alternate Director
• Obtaining DIN and Digital Signature Certificate
• Meeting of Nomination and Remuneration Committee
• Within 30 days following the Board meeting, a Return of Appointment of Directorship (Form DIR-
12) must be submitted with the Registrar, together with a copy of the Board Resolution, Consent, and
Declaration.
• Entry to be made in Register of Directors
 Small Shareholder Director
• Section 151: A listed company may have one director elected by such small shareholders in such
manner and with such terms and conditions as may be prescribed.
• Explanation.—For the purposes of this section “small shareholders” means a shareholder holding
shares of nominal value of not more than twenty thousand rupees or such other sum as may be
prescribed.
• A listed company, may upon notice of not less than: (a) “One thousand small shareholders”, or (b)
“One-tenth of the total number of such shareholders”, whichever is lower; have a small
shareholders’ director elected by the small shareholder.
• Small shareholder directors are not liable to retirement by rotation. Their tenure shall not exceed a
period of three consecutive years. Upon expiry of tenure they are not eligible for reappointment.
 Procedure for Appointment of Small
Shareholder Director
• Rule 7 of the Companies (Appointment and Qualification of Directors) Rules, 2014 laid down
the following terms and conditions for appointment of small shareholders’ director, which are as
under:
• (i) Election of small shareholders’ director
• (ii) Notice of intention to propose a candidate
• (iii) Notice to be accompanied by statement of proposed Director along with his DIN and consent
• (iv) Such director will be considered as independent director
• (v) Proposed director will be subject to conditions under 152
• (vi) Such a director cannot hold this position in more than two companies at the same time. The
second company in which he is a director cannot be a competing company of the first.
 Nominee Director
• Explanation to section 149(7) of the Companies Act 2013 states: nominee director means a director nominated
by any financial institution in pursuance of the provisions of any law for the time being in force, or of any
agreement, or appointed by any Government, or any other person to represent its interests.
• Section 161(3): Subject to the articles of a company, the Board may appoint any person as a director nominated
by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or
by the Central Government or the State Government by virtue of its shareholding in a Government company.
• Provided that in case of a Specified IFSC public company , the Board may appoint, any person nominated by
any institution or company or body corporate as a director in pursuance of the provisions of any law for the
time being in force or of any agreement or by the Central Government or the State Government by virtue of its
shareholding in a Government company.
• The Appointment of Nominee Director can be done in two ways: i. By passing of Resolution in Board Meeting,
OR ii. By passing of Resolution through Circulation
 Appointment of Nominee Director by
passing Resolution in Board Meeting
• Issue Notice of Board Meeting to Directors at their registered addresses
atleast 7 days before the date of the Board Meeting.
• Hold a meeting of the Company’s Board of Directors to consider the agenda
and choose a Nominee Director.
• Pass Board Resolution after appointing Nominee Director.
• Issue a letter of appointment to the Company’s Nominee Director
• Authorize the Company Secretary or any Director to sign and submit the
required document with the Registrar of Companies
 Appointment of Nominee Director by
passing resolution through Circulation
• Before the draft Resolution is circulated to all of the Directors, the Chairman of the Board or, in his
absence, the Managing Director or, in their absence, any Director other than an Interested Director shall
decide whether the Board’s approval for a particular business shall be obtained by means of a Resolution
by circulation.
• Prepare relevant documents and deliver them to the registered address of the Directors.
• The Directors will have seven days to respond from the date of distribution.
• The Chairman should hold the Resolution by Circular under consideration at a Board Meeting if a
minimum of 1/3rd Directors desires to decide the Resolution under circulation in a Board Meeting.
• When a majority of the Directors who are eligible to vote accept the Resolution, it is considered
approved.
• Resolutions passed by circulation will be acknowledged at a later Board meeting
 Filings by proposed Nominee Director
• Consent and Declaration from the Proposed Director– Before or during the Board Meeting, the Proposed Director
must submit Form DIR-2 (Consent to Act as a Director) and Form DIR-8 (Intimation by Director regarding his
disqualification) to the Company.
• Filing of Returns with the ROC– Within 30 days following the Board meeting, a Return of Appointment of Directorship
(Form DIR-12) must be submitted with the Registrar, together with a copy of the Board Resolution, Consent, and
Declaration. A Company Secretary/Chartered Accountant/Cost Accountant must also certify the return in the case of
companies other than OPC and Small Companies. The following documents must be included to Form DIR-12 as an
attachment: Certified True Copy of the Board Resolution passed DIR-2 Consent to Act as Director DIR-8 Declaration by
Director Letter of Appointment.
• Obtain Form MBP-1 from the Appointed Director– Within 30 days of appointment or at the first Board Meeting in
which he participates as a Director, get the Appointed Director’s declaration on Form MBP-1 detailing his stake in other
companies.(Section 184(1) Read with Section 189(2))
• Making Necessary entries in Register of Directors– In the Register of Directors and Key Managerial Personnel, the
company should make the appropriate entries.
 Casual Vacancy
• The term “casual vacancy in the office of a director” refers to a director’s office
being vacated before his term of office expires in the usual course of business. It
might be as a result of: Director’s death, Director’s resignation Director’,
disqualification under section 164 of the act. In this situation, the company,
whether public or private, is responsible for filling the vacancy.
• Section 164 does not apply to private companies.
• A person appointed to fill a casual vacancy as a Director shall serve only until the
date on which the director in whose place he is appointed would have served if the
position had not been vacated.
 Appointment of Director by Casual Vacancy
• Section 161(4):If any vacancy is caused by death or resignation of a director appointed by the shareholders in
General meeting, before expiry of his term, the Board of directors can appoint a director to fill up such vacancy.
The appointed director shall hold office only up to the term of the director in whose place he is appointed.
• The proposed Director should not be disqualified under section 164 and has a DIN.
• The individual nominated to fill the vacancy also meets the requirements set out in section 149(6) and Rule 5 of
the Companies (Appointment & Qualification of Directors) Rules, 2014, for independent directors.
• Ascertain that the individual nominated for appointment as a director has provided the Company with his DIN as
well as a declaration in Form DIR.8 declaring that he is not disqualified to serve as a director under the
Companies Act, 2013.
• Obtain his signed approval to function as Director in Form No. DIR-2 along with certain other documents.
 Appointment of Director by Casual Vacancy
• Hold a meeting of Board of Directors to pass the following resolutions: [Section 184(1) read with Section 189(2) of
Companies Act, 2013 and Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014.]
• Pass the appropriate Board Resolution for the appointment of a Director to serve until the date on which the director in whose
place he is appointed would have served if the position had not been vacated. [Section 161(4) proviso]
• To authorise the Company Secretary or any Director to sign and submit the required document with the Registrar of
Companies.
• Within 30 days of appointment, get the appointed Director’s approval in Form MBP 1, E-Form No. DIR-12 with the Registrar,
together with the fee specified in the Companies (Registration Offices and Fees) Rules, 2014.
• Make the required entries in the Register of Directors and Key Management Personnel, as well as their stock holdings.[ Section
170(1) and Rule 17 of Companies (Appointment and Qualification of Directors) Rules, 2014 ]
• Following his appointment, the appointed director must notify other companies in which he is a director, using Form MBP-1.
(Section 184(1) of Companies Act, 2013)
• Prepare and distribute draft minutes of the meeting to all Directors for comment within 15 days after the completion of the
board meeting