DIRECTORS- COMPANIES ACT 2013
Directors under the Companies Act, 2013
Directors are key personnel who manage and oversee the affairs of a company. The Companies Act, 2013 lays down detailed provisions regarding their appointment, qualifications, duties, responsibilities, and liabilities.
1. Definition of Director
A Director is a person appointed to the Board of a company to manage its affairs. (Section 2(34))
2. Types of Directors
Executive Director: Involved in day-to-day management.
Non-Executive Director: Not involved in daily operations but provides oversight.
Independent Director (ID) (Section 149): A non-executive director who does not have any material or pecuniary relationship with the company, its promoters, or management. Ensures unbiased and independent judgment.
Additional Director (Section 161): Appointed by the Board to fill casual vacancies or add to the existing Board.
Nominee Director: Appointed by specific stakeholders like financial institutions or lenders.
Women Director (Section 149(1)(a)): Certain classes of companies must have at least one woman director.
3. Number of Directors
Private Company: Minimum 2 directors (Section 149(1))
Public Company: Minimum 3 directors (Section 149(1))
One Person Company: 1 director
4. Appointment of Directors
Directors are appointed by the shareholders in the General Meeting or by the Board (for additional directors).
Independent directors must meet eligibility criteria and give a declaration of independence.
Women directors are mandatory for listed companies and certain classes of companies.
5. Qualification of Directors
There is no specific qualification mandated except that a director must be a natural person, not be disqualified, and hold a Director Identification Number (DIN).
6. Disqualifications (Section 164)
A person is disqualified from being appointed director if:
Is an undischarged insolvent.
Has applied for insolvency.
Has been convicted of an offense involving moral turpitude or fraud.
Has not paid calls on shares or has been found guilty of misfeasance.
Has been disqualified by an order of a court or tribunal.
7. Duties of Directors (Section 166)
Directors must:
Act in good faith and in the best interests of the company.
Exercise duties with due care, skill, and diligence.
Avoid conflicts of interest.
Not achieve any undue gain or advantage.
Exercise independent judgment.
8. Responsibilities and Liabilities
Directors are responsible for compliance with laws, safeguarding company assets, and protecting shareholders' interests.
They can be held liable for negligence, fraud, or breach of fiduciary duties.
Board committees like Audit Committee oversee director accountability.
9. Meetings of Directors
Board Meetings must be held at regular intervals (minimum 4 times a year).
Proper notices and quorum are required.
Decisions are made via resolutions.
10. Independent Directors (Section 149 & Schedule IV)
Serve for a term up to 5 years, eligible for reappointment.
Must uphold integrity, confidentiality, and act in the company’s interest.
Protect minority shareholders and promote corporate governance.
11. Removal of Directors
Shareholders can remove directors before expiry of their term by ordinary resolution (Section 169).
Independent directors can be removed only by following prescribed procedures.
12. Director Identification Number (DIN) (Section 153)
Mandatory unique number for all directors.
Required for appointment and filing with ROC.
Summary Table
| Aspect | Details |
|---|---|
| Minimum Number | Private: 2, Public: 3, OPC: 1 |
| Types | Executive, Non-Executive, Independent, Women, Additional |
| Duties | Act in good faith, due care, avoid conflicts |
| Disqualifications | Insolvency, conviction, non-payment, court orders |
| Appointment | By shareholders or Board (additional directors) |
| Removal | By shareholders via ordinary resolution |
| DIN | Mandatory for all directors |
| Board Meetings | Minimum 4 times a year |
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