Legal Requirements for Director’s Appointment in Company

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Legal Requirements for Director’s Appointment in Company

Registrationwala

Directors play an irreplaceable role in a company. They are responsible for controlling and managing the company’s affairs. Not only do they help the shareholders to run the company smoothly, they also uphold the rights and interests of the employees. 

 

Generally, the directors are appointed by the shareholders of the company. A director has to be a real person. This means that no company, organization or legal firm with an artificial legal personality can be appointed as a director. To learn what are the legal requirements for appointing a director in a company, read this post.

How many Directors must be appointed in a Company?

In small companies, at least one director must be appointed as a legal requirement. It is a legal requirement for a private limited company to have at least two directors. In case of a public limited company, a minimum of three directors is required. 

Legal Documents required for Director’s Appointment

A director must be in possession of certain legal documents to be appointed in a company.

Eligibility Criteria for the Appointment of a Director 

In order to be appointed as a director, an individual must fulfill the following eligibility criteria:

Process for the Appointment of a Company’s Director

The director’s appointment in a company must be done according to the provisions of the Companies Act 2013. The process for the company director’s appointment takes place in the following manner:

Articles of Association’s Analysis

It is necessary to examine the AOA of the company. A specific clause must be included in the AOA which permits the director’s addition or appointment. If such a provision is not in the AOA, the AOA must be amended so that new directors can be added and appointed. Additionally, there should be a clause which determines whether the director can be appointed just by holding the meeting between shareholders or the AOA must hold the option for the board of directors to appoint a new director who can be confirmed in the upcoming general meeting.

Conduction of General Meeting for Director’s Appointment

It is a legal requirement to appoint the director formally. This must be done by passing a resolution in a general meeting. This can be done at the time an annual general meeting is being conducted. But if the director needs to be appointed in the middle of the year, then a resolution can be passed in an extraordinary general meeting. For holding the extraordinary general meeting, a resolution must be passed in the board meeting. Thereafter, in the extraordinary general meeting, a resolution must be passed for appointment of a director in a company.

 

After the appointment, the resolution must be filed by the company in Form MGT-14 with the ROC. This must be done within a period of 30 days from the date the resolution was passed.

Must Read: What Happens When a Director Passes Away?

Acquiring DIN and DSC

After a resolution has been passed for the appointment of an individual as a director, the individual must apply for a director identification number and digital signature certificate if he does not already have them. Once DIN is obtained, the individual must provide the company with his DIN along with a declaration which asserts that they are not disqualified from being a director under the provisions of the companies act.

Consent of the Prospective Director using Form DIR-2

Once the DIN and DSC has been obtained by the individual, he must express his consent for directorship formally by submitting form DIR-2. Without explicitly providing consent, an individual cannot assume the post of a director in a company.

Issuance of Appointment Letter to Director

After all the formalities have been completed, the company is required to issue the newly appointed director a formal letter of appointment. The letter must include their role, salary, responsibilities, terms and conditions and other relevant information.

Entry in Register of Directors and Filing of Amendment Application

All the necessary information must be entered in the register of directors and key managerial personnel. Once the new director is appointed, the company must update the details of the director, including making amendments in GSTN, with the relevant regulatory authorities by filing applications. This will ensure compliance with tax and other regulatory requirements.

Conclusion

Appointing a director in a company is a legal requirement. The appointment of a director must be done in accordance with the Companies Act 2013. The process of a director’s appointment involves several steps as discussed in this blog post. If you need assistance in Company Registration in India, get in touch with Registrationwala. 

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