How to Appoint a Director in NBFC Company?

Directors help to ensure the company’s regulatory compliance with regulatory requirements. For any company, the appointment of directors is crucial. Appointment of a director in an NBFC company is a mandatory requirement and takes place in a particular manner. An individual can only be appointed as a director in an NBFC company if they meet the fit and proper criteria of the Reserve Bank of India (RBI). In this article, we will explore how to appoint a director in an NBFC company.

Role of a Director in an NBFC Company

A director plays an important role in the company’s success and ensures compliance with the regulatory requirements set by the RBI. They assist the shareholders in making strategic decisions and protect the interests of customers, employees, etc.

There are many types of directors in an NBFC company. While an executive director takes care of the day-to-day management of the NBFC, a non-executive director provides oversight and strategic guidance for the NBFC’s growth. An NBFC’s independent director ensures impartial and independent oversight without being involved in the management or having a significant business relationship with the company. Stakeholders appoint a nominee director of an NBFC to represent the interests of those who nominated them.

Eligibility Criteria for the Appointment of a Director in NBFC

When an NBFC company appoints a director, it must make sure that the following requirements are met by the candidate: 

• Must be 18 years of age or above.
• Graduation in any relevant field.
• The candidate shall not have any criminal history.
• The candidate may not serve on the Board of Directors of more than three NBFCs (NBFC-Middle Layer or NBFC-Upper Layer) at the same time.
• Must meet the “fit and proper” criteria of RBI.

Documents required for Appointment of a Director in NBFC 

For an individual to be appointed as a director in an NBFC company, he must be in possession of the following documents:

• PAN Card
• Valid DIN
• Aadhaar Card
• Most recent utility bills, such as electricity bills or water bills
• Passport Size Photograph
• Digital Signature Certificate

Process for Appointing a Director in NBFC 

The process for appointing a director in an NBFC company includes several steps. We have explained them below:

Looking for the right candidate

As the very first step, the NBFC must search and discover the right candidate for directorship based on their educational qualifications, work experience, and expertise.

Verifying the candidate’s background

Once the NBFC has found the right candidate for directorship, it is imperative to do a background check to verify their credentials and make sure that they meet RBI’s fit and proper criteria.

Getting Approval from the Board

Now the board of directors of the NBFC must carefully review the profile of the candidate. Their approval holds utmost importance for the appointment of a director.

Getting Approval from the Reserve Bank of India (RBI)

RBI’s prior approval for certain key positions is mandatory. All the relevant documents must be submitted by the NBFC so that the RBI can assess them and give its approval.

Formalizing the Appointment

Once the approval is received from the Board of Directors as well as the RBI, the candidate will be appointed as a director of the NBFC company, and all the relevant authorities and stakeholders will be informed about the same.

In Summary

The appointment of a director in an NBFC is an essential requirement. A director helps the owner in making important decisions for the company and also plays an important role in the management of the day-to-day operations. It is extremely important for an NBFC company to hire a competent and qualified individual as a director who meets the fit and proper criteria of the RBI and all the other general requirements. If you need any assistance in NBFC company registration or in obtaining the NBFC license, get in touch with Registrationwala.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.