This presentation briefly explains the concept of "Appointment of Director"

1. LegalAspects of Business
Appointmentof Director
Presented By:
Nawaz Sharif 19020841184
Shubhangi Pant 19020841201

2. Who is the
DIRECTOR??
 Acc.To the Sec.2(13) of INDIANCOMPNIESACT 1956, may be
defined as an individual who directs ,controls or manages the
affairs of the company.
 The directors of the company collectively are referred to as “board
of directors” or “board”.

3. Number
of Director
 Every company should have a minimum number of
directors :->
3 directors in case of Public company
2 directors in case of Private company
1 director in case of One Person company
1 director in case ofWomen Director
1 director in case of Resident Director

4. continued
……..
 A company can appoint maximum 15 directors
 A company can appoint more than 15
directors after passing special resolution (SR ) in general
meeting.
 Deadline to fulfil these requirement is 1 year according to
companies act 2013

5. Maximum
Tenure
 Max term of 5 consecutive years
 Eligible for reappointment on passing of a special resolution
by the company and disclosure of such appointment in the
Directors Report

6. Types of
Directors:-
 Residential Director:-As per Section 149(3) of
Companies Act,2013 every company shall at one
director who has stayed in India for a total
Period of not less than 182 days in the Previous
calendar year.
 Independent Director:-As per section 149(6) an
independent director in relation to a company, means a
director other than a Managing Director, WholeTime
Director Or Nominee Director. Companies which have
to appoint Independent Director:- As per Rule 4
of Companies (Appointment and Qualification of
Directors) Rules,2013 :-

7. Continued..
 Nominee Directors:-They can be appointed by certain
shareholders, third parties through contracts, lending
public financial institutions or banks, or by the Central
Government in case of oppression or mismanagement.
 De facto Directors :-A de facto director is a person who
has not been validly appointed or who is disqualified
but who in effect occupies the position of, and acts as if
he were, a director.
 Alternate Directors:-Alternate directors are persons
who are nominated by a director to act in their
absence. An alternate director can only be appointed
with the agreement of a majority of the directors.

8. A director shall
For the first time, duties of directors have been specified in
the Act.
 (i) Act in accordance with the company’s Articles
 (ii) Act in good faith in order to promote the objects of the
company for the benefit of its members as a whole, and in
the best interests of the company
 (iii) Exercise his duties with due and reasonable care, skill
& diligence.

9. A director shall
not:
 (i) Involve in a situation where he may have direct or indirect
interest
 (ii) Achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives
 (iii) Shall not deal in insider trading of shares of the
Company

10. Continued…
 Not to involve ‘self’ or ‘self benefited entity’ as supplier or
customer or in other nature
 Not to have competing business with that of company

11. Director
Identification
Number
 DIN essential for appointment as Directors
 Application to Central Government for DIN to be filed
 Director to inform DIN to company
 Company to inform DIN to Registrar Of Companies.
 Two DIN not permissible

12. Appointment
of Directors
 In public or a private company, a total of two-thirds of directors
are appointed by the shareholders.The rest of the one-third
remaining members are appointed with regard to guidelines
prescribed in the Article of Association.
 In the case of a private company, their Article of Association can
prescribe the method to appoint any and all directors. In case the
Articles are silent, the directors must be appointed by the
shareholders.
 The CompaniesAct also has a clause that permits a company to
appoint two-thirds of the company directors to be appointed
according to the principle of proportional representation.This
happens if the company has adopted this policy.

13. Ways of
Appointment
of Directors
Way # 1. Appointment of Directors by Signatures to the
Memorandum: (Sec. 254 and Clause 64 ofTableA):
The Articles of a company usually name the first directors by their
respective name or prescribe the method of appointing them
Way # 2. Appointment of Directors by Company in the General
Meeting: (Secs. 255 to 257, 263 and 264):
 Section 255 provides that subsequent directors shall be appointed
by the company in general meeting.
 In the case of a public company or a private company which is a
subsidiary of a public company, unless the Articles provide for the
retirement of all directors at an annual general meeting, at last
two-thirds of the total number of directors shall be liable to retire
by rotation and shall be appointed by the company in general
meeting.

14. Continued..
Way # 3. Appointment of Directors by Board of Directors (Secs. 260,
262 and 313):
In the following cases, the Board of Directors may appoint the
directors:
(i) Additional Directors:
 Section 260 of the Companies Act empowers the Board to appoint
additional directors and Articles of every company also confer this
power to the Board.
(ii) Casual Director:
 The Companies Act empowers the Board to appoint the casual
director subject to any regulation in the Articles.The casual vacancy in
the office of the director may exist due to retirement, resignation,
insolvency or any other reason
(iii) Alternate Director:
The Board is empowered to appoint the alternate director if the original
director remains absent for more than three months from the date on
which the meeting is ordinarily held.

15. Continued..
Way # 4. Appointment of Directors byThird Parties (Sec. 255):
 The articles may permit the third parties (Vendor, Banking
Company, FinanceCorporation and Debenture holders) for the
appointment of director as their nominee, but the number of
directors so appointed should not exceed one- third of the total
number of directors and they are not liable to retire by rotation.
Way # 5. Appointment of Directors by Proportional
Representation (Sec. 265):
 Directors are appointed individually either by show of hands or by
ballot unless the Articles otherwise provide. If the Articles permit,
a system of proportional representation may be adopted for the
appointment of directors.
Way # 6. Appointment of Directors by the Central Government
(Sec. 408):
 According to Sec. 408, the Central Government may appoint the
directors but not more than two in number and for the period not
exceeding 3 years.

16. Appointment
of Managing
Directors
 A managing director must be an individual (a real person) and can
be appointed for a maximum period of five years.
 A managing director of a pre-existing company can be appointed
as a managing director of another company as long as the board
of directors of the first company are aware and approve of this
new appointment.

17. Conditions for
Appointing
Directors
 He or she should not have been sentenced to imprisonment for any
period, or a fine imposed under a number of statutes.
 They should not have been detained or convicted for any period under
the Conservation of Foreign Exchange and Prevention of Smuggling
Activities Act, 1974.
 He or she should have completed twenty-five (25) years of age, but be
less than the age of seventy (70) years. However, this age limit is not
applicable if the appointment is approved by a special resolution
passed by the company in general meeting or the approval of the
Central Government is obtained.
 They should be a managerial person in one or more companies and
draws remuneration from one or more companies subject to the
ceiling specified in Section III of Part II of Schedule XIII.
 He or she should be a resident of India. ‘Resident’ includes a person
who has been staying in India for a continuous period of not less than
twelve (12) months immediately preceding the date of his or her
appointment as a managerial person and who has come to stay in
India for taking up employment in India or for carrying on business or
vocation in India.

18. Removal of
Directors
 The company in general meeting
A company can remove a director from the board before his term of
office expires.They can pass a resolution in a general meeting upon
special notice.
 Removal by the Government
A director can be removed from office under advice from Central
Government.The Central Government chooses to use this power on the
recommendation of the Company Law Board/National Company Law
Tribunal.
 Removal by Company Law Board/National Company LawTribunal
The Company Law Board or the National Company LawTribunal may
remove a director from the board. If found guilty of any inappropriate
conduct like fraud, harassment, oppression or any other justifiable
cause, he will be removed.