Appointment of Directors: Meaning, Procedure, Forms, Fees, and Timelines

A company, being an artificial person, cannot function on its own. Therefore, the appointment of directors is made to manage the operations of the company. Directors play the most important role in a company, whether it is public or private. Directors conduct the daily operations of the company, ensure compliance with various laws, take necessary decisions, and possess various rights and duties towards the company.

They are the trustees of the company's property. Keeping in mind the level of responsibility of the directors of the company, the appointment of directors should be made very carefully and by following the proper procedure.

Who are the Directors?

A director is a person appointed by the company to manage its affairs. Directors are the stewards of the company, i.e., they take care of the assets of the company on behalf of shareholders who have invested their funds in the company. Directors are responsible for various things, and they represent the company before various parties, regulatory authorities, and shareholders.

They ensure that the business of the company is conducted reasonably. The board of directors makes its decisions by passing board resolutions. There are various provisions for the appointment of directors under the Companies Act, 2013.

What are the Different Types of Directors?

• Executive Director: The executive director is a director who is concerned with the day-to-day affairs of the company. They are appointed as whole-time directors in a company and receive remuneration and other incentives for their work in the company.
• Non-Executive Director: Non-executive directors do not participate in the day-to-day affairs of the company. They oversee the affairs of the company from a distance and contribute to the board's decision-making process.
• Independent Directors: The appointment of independent directors is made under section 149(6) of the Companies Act, 2013. Independent directors are directors who do not receive anything from the company except for remuneration as such directors and are eligible to be appointed as per the provisions of section 149(6) of the Act.

Reasons for Appointment of Directors

The appointment of directors can be made for various reasons such as:

• Legal Requirements: The appointment of directors can be made to comply with the requirements of minimum directors on the board as per the provisions of the Companies Act, 2013.
• New Talent: The new appointment/addition can be made to introduce new talent to the board and to diversify the board by having the directors each have different skills and expertise.
• Board Deadlock: There can be situations of board deadlock or inefficiency of the existing directors, due to which the existing directors might decide to conduct appointments of directors.
• To Manage Workload: The directors of the company are responsible for its daily operations. There can be situations where the directors are fewer and the work requirements are huge. Therefore to avoid such situations, the appointment of directors in company law is made.

Procedure for Appointment of Directors

The appointment of directors in a company can be made by following these steps:

Step 1: Provision in AOA

The company should first check whether the articles of association (AOA) of the company contain provisions for the appointment of directors. If not, the company should alter the AOA to add such provisions.

Step 2: Pass a Resolution

The company after checking the articles should proceed to pass a resolution at a duly convened Annual General Meeting (AGM). The shareholders should approve the appointment of directors at the AGM. However, if the appointment is made during the year, then consent should be obtained by passing a resolution at the Extraordinary General Meeting (EGM).

Step 3: Obtain DIN and DSC

If the proposed director does not have a Director Identification Number (DIN) and Digital Signature Certificate (DSC), then the application should be made by such director to obtain DSC and DIN. Once DIN has been obtained by the director, he should furnish the same to the company along with the declaration that he is not disqualified to be appointed as a director.

Step 4: Consent of the Directors

The company should obtain the consent of the proposed director to act as the company's director. The consent by the director should be given in Form DIR-2.

Step 5: Letter of Appointment

After the consent of the director has been received, the company should proceed to issue a letter of appointment to the director containing the terms of appointment including the period of appointment, salary, bonus, etc.

Step 6: Filing with ROC

The company shall within 30 days of passing the resolution intimate the registrar of companies (ROC) by filing Form DIR-2, Form MGT-14 and Form DIR-12 along with the requisite fee.

Documents for Appointment of Directors

The documents required for the appointment of directors are:

• PAN of the director
• Identification proof such as Adhaar card, driving license, etc.
• Passport size photograph
• Proof of residence, such as utility bills, rent agreement, etc.
• Digital Signature Certificate (DSC)

Fees for Appointment of Directors

The fee for the appointment of directors under the Companies Act, 2013 is:

In case the company commits delay in filing form DIR-12 within 30 days of passing the resolution, then the company shall be liable to a penalty of:

BizFoc’s professional fee (excluding GST) for the appointment of a director is as follows:

Timeline for Appointment of Directors

The appointment of directors can be made by filing Form DIR-12 with the ROC. The process of appointment of directors is simple if done under professional assistance. Otherwise, it can cause the company to bear huge penalties. The approximate time for the appointment of directors is 2 to 3 days.

How can BizFoc help you with the appointment of directors?

BizFoc is a highly professional team of experts always working to provide the best professional assistance to their clients related to the matter of the Companies Act, 2013. BizFoc can help with the appointment of directors by:

• Ensuring proper compliance with the provisions
• Filing forms before the deadline with necessary attachments
• Providing the best prices in the industry
• Providing helpful and independent assistance during the process

Conclusion

In a nutshell, the directors are the important intermediary between the company and the stakeholders. They are the agents of the company. The appointment of directors can be made due to various reasons such as to acquire new talent, due to board deadlock, etc. However, the appointment of a director under the Companies Act, 2013 should be made by following the procedure.

The appointment of directors in company law is mandatory. BizFoc can help you in complying with this important requirement by being your compliance partner and independent advisor. Trust us with your requirements today!

What is the procedure for the appointment of directors?