Procedure for Appointment of Director

Aakanksha Singhal

Aakanksha Singhal

Published on: May 6, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

★★★★★(147 Rating)

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Introduction

Appointment of Director in a Company shall be pursuant to provisions of Companies Act, 2013. In accordance with the Companies Act 2013, every company shall have a certain number of directors. The minimum number of directors is fixed according to the different type of companies- a Public Company shall have at least 3 Directors, a Private Company shall have atleast 2 and a One Person Company shall have atleast 1 Director. The upper limit is fixed at 15. However, a Company needs to pass a Special Resolution if it wants to have more than 15 directors. [Section 149(1)]

Members of the Company at General Meeting appoint/re-appoint Directors in case of Director retiring by Rotation of Public Company or Regularize the Director appointed by the Board as an Additional Director. Unless the articles provide for the retirement of all Directors at every Annual General Meeting, not less than two-thirds of the total number of Directors of a Public Company shall be persons whose period of office is liable to determination by retirement of Directors by rotation and be appointed by the Company in General Meeting. One-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office. [Section 152(6)]

1. Section 152, 153, 160, 161, 164 & 173 of Companies Act, 2013
2. Rule 8 of Companies (Appointment and Qualifications of Directors) Rules, 2014
3. Regulation 30, 44 and 46 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Mandatory Requirements

1. The individual who will be appointed as a Director shall have an Active DIN. [Section 152(3)]
2. A person shall not be eligible for appointment as a Director of a Company, if he is disqualified from being appointed as a Director in the Company as per Section 164(1).
3. No person who is or has been a director of a company which
   • has not filed financial statements or annual returns for any continuous period of three financial years or
   • has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company for a period of five years from the date on which the company fails to do so. [Section 164(2)(a)]
4. A person who is not a retiring director in terms of section 152 and is eligible for appointment to the office of a Director at any General Meeting, shall be appointed as a Director after fulfilling following conditions [Section 160(1)]
   • he, or some member intending to propose him as a director, has, not less than fourteen days before the meeting, left at the registered office of the company, a notice in writing under his hand signifying his candidature as a director or
   • as the case may be, the intention of such member to propose him as a candidate for that office, along with the deposit of one lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or to the member, if the person proposed gets elected as a director or gets more than twenty-five per cent of total valid votes cast either on show of hands or on poll on such resolution.
     But the requirements of deposit of amount shall not apply in case of appointment of an Independent Director or a Director recommended by the Nomination and Remuneration Committee, or a Director recommended by the Board of Directors of the Company, in the case of a company not required to constitute Nomination and Remuneration Committee.

Following Procedure is to be followed

1. Convene a Meeting of Board of Directors [As per section 173 & Secretarial Standard-1 (SS-1)]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors of the Company to discuss the agenda and deciding on the name of Proposed Director and pass Board Resolution
     • to consider the Appointment of New Director/Re-appointment of Retiring Directors including Regularization of an Additional Director subject to approval of members at general meeting.
     • to fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013 and authorize the Director or Company Secretary to sign and issue notice of General Meeting.
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation, Signing and Compilation of Minutes of Board Meeting]
2. Consent and Declaration from the Proposed Director
   The Proposed Director has to submit Form DIR-2 (Consent to act as a Director) and Form DIR-8 (Intimation by Director about his disqualification) to the Company either before the Board Meeting or during the Board Meeting.
3. Obtaining DIN and Digital Signature Certificate [Section 153]
   • If the person does not have Digital Signature, he shall obtain Digital Signature from Certifying Authority in India.
   • The person shall have a valid DIN allotted by the Ministry of Corporate Affairs. At present, application for allotment of DIN can be submitted to MCA only through the company where he/she is proposed to be appointed.
   • The Application for DIN is required to be countersigned by a Director of the Company and a copy of resolution approving the proposal of appointment is also to be submitted by the person in Form DIR-3 with MCA with his ID Proof & Address proof, duly digitally signed by him and a director of the company in which the appointee is intended to be appointed as director.
   • Documents for DIR-3 are as follows
     • One Passport Size Photo in JPG/JPEG Format
     • Board Resolution proposing his appointment as director in an existing company
     • Specimen signature duly verified
     • ID Proof- Driving License/Passport/Election Voter ID Card
     • Residence Proof- Utility Bill (Electricity Bill/Telephone Bill)/Bank Statement/Mobile Bill
     • Other Mandatory Attachments- Income Tax PAN (For Indian National), Passport (For Foreign Nationals)
     • Other Attachments- Aadhaar Card
4. Convene General Meeting (Section 96, 100 and Secretarial Standard-2 (SS-2)]
   • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
   • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the General Meeting on fixed day and pass an ordinary resolution for appointment of new director/re- appointment of the retiring director or regularization of additional director. Also check the Quorum and check whether auditor is present, if not. Then Leave of absence is Granted or Not.
   • Issue letter of appointment to the Director of the Company mentioning terms and conditions of appointment and salary to be payable to the Director.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit a disclosure regarding appointment of Director within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
5. Obtain Form MBP-1 from the Appointed Director
   Obtain the declaration from the Appointed Director regarding his interest in other entities in Form MBP-1.
6. Filing of Return of Appointment of Director with the ROC [Section 152(2) and Rule 8 of the Companies (Appointment and Qualifications of Directors) Rules, 2014]
   After the General Meeting, a Return of Appointment of Directorship (Form DIR-12) is required to be filed with Registrar within 30 days of appointment with copy of Ordinary Resolution along with Consent to Act as Director and Declaration about his disqualifications. In case of Companies other than OPC and Small Company, the return is also to be certified by a Company Secretary/Chartered Accountant/Cost Accountant.
   Following documents will be required as an attachment with Form DIR-12
   • Certified True Copy of the Ordinary Resolution passed
   • DIR-8 Declaration by Director
   • Letter of Appointment.
7. Making Necessary entries in Register of Directors
   Company shall make necessary entries in the Register of Director and Key Managerial Personals and registers of contract and arrangements in which Directors are interested in Form MBP-4.
8. File Necessary Amendment Application under following Acts
   • Goods and Services Act
   • Shops & Establishment Act
   • Factories Act
   • Foreign Exchange Management Act
   • Inter-State Migrant workmen Act
   • Private Security Agency Act
   • EPF
   • ESI
   • Other Labour Laws
   • Industry Specific Laws

Note: The Ministry of Corporate Affairs had notified Companies (Appointment and Qualification of Directors) Amendment Rules, 2023 (dated: 20th January, 2023) by which in form DIR-12:

1. attachment DIR-2 is not require to be separately attached to the form rather to be certified in the form DIR-12 itself by the director
2. in attachment DIR-8. Now, the Director shall be to inform about personal disqualifications u/s 164(1) alongwith company related disqualifications u/s 164(2) and Company shall file Form DIR-9 with RoC within 30 days of receipt of DIR-8.
3. purpose of DIR-12 shall be selected as appointment due to disqualification of all the existing directors or appointment by liquidator/IRP/RP added in addition to the existing purposes as the case may be and SRN of INC-28 to be mentioned and order of NCLT to be attached, if applicable
4. Form DIR-3 Linked with Digilocker and in particulars of residential address of applicant jurisdiction of police station to be mentioned.