The ability and moral character of a company's directors have a significant role in the company's success. Therefore, it is essential that the administration of businesses be in competent hands. As a result, the Companies Act of 2013 has tight regulations on the appointment of directors. Special rules have been put in place to prevent undesirable people from managing the company.
The Act has made it illegal for a company or firm to act as a director of another company, which is one evil it has put an end to. Now, a director of a business can only be an individual person. No company, firm, or association may be chosen to serve as a director.
Any person who has not been allotted a Director Identification Number under Section 154 of the companies act, 2013, may not be appointed as a director by a company.
According to section 149 of the companies act, 2013, every company must have a board of directors. It should be composed of individual directors. A minimum of three directors are required for a public company, two are required for a private one and o Only one director is required in the case of a one-person company. The number of directors is capped at 15. A specific resolution must be passed before a firm may appoint more than 15 directors. Additionally, each company has to have one resident director or someone who spent at least 182 days in India during the fiscal year.
The Companies Act does not provide any qualifications for directors of any companies. The Companies Act does, however, set a cap on the specified share requirement for directors at 5,000 rupees (Rs. 5,000/-) for public companies and private companies that are subsidiaries of public companies.
The primary managerial function of investors in the company is the election of directors, which required stringent regulation to protect their interests. Directors shall be elected by the Company at the general meetings held under Section152. The candidate for appointment must provide his Director's Identification Number and a statement stating that he is not barred from serving as a director under the Act. The individual designated as a director is not permitted to function in that capacity unless he has submitted written consent to the firm. Within 30 days after his appointment, he must provide his consent in the required format to the Registrar.
The board meeting is an important aspect of the appointment of directors. In the case of Usha Chopra v. Chopra Hospital Pvt ltd. new directors were appointed without any record of board meetings or notice to directors, the appointments were held to be wrong and oppressive.
Independent directors: The names, addresses, and credentials of individuals who are qualified to serve as independent directors must be included in a data bank from which independent directors must be chosen. Any organisation, institution, or association that the Central Government may notify is required to retain this. For the company appointing the directors, the body to be alerted should have experience in the construction and upkeep of such a data bank and post it on their website. The company is in charge of carrying out due diligence prior to selecting a candidate from such a data bank.
The company's general meeting must approve the appointment. The explanation for selecting the appointee must be included in the explanatory statement attached to the notice of the general meeting convened to consider an appointment. Data banks must be preserved in compliance with any applicable requirements. The method and process for choosing independent directors who meet the qualifications and standards outlined in Section 149 may be prescribed by the Central Government.
This power of the directors is not affected by the provisions
Reappointment of directors: The reappointment process would be conducted in the same meeting where a director’s position is made vacant, the vacancies resulting from this process should be filled. However, the general assembly may alternatively decide that the positions will not be filled. The meeting will be regarded to have been postponed for a week if it hasn't done one of those things. if neither a resolution in favour of an appointment nor a new appointment is made at the reappointment meeting, the retiring director will be reappointed, unless he gives in writing to the company his willingness to discontinue.
Fresh Appointment: Fresh appointment process related to directors is outlined in Section 160 of the companies act, 2013, it must be followed if it is proposed to replace a retiring director with a new one. A written notice of his appointment must be submitted to the company's office at least 14 days prior to the meeting date. This notice must be accompanied by a deposit of Rs. 1,00,000, which will be returned to the candidate or member if the candidate is chosen as a director or receives more than 25% of the total valid votes cast by show of hands or poll. The proposed director may provide notice.
Additional directors: If the articles of the company provide a provision for appointing additional directors, the Board may nominate additional directors; but, the total number of directors appointed by the Board shall not exceed the number set forth in the articles. The selection of an additional director by the remaining directors was considered lawful in cases when the number of directors dropped below the required minimum. Such new directors may serve only through the date of the following annual general meeting or until the final day on which a meeting was scheduled. Section 152 exempts them from having to get consent to function as a director.
Appointment by Tribunal: The Company Law Tribunal has the power to appoint the directors of a company for the prevention of oppression and mismanagement.
Powers of directors: The board of directors is a company's top administrative body. In accordance with Section 179 of the Companies Act, 2013, a company's directors have the right to make any and all decisions and, as a result, to exercise all the power that the company is authorised to have.
The following are the powers that can be exercised by the directors of a company after a resolution has been passed regarding the same in the board meeting of the company.
- making calls on shareholders
- approving the repurchase of shares and securities
- issuing shares and securities
- borrowing money from organisations
- putting the money to use in numerous ways
- authorising and granting loans
- Approve the company's fiscal year's financial statements.
- Approve mergers and amalgamations
- expand the company's business diversity
- take over a business
- contributing to political activities
- selecting or dismissing important managerial individuals.
- appointing secretarial and internal auditors.