director appointment- series- 57

CS Divesh Goyal Mob: +91-8130757966

Practicing Company Secretary EMAIL: [email protected]

GOYAL DIVESH & ASSOCIATES

GOYAL DIVESH & ASSOCIATES, Practicing

Company Secretary

DIRECTOR CA- 2013

Series-32

As we are aware that Companies Act, 2013 is already in force from April 01ST, 2014, and every

professionals is trying his/her best to unlock and decode the provisions of Companies Act, 2013. In this

regard an attempts have been made from my side to compile the procedure for appointment of

Additional Director in Public Company/ Private Company (Purely Private) taken the route of

appointment of Director by Board.

With the newWith the newWith the newWith the new Companies ActCompanies ActCompanies ActCompanies Act, the law has become more stringent for private companies than for, the law has become more stringent for private companies than for, the law has become more stringent for private companies than for, the law has become more stringent for private companies than for public public public public

companiescompaniescompaniescompanies,,,, Moving from the Companies Act 1956 to the Companies Act 2013 is like shifting from your

old house to a new one. In the old house, where you have stayed for years, everything would have found

its own place the shoes, the clothes, umbrella, first aid, brooms, and whatever else you need in your

household. Your legs can find their own way, even in pitch dark of night they know the way to the

bathroom, to the stairs, they even know where the stairs end.

Directors of a company hold the most crucial position in the Company. With the new Companies Act,

2013 (New Act) already in force, their position has become even more significant than ever before.

They are now formally included within the definition of key managerial personnel or KMP under

Section 2(51) of the New Act.

As per Section 149(1): Every Company shall have a Board of Directors Consisting of Individuals as Individuals as Individuals as Individuals as

DirectorDirectorDirectorDirector. (It is clear to understand from this line that only an individual can be director of company.

Some persons have doubt that other than individual can be director or not). According to this section

ONLY AN INDIVIDUALONLY AN INDIVIDUALONLY AN INDIVIDUALONLY AN INDIVIDUAL can be director of company. {The Board shall consist of individuals not of

other persons like firms, LLP, companies, gods or other legal persons.}

PROCEDURE FOR APPOINTMENT OF DIRECTORS UNDER

COMPANIES ACT- 2013

SERIES

NO- 32




MinimumMinimumMinimumMinimum No.No.No.No. ofofofof DirectorsDirectorsDirectorsDirectors asasasas perperperper SectionSectionSectionSection 149(1)(a):149(1)(a):149(1)(a):149(1)(a):

Three in case of Public Company.

Two in case of Private Company.

One in case of One Person Company.

MaximumMaximumMaximumMaximum 15151515 DirectorsDirectorsDirectorsDirectors (If(If(If(If companycompanycompanycompany wantwantwantwant totototo appointappointappointappoint moremoremoremore thanthanthanthan 15151515 directorsdirectorsdirectorsdirectors SPECIALSPECIALSPECIALSPECIAL RESOLUTIONRESOLUTIONRESOLUTIONRESOLUTION

RequiredRequiredRequiredRequired totototo passpasspasspass inininin GeneralGeneralGeneralGeneral meetingmeetingmeetingmeeting))))---- ProcedureProcedureProcedureProcedure {Simple{Simple{Simple{Simple ProcessProcessProcessProcess ofofofof HoldingHoldingHoldingHolding ofofofof ExtraExtraExtraExtra----OrdinaryOrdinaryOrdinaryOrdinary GeneralGeneralGeneralGeneral

Meeting,Meeting,Meeting,Meeting, whichwhichwhichwhich wewewewe useuseuseuse inininin otherotherotherother MattersMattersMattersMatters also)also)also)also)

AppointmentAppointmentAppointmentAppointment ofofofof directorsdirectorsdirectorsdirectors in private companies as per new law:in private companies as per new law:in private companies as per new law:in private companies as per new law:

Practicing Company Secretary, GOYAL DIVESH & ASSOCIATES

The liberty given to private companies to self-regulate the appointment process has, surprisingly, been surprisingly, been surprisingly, been surprisingly, been

completely taken away Undercompletely taken away Undercompletely taken away Undercompletely taken away Under Companies ActCompanies ActCompanies ActCompanies Act----2013201320132013. This sounds completely paradoxical, in view of the

fact that in case of public companies, they still have the liberty to self-regulate to the extent of one third

of the board strength.

Sec 152 (6) (b) provides liberty, but only to public companies, to appoint one third of the total board by

a self-regulated process. While there was an exception to private companies in Sec. 255 (2) of the 1956

Act, that exception has been dropped while transporting the provisions into the new Act.

It could not be the case that such was the intent of the lawmaker there is absolutely no case for

imposing more stringent regulations in case of private companies, than in case of public companies.

Section 152 of the New Act governs the appointment of direcSection 152 of the New Act governs the appointment of direcSection 152 of the New Act governs the appointment of direcSection 152 of the New Act governs the appointment of directors. Certain specific requirements for tors. Certain specific requirements for tors. Certain specific requirements for tors. Certain specific requirements for

appointment of director as lay down in the New Act areappointment of director as lay down in the New Act areappointment of director as lay down in the New Act areappointment of director as lay down in the New Act are----

If different person are not named as first director in articles of the company, individual subscribers shall

be deemed to be first directors. Every Every Every Every directordirectordirectordirector otototother than first directors of company shall be aher than first directors of company shall be aher than first directors of company shall be aher than first directors of company shall be appointed ppointed ppointed ppointed

in general meeting as per Section 152(2)in general meeting as per Section 152(2)in general meeting as per Section 152(2)in general meeting as per Section 152(2).... If company wants to appoint a person as director in meeting

other then General meeting Company can do this by appointing such person as Additional Director U/s

161(1) of Companies Act, 2013.

ADDITIONALADDITIONALADDITIONALADDITIONAL DIRECTOR:DIRECTOR:DIRECTOR:DIRECTOR:

Ensure that the director to be appointed by board of directors exercising the power so conferred in them power so conferred in them power so conferred in them power so conferred in them

by the Articles of the companyby the Articles of the companyby the Articles of the companyby the Articles of the company is is is is not such a person who has failed to get appointed as a dirnot such a person who has failed to get appointed as a dirnot such a person who has failed to get appointed as a dirnot such a person who has failed to get appointed as a director in a ector in a ector in a ector in a




general meetinggeneral meetinggeneral meetinggeneral meeting. (If A proposal is made in General Meeting for appointment of a person as Director, if

resolution got failed not passed in that meeting and that person fails to get appointed as a director in a

general meeting, then that person cant appoint as additional director). The additional director has to be

appointed till date of next AGM or last date, on which AGM should have been held, whichever is

earlier.

PROCEDURE:PROCEDURE:PROCEDURE:PROCEDURE:

First CheckCheckCheckCheck whether Articles (AOA) of the Company contain power/authorization to appoint

Additional Director read with Section 161(1) of the Companies Act, 2013. {If there is no

provisions in Articles of the Company then Alter the Articles of the company to have enabling

clause for appointment of Additional Director.

Second Check whether such person have DIN No. or Not. If such person doesnt have DIN No.

then Apply for DIN.

(FOR PROCEDURE OF APPLICATION OF DIN CLICK ON GIVEN LINK:

http://www.simpletaxindia.net/2014/07/procedure-to-obtaining-din-director.html) and

(My coming Article Series(My coming Article Series(My coming Article Series(My coming Article Series---- 38383838 will be on Procedure for application of DIN mail me at will be on Procedure for application of DIN mail me at will be on Procedure for application of DIN mail me at will be on Procedure for application of DIN mail me at

[email protected]@[email protected]@gmail.com . . . . . . . . .). . . . . . . . .). . . . . . . . .). . . . . . . . .)

Third following Documents Are Requiring Documents Are Requiring Documents Are Requiring Documents Are Requiring fromfromfromfrom DirectorDirectorDirectorDirector to appoint him as Additional Director.

Consent in writing to act as Director in Form DIRForm DIRForm DIRForm DIR----2222 pursuant to Rule-8 of Companies

(Appointment & Qualification of Director) Rules, 2014- FORMAT FORMAT FORMAT FORMAT Get by mail to meGet by mail to meGet by mail to meGet by mail to me at at at at

[email protected]@[email protected]@gmail.com .... . . . . . . . . . . . . . . . . . . . . . . . .

Intimation by Director in form DIRDIRDIRDIR----8888 in terms of Companies (Appointment &

Qualification of Directors) Rules, 2014, to the effect that he/ she is not disqualified u/s

164(2) of Companies Act, 2014.- FORMAT Get by mail to meFORMAT Get by mail to meFORMAT Get by mail to meFORMAT Get by mail to me at at at at

[email protected]@[email protected]@gmail.com.... . . . . . . . . . . . . . . . . . . . .

Advisable to take disclosure of Interest in Form MBP-1 pursuant to Section 184(1) read

with Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014. {One thing

should be noted MBP-1 should not be dated earlier than date of his/her appointment as

Director}. - FORMAT Get by mail to meFORMAT Get by mail to meFORMAT Get by mail to meFORMAT Get by mail to me at.at.at.at.

[email protected]@[email protected]@gmail.com.... . . . . . . . . . . . . . . . . . . . .

However, if there is nothing to disclose on the part of new Director, even then also require to take form

MBP-1 from Director. (NIL disclosure is also a disclosure under section 184(1).

Fourth Fourth Fourth Fourth after after after after receiving all the documents from the receiving all the documents from the receiving all the documents from the receiving all the documents from the director:director:director:director:----

Call the Board Meeting.

Pass Resolution for appointment of Additional Director.




Issue Letter of Appointment.

File e-form DIRDIRDIRDIR----12121212 [Along with DIR-2 + Letter of Appointment+ DIR-8+ Interest in other

entities.)

Make necessary entries in the Register of Directors along with their Shareholding, if any,

maintained u/s 170 of Companies Act, 2013.

Now this person will be shown as Additional Director till AGM of company. His tenure will be upto

AGM of Company.

Board resolution for taking note ofBoard resolution for taking note ofBoard resolution for taking note ofBoard resolution for taking note of Disclosure of Interest and filing of form MGT.14Disclosure of Interest and filing of form MGT.14Disclosure of Interest and filing of form MGT.14Disclosure of Interest and filing of form MGT.14

Form MBP.1Form MBP.1Form MBP.1Form MBP.1 given by the Additional Director, towards disclosure of interest u/s 184, should be taken

note of by the Board of Directors through a separate Board Resolution in next Board Meeting (In the

First Board Meeting after appointment of Additional Director).

Hence it is duty of the company to pass board resolution to take note of disclosure of interest by Director

and file a copy of that board resolution in MGT.14 within 30 days of passing board resolution as desired

by section 117(3) of Companies Act, 2013.

IF THE SECTION IS VIOLATEDIF THE SECTION IS VIOLATEDIF THE SECTION IS VIOLATEDIF THE SECTION IS VIOLATED

Since the 8-lakh odd companies, sitting with more than 16-lakh directors, may not even be aware of this

change of law, what is the provision gets violated? There you have section 159 to take care of which

provides for a jail up to six months, of course with/without a fine too!

APPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANYAPPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANYAPPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANYAPPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANY::::

If company wants to appoint additional director then there is need to regularize such person in the

General Meeting of Company.

By following above mentioned procedure a person can be appointed as additional director of company

but to appoint him as permanent director of company procedure as given below:

As per Section 160 (1) of CompaniesAs per Section 160 (1) of CompaniesAs per Section 160 (1) of CompaniesAs per Section 160 (1) of Companies Act, 2013:Act, 2013:Act, 2013:Act, 2013:

If he, or some member intending to propose him as a director, steps involved. (He denotes Additional

Director).

Other Person or additional director himself at lease 14 days before the General Meeting left at

the registered office of the company,




A Notice in writing under his hand signifying candidature as a director.

Along with the deposit of Rs. 1,00,000/- (Rupees One Lakh) rupees.

The company shall, at least seven days before the general meeting, inform its members of the

candidature of a person for the office of a director or the intention of a member to propose such

person as a candidate for that office:

by serving individual notices, on the members through electronic mode to such

members who have provided their e-mail addresses to the company for communication

purposes, -

in writing to all other members

by placing notice of such candidature or intention on the website of the company, if any

Note:Note:Note:Note: Provided that it shall not be necessary for the company to serve individual noticesnot be necessary for the company to serve individual noticesnot be necessary for the company to serve individual noticesnot be necessary for the company to serve individual notices upon the

members as aforesaid, if the company advertises such candidature or intention,if the company advertises such candidature or intention,if the company advertises such candidature or intention,if the company advertises such candidature or intention, at least seven days before

the meeting at least once in a vernacular newspaper in the principal vernacular language of the district

in which the registered office of the company is situated, and circulating in that district, and at least

once in English language in an English newspaper circulating in that district.

After completion of above processAfter completion of above processAfter completion of above processAfter completion of above process::::

The company will pass Ordinary Resolution Ordinary Resolution Ordinary Resolution Ordinary Resolution for appointment of such person as directors of the

Company.

File e-form DIR-12 for change in designation of director within 30 days of passing of Ordinary

Resolution.

(Author (Author (Author (Author CS Divesh Goyal, CS Divesh Goyal, CS Divesh Goyal, CS Divesh Goyal, Company Secretary in PracticeCompany Secretary in PracticeCompany Secretary in PracticeCompany Secretary in Practice,,,, from Delhifrom Delhifrom Delhifrom Delhi GOYAL DIVESH & GOYAL DIVESH & GOYAL DIVESH & GOYAL DIVESH &

ASSOCIATESASSOCIATESASSOCIATESASSOCIATES and can be contacted at [email protected]) Disclaimer: The entire contents of this and can be contacted at [email protected]) Disclaimer: The entire contents of this and can be contacted at [email protected]) Disclaimer: The entire contents of this and can be contacted at [email protected]) Disclaimer: The entire contents of this

document have been prepared on the basis of relevant provisions and as per the information existing at document have been prepared on the basis of relevant provisions and as per the information existing at document have been prepared on the basis of relevant provisions and as per the information existing at document have been prepared on the basis of relevant provisions and as per the information existing at

the time of the preparation. Though utmost efforts has made to the time of the preparation. Though utmost efforts has made to the time of the preparation. Though utmost efforts has made to the time of the preparation. Though utmost efforts has made to provide authentic information, it is provide authentic information, it is provide authentic information, it is provide authentic information, it is

suggested that to have better understanding kindly crosssuggested that to have better understanding kindly crosssuggested that to have better understanding kindly crosssuggested that to have better understanding kindly cross----check the relevant sections, rules under the check the relevant sections, rules under the check the relevant sections, rules under the check the relevant sections, rules under the

Companies Act, 2013. The observations of the author are personal view and the authors do not take Companies Act, 2013. The observations of the author are personal view and the authors do not take Companies Act, 2013. The observations of the author are personal view and the authors do not take Companies Act, 2013. The observations of the author are personal view and the authors do not take

responsibility of tresponsibility of tresponsibility of tresponsibility of the same and this cannot be quoted before any authority without the written consent of he same and this cannot be quoted before any authority without the written consent of he same and this cannot be quoted before any authority without the written consent of he same and this cannot be quoted before any authority without the written consent of

the authorthe authorthe authorthe author

SUGGESTIONS, COMMENTS AND QUERIES SOLICITED.SUGGESTIONS, COMMENTS AND QUERIES SOLICITED.SUGGESTIONS, COMMENTS AND QUERIES SOLICITED.SUGGESTIONS, COMMENTS AND QUERIES SOLICITED.