Discover the straightforward process of appointing a director to your company. Explore eligibility criteria, required documents, and the removal procedure, all explained in simple terms.
How to Add a Director to an Existing Company
In the realm of business, a company is an artificial legal entity managed and operated by natural persons known as directors. These directors play a pivotal role in steering the company towards success. As the dynamics of a business evolve, there may come a time when you need to appoint additional directors to your company’s board.
Whether it’s to bring in fresh talent, prevent dilution of ownership, or address the inefficiency of existing directors, the process of adding a director must adhere to legal regulations as per the Companies Act, 2013.
In this article, we’ll take you through the steps of adding a director to an existing company, the reasons behind such appointments, and the essential documents required.
Adding a Director – An Overview
A director is an individual elected by the company’s shareholders to manage its affairs in accordance with the Memorandum of Association (MOA) and Articles of Association (AOA). Before one can become a director, they must possess a Digital Signature Certificate (DSC) and Director Identification Number (DIN). It’s important to note that any individual above the age of 21 can become a director.
The AOA of your company should contain provisions for adding a director, and the Companies Act, 2013 further outlines the procedures to follow for this purpose. While a private company is required to have a minimum of two directors at all times, it can have a maximum of fifteen directors.
Why Add or Change Directors
There are several reasons why a company may want to add or change directors:
- Get New Talent: As a company grows and expands, it may need to bring new talent to its board of directors to meet additional requirements and challenges.
- Prevent Dilution of Ownership: Appointing additional directors can help shareholders assign extra operational responsibilities without losing strategic control.
- Address Inefficiency: Sometimes, existing directors may become inefficient due to various reasons. Adding new directors can address this issue and maintain the company’s efficiency.
- Meeting Statutory Limits: Every company must maintain a certain number of directors as per the Companies Act, 2013. In case of sudden vacancies, the company may need to appoint directors to meet these statutory limits.
Process of Adding a Director
Here is a step-by-step guide to adding director of a company:
- Check AOA for Director Appointment Provision:
Review your company’s Articles of Association (AOA) to ensure it contains a clause for appointing or adding a director. If not, consider modifying the AOA to include such a provision.
- Conduct a General Meeting:
Appoint a director by passing a resolution in a general meeting. Depending on the timing, this can be either an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM). For an EGM, hold a board meeting to pass a resolution for conducting it.
- File Form MGT-14:
File the resolution for the director’s appointment in Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing the resolution.
- Apply for DIN:
The proposed director should apply for a Director Identification Number (DIN) using Form DIR-3 if they do not already have one.
- Consent from the Proposed Director:
After obtaining the DIN, the proposed director must give their consent to act as the director by filing Form DIR-2.
- File Forms with the ROC:
After obtaining the consent, the company can officially appoint the director. File Form DIR-2 and DIR-12 (Particulars of appointment of the director) with the ROC within 30 days of the appointment.
Documents Required to Appoint a Director
To appoint a director, you will need the following documents:
- The PAN card of the director
- Identification proof (e.g., Voter ID, driver’s license, Aadhaar card)
- Proof of residence (e.g., utility bills, rental agreement)
- Passport size photograph
- Digital Signature Certificate (DSC)
The Bottom Line
In conclusion, adding a director to an existing company is a well-defined process that ensures transparency and adherence to legal regulations. By following the steps outlined above and providing the required documents, you can seamlessly enhance your company’s leadership team.
For expert assistance, reach out to the professionals at Vakilsearch and navigate the journey to growth and success with ease!
FAQs
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1. Who can be a company director? Any individual above 21 years of age can be appointed as a director. Artificial persons like corporations, firms, or entities cannot hold the position of a director. |
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2. What are the eligibility criteria to be a company director? To become a director, an individual must meet certain criteria:
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3. Is it necessary for a director to hold company shares? No, a director is not required to hold company shares. A person without company shares can still be appointed as a director unless the AOA specifies otherwise. |
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4. What is the procedure for removing a director? The procedure for removing a director involves passing a resolution for removal in a general meeting, filing Form DIR-12 with the ROC, and having the director’s name struck off from the MCA website. |
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5. How long does it take to appoint a company director? After passing the resolution for an appointment and obtaining the DIN, it can take up to three days to officially appoint the director. |
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