Here, we provide the definitive explanation of the board resolution for the appointment of a director. After adopting a resolution, a company may elect more directors than fifteen. In this article, you will find the ultimate guide to board resolution for the appointment of a director.
The shareholders and board of directors must make the most important decisions regarding the appointment of directors to the company’s board. The articles of association and bye-laws provide guidelines for Indian directors. Selection and appointment of director are crucial in ensuring good governance within a company, protecting it against external threats and preventing fraud. When appointing directors, companies must follow best practices. This includes meeting certain eligibility criteria set by law. Continue to read more about board resolution for the appointment of a director.
What are Board Resolutions?
A resolution is a form of approval where shareholders, directors and members of the company vote on whether they support or dislike the appointment of a person as a director. Make sure to check your local laws before you approve your candidate. Additional essential facts to recognise are that the minimum quorum requirements are typically one-half (1/2) plus one (1), and those appointed cannot normally hold office after they have ceased being employed.
Differences between Ordinary and Special Resolutions
The board can approve either ordinary or special resolutions. Different companies might use different terms. The board will approve resolutions that meet certain criteria. These are some general guidelines:
- An ordinary resolution can be used to resolve company-wide issues such as the approval of an annual budget and the election of members to a board
- A special resolution is a situation where shareholders must be consulted before amending articles or declaring dividends. A special resolution is required if a director nominee has never been appointed.
Types of director
In a Board Meeting, the following types of directors can be appointed.
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Managing Director
A Managing Director is a Director vested with significant powers to manage the activities of a company, either by the article of association, an agreement with the corporation, or a resolution carried by its Board of Directors about the organisation.
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Ordinary Director
An Ordinary director is a Director who simply attends company Board meetings and participates in matters before the Board of Directors. These Directors are not Managing Directors or whole-time Directors.
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Additional Director
Under the provisions of a Company’s Articles of Association, a person governed by a Board of Directors between annual general meetings is referred to as an additional director. Additional Directors will be appointed only up to the next annual general meeting of the corporation. The maximum number of Directors and additional Directors of the same company shall not exceed the Articles of Association’s maximum strength.
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Alternate Director
A Board of Directors responsibly governs an alternate director at a meeting to replace the original director whenever he is absent for three months or more. In most cases, alternate directors are appointed to substitute a company’s Non-Resident Indian or foreign associate.
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Professional Director
A Professional Director has formal skills but has no financial stake in the business. Large companies sometimes appoint professionals to the board to use their experience managing the company.
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Nominee Director
Private Equity investors and banks that lend equity or debt assistance to companies generally place a condition on the appointment of their representative to the board. These nominee directors are known as the nominee director.
What Areas are Included in the Preparation of a Board Resolution
- The title as well as the date
- The company’s name and company registration address
- The names and addresses of each director currently in office
- Indicate whether there are any new appointments. If so, indicate how many appointments are available and their names. If an annual appointment is made, indicate the month and year it expires
- Indicate which director(s), if any, the resolution refers to. Please indicate their nationality
- They are responsible for confirming their appointment and being appointed directors
- Finally, include reasons why the nominee should be named as director. Also, identify other people who support the nomination
- Briefly describe relevant skills, experience, and qualifications related to the appointment. You can also state that you have sufficient evidence that the person is solvent as required by law.
Directors Nomination
- Shareholders can appoint two-thirds (public or private) of the directors in a company
- Private companies can have their Article of Association specify the procedure for appointing directors. If the Articles do not contain any information, shareholders must appoint the directors
- A clause in the Companies Act allows companies to appoint up to two-thirds of company directors. This is according to the principle of proportional representation. If the company adopts this policy, it will be possible
- Third-party officials or the government appoint nominee directors to resolve mishandling and misbehavior. Directors are expected to act honestly and with reasonable care and skill in performing their duties for the organisation.
Format of the Board Resolution for the appointment of director
A true certified copy of the resolution made at the board of directors of (company names) held at (address) on(time).
RESOLVED (Mr./Ms.) in compliance with Section 161 of the Corporations Act (2013): https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf and the Company’s Association Articles. The Director Name, who has consented to be a Director of this Company in Form DIR-2, if so appointed, is and is at this moment designated as an additional director.
FURTHER RESOLVED THAT, to bring to this resolution, Mr_____________________, Director of the Company, be and is at this moment empowered to carry out all actions, accomplishments, matters, and things considered necessary, appropriate, or beneficial, and to sign and start executing all required documents, implementations, and returns, as well as to file the required E-form with the Registrar of Companies.”
For (COMPANY NAME)
(Director Name)
The Process of Appointing a New Director
Step 1: If the proposed director doesn’t have a Digital Signature Certificate (DSC), they should obtain one.
Step 2: If the proposed director doesn’t have an active Director Identification Number (DIN), they should obtain it by filing Form DIR-3.
Step 3: The company should convene a general meeting to pass a resolution for the appointment of the new director.
Step 4: The proposed director should provide consent to the company for their appointment, which is submitted in Form DIR-2. Upon receiving DIR-2, the person is officially appointed as a director.
Step 5: Once appointed, the company issues an appointment letter to the director.
Step 6: Following the appointment letter issuance, the company must file forms MGT-14, DIR-2, and DIR-12 with the Registrar of Companies (ROC) within 30 days.
Step 7: The company should update the Register of Directors and Key Managerial Personnel with the necessary details of the newly appointed director.
Board Resolution Template for Appointing a New Director
CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF (COMPANY NAME) HELD AT THE REGISTERED OFFICE OF THE COMPANY AT (ADDRESS) ON (DATE) AT (TIME)
[COMPANY NAME]
Registered Office: [ADDRESS]
Date: [DATE] Time: [TIME]
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RESOLVED THAT
In accordance with the provisions of Section 161 of the Companies Act, 2013, and pursuant to the Articles of Association of the Company, (Mr./Ms. Director Name), having signified his/her consent by filing Form DIR-2 if appointed, to act as a Director of the Company, is hereby appointed as an additional director of the Company.
FURTHER RESOLVED THAT
To give effect to this resolution, Mr. [Director Name], Director of the Company, is hereby authorized to perform all acts, deeds, matters, and things deemed necessary, proper, or desirable. Mr. [Director Name] is also authorized to sign and execute all necessary documents, applications, and returns, including the filing of the required E-form with the Registrar of Companies.
For [COMPANY NAME]
[Director Name]
[Designation]
[Date]
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Conditions for the Appointment of Directors
These conditions apply when a director is appointed:
- He or she shouldn’t have been sentenced to imprisonment or a penalty under any number of statutes
- They should never have been detained or found guilty under the 1974 Act to Conserve Foreign Exchange and Prevent Smuggling Activities
- The individual must be at least twenty-five (25) years old but not over seventy (70). This age requirement doesn’t apply if the appointment has been authorised by a special resolution of the company’s meeting or by Central Government permission
- They must be managers in at least one company and draw remuneration from at least one or two companies, subject to the ceiling in Section III of Schedule II
- A person is a resident if they have been living in India continuously for at least twelve (12) consecutive months immediately before their appointment as a manager. They must also prove that they are Indian citizens and intend to remain in India to take up the occupation or carry-out business or vocations in India.
Conclusion
The board resolution for appointment of director in company must identify the names of the director (s), their designation, the entity, and their consent. It must be two-staged. The resolution must be approved by the meeting to cover any future disputes. Second, it must be signed by all directors involved, who can sign it individually or collectively by adding their signatures at the bottom of each page.
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