A Whole-Time Director holds a major role in a company. Appointing a Whole-Time Director in your company is one of the most important steps you can take to ensure success.
Overview
A Whole time employee is appointed as a company’s director and is in the position of a Whole Time Director, according to the Company Law Board. A director who works for the company full-time is referred to as a whole-time director under Section 2(94) of the Act, 2013. This definition includes all directors who have worked for the company on a full-time basis and are eligible to receive remuneration as prescribed under the relevant act.
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Why Are Whole Time Directors Appointed in a Company
In accordance with the Companies Act, 2013, the term ‘whole-time director’ is broadly defined as a director engaged in the whole-time employment of the company. This definition, though inclusive, lacks specific details regarding the powers and functions vested in a whole-time director. The Act provides companies with the flexibility to determine the scope of authority for whole-time directors based on various factors specific to each company.
A whole-time director is an individual who dedicates their services exclusively to the company on a full-time basis. When a whole-time employee assumes the position of a director within the company, they automatically hold the designation of a whole-time director. This clarification was emphasised by the Directorate of Company Affairs (DCA) through a directive dated 29.06.1964, stating that a whole-time employee appointed as a director concurrently occupies the role of a whole-time director.
The role and responsibilities of a whole-time director can vary significantly, contingent upon factors such as the company’s structure, industry, and specific objectives. While the Companies Act of 2013 outlines the requirement for certain classes of companies to have directors in full-time employment, it does not prescribe specific powers for them. As a result, the discretion to define the powers vested in a whole-time director lies with the company’s management.
Whole-time directors are integral members of a company’s board of directors, contributing their expertise and experience to key decision-making processes. The Companies Act does not explicitly outline the powers but rather leaves it to the company’s management to decide the roles and responsibilities of these directors. Typically, individuals appointed as whole-time directors possess substantial experience and specialised knowledge relevant to their designated roles within the company.
What Laws Governs the Appointment of Whole-Time Director
In compliance with the regulatory framework, the appointment of whole-time directors is governed by various provisions outlined in The Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Companies Act, 2013, specifically under Sections 204, 196, 197, and 202, along with The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, delineates the legal aspects surrounding the appointment of whole-time directors.
Additionally, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, further stipulates the requirements for companies regarding the appointment of whole-time directors. Specific regulations such as Regulation 17, 17A, and 30, coupled with Schedule III of SEBI’s regulations, delineate the disclosure obligations and listing requirements associated with the appointment and remuneration of managerial personnel, including whole-time directors.
Understanding and adhering to these statutory provisions and regulatory guidelines is essential for companies seeking to appoint whole-time directors, ensuring compliance with legal and disclosure requirements. These regulations collectively contribute to fostering transparency and governance in corporate practices, safeguarding the interests of stakeholders and upholding the integrity of the appointment process.
What Are the Forms to Appoint a Whole-Time Director in a Company
The appointment of a whole-time Director necessitates the submission of just three forms, namely:
- MGT-14 within a thirty-day timeframe,
- DIR-12 within thirty days, and
- MR-1 within sixty days.
How Many Whole-Time Directors Can Be Appointed In A Company?
- A company can have a maximum of 15 directors.
- Term of Appointment: A Whole-Time Director may be appointed for up to a five-year period.
- Ineligibility for an Appointment: No company shall appoint or maintain the employment of any person as a Whole Time Director who:
- An undischarged insolvent or is a fraudulent borrower or has been adjudged as an insolvent;
- Has at any time been sentenced of an offence by a court and sentenced for a time exceeding 6 months;
- is under 21 years old or is beyond 70 years old;
- has at any time delayed or suspended payments to their creditors or is currently making or has previously made a composition with them.
A Managing Director, Whole-Time Director, or Manager shall be appointed subject to the provisions of Section 197 and Schedule V, and the terms and conditions of such appointment and remuneration payable shall be approved by the Board of Directors at a meeting, subject to approval by resolution at the Company’s subsequent Annual General Meeting and by the Central Government.
According to the requirements of the Companies Act, 2013, the person nominated as a Director would carry out all of the responsibilities and obligations assigned to him. The collective group of directors of a firm is referred to as the Board or Board of Directors. The Board of Directors oversees how the business is run. The management of the corporation is under the control of the Board of Directors. They decide on matters pertaining to the business.
Directors Identification Number
The Directors Identification Number is a unique identifying number for a director who is currently serving or who is considering serving as a Director of a corporation. All Directors are required to obtain a Directors Identification Number.
- Every person who is to be appointed as a Director of a company shall submit an electronic application to the Central Government for the issuance of a Director Identification Number in Form DIR-3 (Application for allotment of Directors Identification Number )
- To make it easier to submit an application for the allocation of a Directors Identification Number through the portal on the Ministry of Corporate Affairs website, the Central Government shall make an electronic system available.
- a. The applicant must download Form DIR-3 from the portal, complete it with the necessary information, attach a photograph, a copy of identification or proof of residency, and verify their signature in Form DIR-4. They must also digitally sign the form.
- The applicant must electronically sign and submit Form DIR-3 using their own Digital Signature Certificate. This signature must then be digitally verified by the following parties:
- A Cost Accountant, a practising Corporate Secretary, a Chartered Accountant; or
- By the Managing Director or Director of the company in which the applicant is to be appointed a Director, or by a Company Secretary employed full-time by the firm.
Companies Which Are Required To Appoint Whole-Time Director
In accordance with Section 203 of the 2013 Companies Act 2013:
- Any public firm that is both listed and has a paid-up share capital of at least 10 crore rupees
- The company shall designate a Managing Director or Manager as a full-time Key Managerial Personnel, and in their absence, a Whole-Time Director.
Duties Of Whole-Time Directors
A Director of a company (including a private company) must operate in line with the firm’s bylaws, according to Section 166 of the new Act. His responsibilities are listed in the following section:
- In order to advance the company’s goals for the benefit of all of its members, he must behave in good faith
- He must act in the organisation’s, employees’, shareholders’, community’s, and environment’s best interests
- He must perform his obligations with the proper and reasonable care, skill, and diligence, as well as using his own judgment
- He must refrain from getting involved in any circumstance in which he might have a direct or indirect interest that is in opposition to or likely to be in opposition to the company’s interests
- He is prohibited from obtaining or attempting to obtain any unauthorised benefit or advantage for himself, his loved ones, business partners, or colleagues
- He may not delegate his duties to anyone else.
Conclusion
The definition of the term Whole-Time Director varies between nations and their statutes, but it generally refers to a member of an organization’s Board of Directors of the Company . Their assigned tasks and responsibilities vary from firm to company. According to the Companies Act of 2013, such a kind of company must have Directors who are employed full-time and have no restrictions on their authority. Therefore, it is up to the decision of the Management as to why they are hired by a Company. Usually, a person chosen for a position in a Company should have extensive experience and skill in that position. Connect with Vakilsearch in filling up forms for you quickly.
