A company needs a director to handle all the company processes and take important decisions. In India, a private limited company plays a significant role in boosting the economy’s growth rate. The director is essential during the company’s incorporation and post-incorporation process. There are many rules to becoming a company director, and one must abide by them.
As per the Companies Act, 2013, the director of a company is defined as a person who the board members of the company appointed. The board of directors includes members elected by the company shareholders to manage the different affairs of the company. A company must be managed with the help of proper individuals, and the company’s director plays a significant role in this process. One must be aware of the director’s background when choosing a director.
The company entrusts the board of directors regarding any decision and the company’s plan to expand further. Another definition of the director is an individual who operates, manages, administers, controls, or directs the company; or a person who the shareholders of the company elect; or who are experienced and authorised to manage the company is known as the director of the company.
However, different norms must be followed when a person wants to become a company director. The person also requires a DIN (Director Identification Number) to become a company director. Anyone above 18 can obtain this number from the DIN Cell. The central government provides this number to a person who will be a director or existing director, an eight-digit number.
Types of Directors
Based on the different needs of the company, there are specific directors. One person cannot handle the company alone, so multiple directors focus on different things of a company or an institution. There can be directors focusing on management, finance, or company operations. Multiple directors help in making the decision process easy and effective. The following are the three basic types of directors a company has: –
- Managing director: –
The board members of the company appoint a managing director, and he looks towards the management and different affairs of the company.
- The Executive director or Whole-time director: –
An executive director or a whole-time director is a person who manages the company full-time with responsibility, and he works as a full-time employee of the company.
- Ordinary director: –
An ordinary director is a person who attends the company’s board meetings. He also helps in the decision-making in the board meetings and participates in matters in front of the company. The ordinary director is neither a full-time director nor a managing director.
Maximum Number of Directors
There are many different kinds of directors a company can have. But, there are certain norms regarding the minimum and maximum directors of a private limited company. One must know that only a living person can be appointed as the director of a company. A business entity or a corporate body cannot act as the director of a company.
However, the company can have a maximum of fifteen directors. The number of directors can also be increased by passing a special resolution. The minimum types of directors in different kinds of companies are as follows: –
- For a one-person company: – There can be a minimum of one director.
- For a limited company: – There can be a minimum of three directors.
- For a private limited company: – There can be a minimum of two directors.
However, now there is a change in the norms that, for a private limited company earning a turnover of more than INR 300 crores and having a paid-up capital in shares of more than INR 100 crores are required to appoint women director in the company.
Who Cannot be the Director of a Company?
There are many norms when choosing a director of the company. According to section 151 of the Companies Act, 1993, the following person can’t be a director of any company: –
- A person who is less than the age of 18 years.
- A person who is considered bankrupt.
- A person who is prevented from becoming a director or promoter of the company or is prohibited from taking part in any company processes under the following given circumstances: –
- The court disqualifies them.
- They are prohibited by FMA (Financial Management and Accountability Act 1997) or Registrar.
- They have committed any crime.
- They have been convicted of an offence concerning the company’s management, formation, or promotion by any illegal means.
- A non-natural person can’t be a director of a company.
- A person who the board members of the company do not accept.
- A person prevented from becoming a director under the Limited Partnerships Act 2008.
These were some brief points because a person cannot be considered a company director. Apart from this, if the person follows the laws properly and fits into the company’s rules and regulations and protocols, he can be considered a company director.
There are many laws given by the different Acts which help the board members of the company to choose the right director for one’s company. These laws can be studied in-depth to know more about the different rules and regulations when choosing a director.
Hence, this was some brief information about the types of directors and the eligibility criteria for selecting a director. One can make more effort to know more about the different criteria for selecting a director with the help of the internet and law firms near you. However, with the help of the internet, many law firms are based on the internet. One can make a call and take tips from the law firms. There are many excellent law firms over the internet.
One of the best law firms in India is situated in Chennai, known as ‘Vakilsearch.’ We can help get more knowledge about the different laws while deciding on a proper director for a company. We can also help file an ITR, legally save taxes, solve court cases, register a company, and many other services. Vakilsearch is India’s leading legal, tax, and compliance services platform. Their services are majorly appreciated by their clients.
We have worked with more than 50,000 customers giving them positive results. We also have registered atleast 10% of the total Indian companies. Hence, this makes our services more trustworthy and efficient. With our team of highly qualified lawyers, charted accountants, and many other professionals, we can help in solving any legal, taxation, or compliance issues efficiently. Also, we have excellent customer reviews.
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