Director Appointment /Cessation

Election of Directors by Companies Act 2013: Directors are appointed through Articles of Association (AOA) or Section 152 of the Companies Act 2013, where memorandum subscribers become company directors. According to the Act, different types of directors include those based on paid-up capital, independent directors, small shareholders’ nominees, resident directors, and others.

Removal of Director: Directors can be removed under specific conditions, including disqualification actions, prolonged absence from board meetings, voluntary resignation, court or tribunal suspension, violations of Article 184, or imprisonment of at least six months.

Procedure for Appointment of Company Director:

1. Form DIR 2 – Director’s Consent: Obtain the proposed director’s consent submitted in Form DIR 2 along with required documents.
2. Get Director’s DSC and DIN: Obtain the director’s Digital Signature Certificate (DSC) and Director Identification Number (DIN).
3. Call the Board and EGM: Notify shareholders of an Extraordinary General Meeting (EGM) where resolutions for director appointment are passed.
4. Letter of Appointment: After resolution approval, send a letter of appointment outlining salary and benefits to the new director.
5. DIR-12 to ROC: Submit Form DIR 12 and supporting documents to the Registrar of Companies (RoC) within 30 days.

Director Appointment and Resignation Requirements:

• Photograph: Passport-size photograph.
• PAN Card: Self-attested Personal Identification Number card.
• Proof of Residency: Aadhar/Voter ID/Passport/Driving License.
• Digital Signature Certificate.
• Valid Form of Identification: Passport, voter’s card, driver’s licence, or Aadhar card.
• Director’s Personal and Official Email Addresses.
• Apostilled Records: Mandatory for directors based outside India.
• Submitted Resignation Notice of the Previous Director.

Elimination of Directors:

As per The Companies Act, 2013, a private limited company must have a minimum of two directors before commencing operations. Shareholders, except in government appointment cases, can vote to remove a company director at the General Meeting under the following conditions:

1. Director Disqualification: If a director engages in actions leading to disqualification under the Act.
2. Missed Board Meetings: If a director is absent from Board meetings for more than one year.
3. Voluntary Resignation: If a director voluntarily resigns.
4. Suspension by Court or Tribunal: If a director is indefinitely suspended from participation by the court or the Tribunal.
5. Violations of Article 184: If a director commits violations by signing contracts.
6. Legal Conviction: If a director is found guilty and receives a prison term of at least six months.

Director Removal Process:

1. Board Decision for Removal:
   • Inform Board at least seven days in advance of proposed removal.
   • Board votes to call an Extraordinary General Meeting (EGM) for shareholder agreement (SHA).
   • Seven days’ notice issued before the next board meeting, with the company having 21 days to provide this notice.
   • Board deliberates on director’s dismissal at the subsequent meeting.
   • Director can present arguments before the final vote.
   • After adopting the resolution, submit DIR-11 and DIR-12 forms. Director submits the Board Resolution (DIR-12) to ROC Filing, and the company presents the DIR-11.
   • Director’s name must be deleted from the Ministry of Corporate Affairs (MCA).
2. Director Missing Three Consecutive Board Meetings:
   • If a director misses three consecutive Board meetings within 12 months (as per Section 167 of the Companies Act, 2013), they are deemed to have resigned. The 12-month period starts from the day they miss the first board meeting, even if notified in advance.
   • If a director is absent and FORM DIR-2 is submitted, it will be treated as a resignation.
   • The director’s name will be erased from the MCA’s online database once these steps are completed.