Appointment of Directors: Process, Conditions

Appointment of Directors: Typically, shareholders are responsible for appointing directors, and entities such as companies, groups, or legal entities with fake legal personalities cannot hold directing roles. The appointee should be alive and at least 21 years for him or her to qualify to be a director of the corporation.

Categories of Directors in a Company

Managing Director:

Whole-time Director or Executive Director:

Ordinary Director:

Additional Director:

Alternate Director:

Professional Director:

Nominee Director:

Nominee Director in a One Person Company:

Process of Appointment of Directors

• In both public and private businesses, owners hold the power to select two-thirds of the directors, while the remaining one-third follows rules stated in the Article of Association.
• For private companies, the Article of Association can define the head hiring process. If the Articles are quiet on this subject, owners are responsible for the choice.
• Under the Companies Act, a clause allows a company to take a proportional representation method, allowing the selection of two-thirds of directors based on this concept, if the company decides to follow such a policy.
• Nominee directors may be named by external organizations or the government to handle problems of mishandling and wrongdoing.

Conditions for Appointment of Directors

• The candidate should not have received imprisonment or fines under various statutes.
• They should not have faced detention or conviction under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
• The individual must be between 25 and 70 years of age, unless a special resolution is passed in a general meeting or approval is obtained from the Central Government.
• The appointee should hold a managerial position in one or more companies and receive remuneration within the specified ceiling outlined in Section III of Part II of Schedule XIII.
• The director must be a resident of India. The term 'resident' includes someone who has stayed in India continuously for at least twelve months prior to their appointment, and who has come to India for employment, business, or vocation.

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Points of Disqualifications of Directors

• If deemed of unsound mind, a court of proper authority must confirm this state.
• If the person is an undischarged bankrupt.
• If they have filed for insolvency review, and the claim is ongoing.
• In cases involving crimes against moral values, or punishable by a minimum of six months of jail, or where five years have not passed from the sentence's end. Additionally, if the crime carries a minimum seven-year sentence, leadership in any company is forbidden.
• If a court order disqualifies them from leadership.
• If calls connected to the shares owned by the person stay unpaid for six months after the due date.
• If guilty of a crime connected to party transactions under Section 188 in the last five years.
• Failure to comply with the Director Identification Number rule (Section 152(3)).