Director is the most important person for a company as he/she manages the entire company’s operations. He/she gives directions to the company to achieve the required goals, objectives etc. Appointment or adding of new director is done by the companies to take new talent on board or on resignation of the existing director. The addition or change in director of the company should be intimated to the ministry of corporate affairs (MCA). The change does not take any affect unless addition or change in director is made to MCA (Ministry of corporate affairs).
Addition or change in director must be made through consent of shareholders. Director’s change is required in the following cases mentioned below -
- Hiring new talent on board – Hiring of new talent on board is needed for the growth of business, to develop new strategies and alliances. There is a need of experts to lead the team in case new product line or department is added.
- Existing directors are not able to work for a long time – Due to retirement/death/other personal reasons; the existing directors are not able to work for a long time. Therefore, in order to make organization functions properly as per the limit specified for directors, company appoints a new director.
- Statutory limit on number of directors – The minimum number of directors required for a private limited company is 2 & for public limited company is 3. If at any time during the company’s existence, the number of directors reduces from the specified limit, the company has to mandatorily appoint a new director within 6 months.
- Assign operational responsibility without dilution ownership – Directors are responsible for managing day to day operations. Appointment of new director is made through consent of shareholders. Shareholders assign the operational responsibilities to directors by keeping strategic control in their hands. The ownership and the voting rights of existing shareholders does not dilute in case of appointment of a new director.
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Documents Required For Addition of Director
The documents required for adding director in a public or a private limited company is as follows –
Procedure of Adding Directors
The procedure of appointing or adding a new director to an existing public or private limited company is as follows –
- Firstly, Company should have a clause in Articles of association (AOA) in relation to appointment of new director. If the company does not have such clause, it should be firstly inserted into AOA of the company.
- The company must have a valid reason to appoint or add a new director to its board of directors.
- A person should be 18 years or above to be appointed as a director in a public or private limited company. He/she should be eligible as per the required qualification & capabilities. He/she should have valid DIN (Director Identification number) and DSC (Digital signature certificate). He/she should not be convicted under any existing Indian laws.
- Board meeting is organized to add or appoint a new director in a public or private limited company. In this meeting, proper resolution is passed to appoint new director in the company by the consent of shareholders. The same resolution must be passed in the annual extra ordinary general meeting (AGM) of the company.
- For adding new director to a company, a company has to mandatorily fill a copy of the resolution along with form DIR – 12, Form DIR -2 & Form DIR – 8 within 30 days to registrar of companies (ROC) or ministry of corporate affairs (MCA) from the date of passing the resolution. A company has to submit form MBP -1 & Form MGT – 14 within 30 days of passing board resolution.
- Finally, as per section 170 of the companies act, 2013, the company makes changes in the register of directors to be maintained by the company after getting approval from ROC/MCA.
Add Company Director FAQ’S
- Form DIR -12
- Form DIR - 2
- Form DIR – 8
- Form MBP -1
- Form MGT - 14