TYPES OF DIRECTORS

DIRECTORS AS PER COMPANIES ACT, 2013

[Section 2(34)] Director means a director appointed to the Board of a company. [Section 2(10)] Board of directors or board, is a group of people who jointly supervise the activities of an organization. The board of directors appoint the Chief Executive Officer of the company and set out the overall strategic direction. Number of Directors Board shall have minimum 3 directors in case of public company, 2 directors in case of private company and 1 director in case of One Person Company. Maximum number of directors shall be 15. A company may appoint more than 15 directors after passing a special resolution. As per section 149 of the companies act, 2013, the Board of Directors of every company shall be consist of Individual only, which means, no body corporate, association or firm shall be appointed as director. Responsibility of the company Every company shall within 1 year is required to appoint Board of Directors with required numbers including 1 women director, whether incorporate under Companies Act, 2013 or any other previous company law. Every company shall have at least 1 director who has stayed in India for a period not less than 182 days during the financial year. Types of Directors Directors may be of the following types such as First director, women director, independent director, nominee director, managing director, small shareholders directors, additional director and alternate director. First Director: First director of the company named in Article of association of the company. If the name of 1st director in not given in Article of a company, then subscribers to the memorandum of association shall be deemed to be the 1st director of the company until directors are appointed. In case of an OPC, an individual being a member shall be deemed to be its first director until the directors are duly appointed. Women Director: Following class of companies shall appoint at least 1 women director-

• Every listed company,

• Every public company, whose:

(a) paid up share capital is Rs. 100 crore or more, or (b) turnover of Rs. 300 crore or more. Appointment of women director shall be done within a period of 6 months from date of its incorporation. Any interim vacancy of women director shall be filed up by the board as early as possible but not after: (i) Next board meeting, OR (ii) 3 months from the date of such vacancy, (whichever is later). [Section 149(4)] Independent Director: As per Companies Act, 2013, every listed company is required to appoint at least 1/3 of total number of directors as independent directors. If there is any fraction while calculating such one third number shall be round off as one. Suppose, Board contain total 20 directors in a company, company is required to appoint 7 independent directors (20/3 = 6.6, round off to 7). Central Government may prescribe the minimum number of independent directors for a class of companies. Following class or class of companies shall have atleast 2 directors as independent directors having: (a) Paid up share capital of Rs. 10 crore or more, or (b) Turnover of Rs. 100 crore or more, or (c) In aggregate, outstanding loans, debentures and deposits, exceeding Rs. 50 crore. However, it is not applicable to; (a) Joint Venture, (b) Wholly owned subsidiary, and (c) Dormant company. Independent director, means a director other than a managing director or a whole time director or a nominee director; (a) Who, is a person of integrity and possess relevant expertise and experience; (b) He shall not be a promoter of the company or is holding, subsidiary or associate company; (c) He shall not be related to promoters or directors of the company, or its holding, subsidiary or associate company; (d) He shall not have any "Financial relationship", other than remuneration or having such transaction not exceeding 10% of his total income or such amount as may be prescribed, with the company, its holding, subsidiary or associate company, or their promoters, directors during two immediately preceding financial year or during current financial year. (e) None of whose relative, during two immediately preceding financial year or during the current financial year:- (i) is holding any security or interest in the company. Relative may hold security or interest of face value not exceeding 50 lakh rupees or 2% of paid up share capital of the company, (ii) indebted to the company, its holding, subsidiary or associate company, (iii) has given any guarantee or security for indebtedness of third person to the company, its holding, subsidiary or associate company, (iv) has any other precautionary relation with company, its holding, subsidiary or associate company amounting to 2% or more of its gross turnover. (f) who, neither himself nor any of his relative, in any of the 3 financial years immediately preceding the financial year; (i) hold position of key managerial personnel or has been employee of the company, its holding, subsidiary or associate company, (ii) has been an employee, partner or proprietor in which he is proposed to be appointed, - a firm of auditors or CS or Cost accountants of the company, - any legal or consulting firm that has or had any transaction with the company which amounts to 10% or more of its gross turnover, (iii) holds together with his relative 2% or more of total voting power, (iv) is a CEO of any non profit organization that receive 25% or more of its receipt from company or that holds 2% or more of total voting power of the company. Qualification of Independent Director Independent director shall possess appropriate skill, expertise, knowledge and experience in one or more fields of finance, law, sales, marketing related to company's business. Independent director may be selected from a data bank which contain details of person who are eligible and willing to act as independent director. An independent director shall hold office upto five consecutive years. He shall be eligible for re-appointment on passing a special resolution. No independent director shall hold office for not more than 2 terms, which means independent director shall not hold office for more than 10 years in a row. Retirement of directors by rotation shall not be applicable to independent director. Nominee Director Nominee director, is a director who is appointed by any financial institution, government or any other person under any agreement to represent its interest [Section 149(7)].

Managing Director Managing Director is a director, who is assign with substantial powers of management of affairs of the company and who is occupying the position of managing director. Small Shareholder Director (Section 151 of Companies Act,2013) Every listed company has one director elected by small shareholders. Small shareholder means, shareholder's holding shares of not more than Rs. 20,000. A listed company, upon notice of not less than 1000 small shareholders or 1/10th of total number of such shareholders, whichever is lower, have to appoint a small shareholder's director. Such director shall not be liable to retire by rotation. Tenure of small shareholder director shall be of 3 years and on expiry of that shall not be eligible for re-appointment. No person shall hold the position of small shareholder director in more than 2 companies at the same time, A disqualified person for the appointment of directors shall not be eligible for such appointment.

Additional Director The board can appoint additional director as authorized by its articles. Additional director shall hold office only; (a) upto the date of next annual general meeting, OR (b) last date on which generally general meeting have been held, (whichever is earlier) A person who fails to get appointed as a director in general meeting cannot be appointed as additional director.

Alternate Director Board of directors of a company, may appoint an alternate director by passing a resolution in general meeting, if authorized by its articles. Conditions for appointment of Alternate director; (a) Person in whose place alternate director appointed should be absent for a period of not less than 3 months from India. (b) Following person cannot be appointed as alternate director; (i) Proposed person should not hold any office as Alternate Director of any other original director in the company. For example- If Mr. Mohit appointed as an alternate director for Mr. Ankur, then Mr. Mohit cannot be appointed as an alternate director for any other director. (ii) Person holding the position of director in the same company.

Term of Alternate Director (a) Alternate director has to vacate the office as and when the original director returns to India. (b) Alternate director, has to vacate the office when the tenure of original director expires.