Wednesday, October 4

Types of Company Directors in India

The Companies Act 2013, defines Directors to be a part of the collective body, called to be as the Board of Directors. Directors are the trustees, guarding the property and money and acting as agents, for any transactions conducted on or behalf of the company.

Directors as per the Companies Act are expected to perform the duties and obligations by being rationally diligent. For every action they take, their skills, experience, knowledge are trusted upon. Be it determining the objectives and policies or monitoring the same towards the achievement of goals, such appointed members on the board are liable for better management.

Maximum and Minimum Directors

Every company is required by law to have several directors to a maximum of 15. They are appointed by passing the Special Resolution in the General Meeting and hold their position for a fixed term. As per the Act, there must be at least: 

  • 1 Director in a One Person Company
  • 2 Directors in a Private Limited Company and
  • 3 Directors in a Public Limited Company

Types of Directors

Based upon the work and the role they play, the following types of Company Directors exist in a company as per the Companies Act, 2013.

  1. Residential Directors

As per section 149(3) of the Act, every company is required to have 1 of such types of company directors, who has resided in India in the previous calendar year for a period of not less than 182.

  1. Independent Directors

An Independent Director is the one other than the Managing Director, Whole Time Director or a Nominee Director. As per the Act, there needs to be a minimum of 2 Independent Directors appointed for Public Companies with:

  • Paid-up Share Capital of INR 10 crores or more
  • Turnover of INR 100 crores or more
  • Total outstanding loans, debentures and deposits of INR 50 crores or more
  1. Women Directors

The Companies Act, 2013, as per its section 149(1)(a), requires a listed company or public company having:

  • Paid-up capital of INR 100 crores or more or
  • Turnover of INR 300 crores or more, to appoint at least one Women Director amidst the other classification of directors on the board.
  1. Small Shareholders’ Directors

For every listed company, there needs to be 1 director appointed by the Small shareholders if a request of such appointment is made upon by:

  • Minimum of 1000 small shareholders or
  • 1/10th of the total shareholders, whichever is lower
  1. Additional Directors

For any individual appointed as such, they occupy the post till the occurrence of next Annual General Meeting (AGM) or till such date on which AGM was to be to be held, in case of its absence.

  1. Nominee Directors

In case of oppression or any mismanagement, Nominee directors among other types of company directors, are appointed by the certain specific class of shareholders or contractual third parties, Union or Central Government, Public financial institutions or the banks.

  1. Alternate Directors

They are board appointed personnel, to fill in the position of any director who falls under the classification of directors and remains absent for more than 3 months from the country. For appointment as such, the Alternate Directors have to vacate their office on return of the original Director.

  1. Shadow Directors

An appointment as such is not appointed on board but the board is accustomed to act as per their directions. Such appointments are liable to the company’s director unless otherwise, they are giving any advice in their capacity.

  1. Executive Directors 

One who is liable for the daily running of the organisation is called as Executive Director. Decision making affecting daily operations is a part of their job.

  1. Non-executive Directors

No involvement is made by them in day to day business. They are the experts of the industry, liable to bring in a 3rd party perspective in the process of decision-making but still they hold an important position among other classification of directors. Various business aspects can also be advised by them.

The Companies Act, 2013 has clearly defined directors considering their functioning and importance, the absence of which might make it difficult for a company to run effectively.

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