Directors Under the Company Law: Their Definition, Types, and Procedure for Removal

The Meaning of a Director

Directors are those chosen to oversee and manage a company’s operations. They are given control over the company’s business and handle the task of monitoring the company’s activities and thus are known as officers of the company. Section 2(34) of the Companies Act, 2013 defines a director as “a director appointed to the board of a business.” this gives us a very brief idea about a director. The group of directors that make up a corporation is known as its Board of Directors, and it is this group that has the last say in how its business is managed. In reality, the Board of Directors oversees the management and guards the interests of all Company stakeholders.

 

Qualifications needed to be a Director

A person must fulfill the following criteria to be considered eligible to become a Director

1. The person has reached the age of majority ( above 18 years) and is an Indian National.
2. The person must be of sound mind and is competent to enter into a contract.
3. Should not be insolvent
4. He/she is not convicted of an offense in court
5. he/she should have their Digital signature certificate (DSC). A DSC is essential to confirm the authenticity of the documents.
6. If mentioned in the Article of Association (AOA) which is a document detailing the primary focus of a company’s nature, work, and purpose, it is impertinent for the director to hold share qualification which is a required percentage of the company’s shareholding in the issued share capital of the company needed to appoint a director.

 

Responsibilities of a Director

The duties of Directors are outlined in Section 166 of the 2013 Companies Act. The following responsibilities should be fulfilled by a corporate director.-

1. He must conduct himself in conformity with the company’s bylaws. 
2. He should constantly act in the best interests of the business, shareholders, workers, and the community at large to advance the company’s goals and benefit its members. 
3. He should carry out his responsibilities with effort and independence. 
4. Should not get involved in matters that either directly or indirectly affect the company’s interests. 
5. Should not use his position to acquire an unfair advantage for himself, his loved ones, coworkers, or partners.

 

The Types of Directors

Residential Director -According to section 149(3) of the Act, the Company must have at least one Director who has spent at least 182 days in India during the immediately preceding calendar year. 

Executive Director -The Managing Director is a director who, under the Company’s AOA, agreement with the Company, Board of Directors, or resolution passed at a general meeting, has considerable ability to manage the business of the Company, according to Section 2(54) of the Companies Act, 2013. 

Permanent Director -A full-time director is a director who works for the company full-time. 

Alternate Director -According to Section 161(2) of the Act, the Company must select an alternative Director if a director is away for more than three months in India. When a resolution is approved by the shareholders at a general meeting or is stipulated in the company’s AOA, the board of directors selects such a director. Such an alternate Director shall not occupy the such office for a time over that of the Director in whose stead he is appointed and shall resign from such office upon the return of the original Director.

Independent Director – According to Section 149(6) of the Companies Act, 2013, an independent director is a director other than a managing, whole-time, or nominee director who is a person of integrity and has relevant experience; who is unrelated to the company’s promoters; who has no financial interest in the company; who is unrelated to the company’s promoters; or who has the necessary qualifications.

A female director -In listed firms or some public companies, at least one Director must be a woman, under section 149(1)(a). 

Director of a small shareholder -The small shareholder has the right, under section 151 of the Act, to elect at least one director. 

 

Removal of Director

Directors hold a crucial position in any company and their role is of great importance. But situations like indulging in malpractices, breach of the company’s privacy, and negligence in duty could pose instances where the management has to take suo moto action of removal of the director. The dismissal of directors is covered under Section 169 of the 2013 Companies Act.

 

Procedure for Directors’ Removal 

First, the concerned director should be informed of his dismissal, followed by a board meeting and a resolution to that effect. 14 days before the general meeting, a notice of the meeting shall be provided. A resolution to remove the director should only be approved if it is reasonable and equitable after the director has had a chance to speak and has been heard. If the resolution is approved, the relevant paperwork should be produced, and the department in question should be notified. If the director is an independent director, approval from two-thirds of the attendees is required.