Appointment of Additional Director
Section 161 of Companies Act, 2013 confers power to the Board of directors appoint a new director to the Board of Directors. The director so appointed by the Board of Directors of the Company is called as ‘Additional Director’.
For appointing an additional director, the articles of association must contain a provision authorizing the board of directors to appoint an additional director. A director cannot be appointed as an additional director if his resolution proposing him as a director was not passed by the shareholders in earlier general meeting.
Term of Additional Director
The term of appointment of an additional director shall be till the next Annual General Meeting (AGM) or the last date on which such AGM should have been held (in case AGM is not held).
The Additional director can continue to act as a director only if a resolution proposing him as a director is passed by the shareholders in a general meeting (Whether Annual General Meeting (AGM) or Extra-Ordinary General Meeting (EGM). The resolution can also be passed before AGM by passing a resolution in an extra ordinary general meeting.
If the resolution is not passed by the shareholders, he shall terminate from his directorship immediately.
Regularization of Director
The process of appointing the additional director at the General meeting is known as regularization of director.
For any reason, if the resolution is not placed before the General meeting or not passed at the General Meeting, the office of such additional director shall automatically vacate. If the director’s appointment is not passed by the shareholders in the General Meeting, then he cannot be appointed as an additional director by the Board in the future.
The additional director so appointed by the Board will be referred as “Additional Director” on records of Registrar of Companies. Once the shareholders approve the appointment of Director at a General meeting, the flings will be updated as ‘Director’ and thereafter the such director will be referred as ‘Director’ on records of Registrar of Companies.
Difference between Director and Additional Director?
There is no major difference between a Director or an Additional director in terms of powers and duties as a director of the Company. The difference only lies in the process as to how and by whom the appointment is made. An additional director is appointed by the Board in a Board Meeting whereas a Director is appointed or regularized by the shareholder in a general meeting.
An additional director has all the powers, limits and obligation as of any other director of the company. They are also included while counting the maximum limit of directors that can be appointed by a company.
Appointment of Additional Director – Requirements
Digital Signature Certificate (DSC)
The Director must have a valid Digital Signature Certificate (DSC) issued by the Certifying Authority in India.
Director identification Number (DIN)
The Director must have a Valid Director Identification Number (DIN)
Qualification of a Director
There is no specific educational qualification to become a director. However, the proposed director must not have been failed to get appointed as a director in the same company by shareholders in general meeting. The proposed director must be not disqualified to act as a director under Companies Act.
Powers of Directors in Articles of Association
Articles of Association must authorize the appointment of Additional Director by the Board. Also, the maximum number of directors that can be appointed by a company is not exceeded after such appointment of additional director.
Process of Appointment of Additional Director
Obtaining DIN and Digital Signature Certificate (DSC)
As a first step for appointment of a Director in a Company, the appointee must have a valid DIN allotted by the Ministry of Corporate Affairs. At present, application for allotment of DIN can be submitted to MCA only through the company where he/she is proposed to be appointed. The Application for DIN is required to be countersigned by a Director of the Company and a copy of resolution approving the proposal of appointment is also to be submitted. To apply for a DIN, the applicant should also have a Digital Signature Certificate (DSC).
Board Meeting for Approval of Proposal of Appointment
In case the proposed Director does not have a DIN, a Board meeting shall be convened to approve the proposal of appointment and making an application to MCA for allotment of DIN for the proposed Director. This meeting is not required in case the appointee already holds a DIN.
Application for DIN
An application in Form DIR-3 to be filed with MCA with ID Proof & Address proof the appointee duly digitally signed by the applicant and a director of the company in which the applicant is intended to be appointed as director
Consent & Declaration from proposed Director
Before the appointment, the Board shall obtain a Consent in Form DIR-2 and a Declaration in DIR-8 from the proposed Director.
Board Meeting for Approval of Appointment of Director
Once the appointee Director has obtained a DIN, another board meeting is required to be convened for approval of appointment of proposed Director. In the meeting, required resolutions to be passed for appointment of proposed Director as an Additional Director of the Company.
Filing of Returns with ROC
After the Board meeting, a Return of Appointment of Directorship (Form DIR-12) is required to be filed with Registrar within 30 days of appointment with copy of Board Resolution along with Consent and Declaration. In case of Companies other than OPC and Small Company, the return is also to be certified by a Company Secretary/Chartered Accountant/Cost Accountant. The Form is also Once the Form DIR-12 is filed with ROC, the details of new director shall be update with MCA portal against respective Company.
Check whether the proposed person hold valid DIN number. New DIN is required, address proof and identity proof document required. Also the person need to take Digital Signature.
To apply for DIN / DSC
- PAN (Mandatory for Indian Nationals)
- Aadhaar (Mandatory, if the applicant has Aadhaar)
- Passport (Mandatory, if the applicant has passport)
- Board Resolution for proposal of appointment
- Latest Address proof such as Phone / Utility Bills / Bank Statement
For Filing Returns with ROC
- Board Resolution
- Consent to Act as Director
- Declaration by Director
- Letter of Appointment
Appointment of Additional Director in Company
Immediate Appointment of New Director
Shareholders are the ultimate decision makers for appointment of a Director in a Limited Company and the decisions are taken at General Meetings. Board of Directors have powers to appoint a Director on urgent needs without waiting for a General Meeting.
Appointment for short period
The term of an additional director is only till the next Annual General Meeting (AGM). He can continue as director only if the shareholders approve the appointment at a General meeting.
Automatic Vacation of Office
The term of additional director automatically vacates at the next Annual General Meeting (AGM) or the last date on which such AGM should have been held as per Companies Act (in case AGM is not held). There is no compulsion for the Company / Board to conti