Today, we will be looking at the compliance checklist for the appointment of Additional Director in a company. There are many rules and provisions governing the appointment. Therefore, it is important to understand all the compliance requirements beforehand.
In a company, a Board of Directors has the authority to make decisions on behalf of the company. It also has specific responsibilities that are different from those of the owners or managers of the business. Further, according to the Companies Act, 2013, the shareholders elect the Board of Directors for the management of the company.
Appointment of Additional Director – Section 161 (1) of the Companies Act, 2013
According to Section 161 (1) of the CompaniesAct, 2013:
The Articles of Association of a company may confer on its Board of Directors the power to appoint an additional director. Further, this person should not have failed to get appointed as a director in a General Meeting. Also, the additional director shall hold office up to the date of the next Annual General Meeting or the last date on which it should have been held (earlier of the two). However, he can be reappointed/regularised as a director in the Annual General Meeting with the consent of the shareholders.
Checklist for Appointment of Additional Director
Here is a quick checklist for the appointment of Additional Director of a company:
- Any company can appoint an additional director.
- The Articles of Association of the company can authorize the Board of Directors to appoint an additional director.
- Further, the Board has the option of passing a resolution in its meeting or a circular resolution for the appointment of the Additional Director of the company.
- The additional director shall hold office until the next Annual General Meeting. If for some reason, the Annual General Meeting is not held, then the additional director shall hold office until the last date on which this meeting was to be held.
- The Board of Directors must also confirm the maximum number of directors as per the Articles of Association at the time of appointment of the additional director. The Board must ensure that they provide this within 15 days of passing the special resolution.
- If an individual has failed to get appointed as a director in a General Meeting of the company, then the Board cannot appoint him/her as the additional director.
In the past, the proposed director should not have been disqualified to become a director of a company. This is under section 164 of the Companies Act, 2013.
If the company subsequently appoints an additional director as an independent director, then it must comply with the provisions of Section 149 (6).
If the company subsequently appoints an additional director as a managing director, then it must comply with the provisions of Section 196.
Section 152 (5)
The proposed director must provide his consent to hold office as the director of the company. Further, he must give his consent in a format prescribed under Section 152 (5) of the Companies Act, 2013.
The appointed director must disclose his concern or interest in any company or body corporate. This is as per Section 184 of the Companies Act, 2013.
The company must confirm that it has entered the prescribed particulars of the additional director and his shareholding in the register of directors and key personnel.
The company must confirm that it has entered the prescribed particulars of the additional director in the register of contracts or arrangements as per the interests of the director. This is as per Section 189 of the Companies Act, 2013.
The company must file Form DIR-12 with the Registrar of Companies for appointing an additional director.
Some other compliances
- The company may, as a part of good corporate secretarial practices, issue an appointment letter to the appointed director.
- The company must also ensure that it makes requisite disclosures in the Board’s report regarding the appointment of Additional Director.
We hope that this article offered you a comprehensive insight into the compliance requirements for the appointment of Additional Director in a private limited company. You may drop us a line and our team can help you streamline this process. Good Luck!