As we are aware that Companies Act, 2013 is already in
force from April 01ST, 2014, and every professionals is trying
his/her best to unlock and decode the provisions of Companies Act, 2013. In
this regard an attempts have been made from my side to compile the procedure
for appointment of Additional Director in Public Company/ Private Company
(Purely Private) taken the route of appointment of Director by Board.
With the new Companies
Act, the law has become more stringent
for private companies than for public companies, Moving from the Companies
Act 1956 to the Companies Act 2013 is like shifting from your
old house to a new one. In the old house, where you have stayed for years,
everything would have found its own place – the shoes, the clothes, umbrella,
first aid, brooms, and whatever else you need in your household. Your legs can
find their own way, even in pitch dark of night – they know the way to the
bathroom, to the stairs, they even know where the stairs end.
Directors of a company hold the most
crucial position in the Company. With the new Companies Act, 2013 (“New Act“)
already in force, their position has become even more significant than ever
before. They are now formally included within the definition of “key managerial
personnel” or “KMP” under Section 2(51) of the New Act.
As per Section 149(1): Every Company shall have a Board
of Directors Consisting of Individuals
as Director. (It is clear to understand from this line that only an
individual can be director of company. Some persons have doubt that other than
individual can be director or not). According to this section ONLY AN INDIVIDUAL can be director of company. {The Board
shall consist of individuals not of other persons like firms, LLP, companies,
gods or other legal persons.}
Minimum No. of Directors as
per Section 149(1)(a):
Ø Three in case of Public Company.
Ø Two in case of Private Company.
Ø One in case of One Person Company.
Maximum 15 DirectorsL (If company want to appoint
more than 15 directors SPECIAL RESOLUTION Required to pass in General
meeting)- Procedure {Simple Process
of Holding of Extra-Ordinary General Meeting, which we use in other Matters also)
Appointment of directors in private
companies as per new law:
The liberty given to private companies to
self-regulate the appointment process has, surprisingly, been completely taken away Under Companies Act-2013.
This sounds completely paradoxical, in view of the fact that in case
of public companies, they still have the liberty to self-regulate to the
extent of one third of the board strength.
Sec 152 (6) (b) provides liberty, but only
to public companies, to appoint one third of the total board by a
self-regulated process. While there was an exception to private companies in
Sec. 255 (2) of the 1956 Act, that exception has been dropped while
transporting the provisions into the new Act.
It could not be the case that such was the
intent of the lawmaker – there is absolutely no case for imposing more
stringent regulations in case of private companies, than in case of public
companies.
Section 152 of the New Act governs the
appointment of directors. Certain specific requirements for appointment of
director as lay down in the New Act are-
If different person are
not named as first director in articles of the company, individual subscribers
shall be deemed to be first directors. Every director other than first directors of
company shall be appointed in general meeting as per Section 152(2). If company wants to appoint a person as director in meeting
other then General meeting Company can do this by appointing such person as Additional
Director U/s 161(1) of Companies Act, 2013.
ADDITIONAL
DIRECTOR:
Ensure
that the director to be appointed by board of directors exercising the power so conferred in them by the Articles
of the company is not such a
person who has failed to get appointed as a director in a general meeting.
(If A proposal is made in General Meeting for appointment of a person as
Director, if resolution got failed not passed in that meeting and that person
fails to get appointed as a director in a general meeting, then that person
can’t appoint as additional director). The additional director has to be
appointed till date of next AGM or last date, on which AGM should have been held,
whichever is earlier.
PROCEDURE:
Ø First Check
whether Articles (AOA) of the Company contain power/authorization to
appoint Additional Director read with Section 161(1) of the Companies Act,
2013. {If there is no provisions in Articles of the Company then Alter the
Articles of the company to have enabling clause for appointment of Additional
Director.
Ø Second Check whether such person have DIN No. or Not. If
such person doesn’t have DIN No. then Apply for DIN.
Ø Third following Documents
Are Requiring from Director to appoint him as Additional Director.
ü Consent in writing to act as Director in Form DIR-2 pursuant to Rule-8 of
Companies (Appointment & Qualification of Director) Rules, 2014- FORMAT Get by mail to me at
ü Intimation by Director in form DIR-8 in terms of Companies
(Appointment & Qualification of Directors) Rules, 2014, to the effect that
he/ she is not disqualified u/s 164(2) of Companies Act, 2014.- FORMAT Get by mail to me
at
ü Advisable to take disclosure of
Interest in Form MBP-1 pursuant to Section 184(1) read with Rule 9(1) of
Companies (Meetings of Board and its Powers) Rules, 2014. {One thing should be
noted MBP-1 should not be dated earlier than date of his/her appointment as
Director}. - FORMAT Get by mail to me at.
However,
if there is nothing to disclose on the part of new Director, even then also
require to take form MBP-1 from Director. (NIL disclosure is also a disclosure
under section 184(1).
Fourth after receiving
all the documents from the director:-
üCall the Board
Meeting.
üPass Resolution for
appointment of Additional Director.
üIssue Letter of
Appointment.
üFile e-form DIR-12 [Along with DIR-2 + Letter of Appointment+ DIR-8+
Interest in other entities.)
üMake necessary entries in the Register of
Directors along with their Shareholding, if any, maintained u/s 170 of Companies
Act, 2013.
Now this
person will be shown as Additional Director till AGM of company. His tenure
will be upto AGM of Company.
Board resolution for taking note of Disclosure of Interest and filing of
form MGT.14
Form MBP.1 given by the Additional Director, towards
disclosure of interest u/s 184, should be taken note of by the Board of
Directors through a separate Board Resolution in next Board Meeting (In the First
Board Meeting after appointment of Additional Director).
Hence it
is duty of the company to pass board resolution to take note of disclosure of
interest by Director and file a copy of that board resolution in MGT.14 within
30 days of passing board resolution as desired by section 117(3) of Companies
Act, 2013.
IF THE SECTION IS VIOLATED
Since
the 8-lakh odd companies, sitting with more than 16-lakh directors, may
not even be aware of this change of law, what is the provision gets violated?
There you have section 159 to take care of – which provides for a jail up to
six months, of course with/without a fine too!
APPOINT ADDITIONAL DIRECTOR AS DIRECTOR OF COMPANY:
If
company wants to appoint additional director then there is need to regularize
such person in the General Meeting of Company.
By
following above mentioned procedure a person can be appointed as additional
director of company but to appoint him as permanent director of company
procedure as given below:
As per Section 160 (1) of Companies Act, 2013:
If he,
or some member intending to propose him as a director, steps involved. (He
denotes “Additional Director”).
·
Other Person or additional director himself at lease 14 days
before the General Meeting left at the registered office of the company,
§ A Notice in writing
under his hand signifying candidature as a director.
§ Along with the deposit
of Rs. 1,00,000/- (Rupees One Lakh)
rupees.
·
The company shall, at least seven days before the general
meeting, inform its members of the candidature of a person for the office of a
director or the intention of a member to propose such person as a candidate for
that office:
§ by serving individual
notices, on the members through electronic mode to such members who have
provided their e-mail addresses to the company for communication purposes, -
§ in writing to all
other members
§ by placing notice of
such candidature or intention on the website of the company, if any
Note: Provided that it shall not
be necessary for the company to serve individual notices upon the
members as aforesaid, if the company
advertises such candidature or intention, at least seven days before
the meeting at least once in a vernacular newspaper in the principal vernacular
language of the district in which the registered office of the company is
situated, and circulating in that district, and at least once in English
language in an English newspaper circulating in that district”.
After completion of above process:
Ø The company will pass “Ordinary Resolution” for
appointment of such person as directors of the Company.
Ø File e-form DIR-12 for
change in designation of director within 30 days of passing of Ordinary
Resolution.
(Author – CS Divesh
Goyal, Company Secretary in Practice, from Delhi GOYAL DIVESH & ASSOCIATES
and can be contacted at csdiveshgoyal@gmail.com) Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Though utmost efforts has made to provide authentic information, it is
suggested that to have better understanding kindly cross-check the relevant
sections, rules under the Companies Act, 2013. The observations of the author
are personal view and the authors do not take responsibility of the same and
this cannot be quoted before any authority without the written consent of the
author.
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