Directors hold a central position in governing and managing companies in India, where they supervise, regulate, and guide various facets of a company’s functioning. This article delves into the diverse categories of directors, as outlined in the Companies Act, of 2013, and illuminates their multifaceted functions within an organization.
Explanation About Directors
The term “Directors” collectively encompasses the individuals constituting a company’s Board of Directors. They shoulder the crucial duty of overseeing, managing, and steering the company’s operations, acting as custodians for its assets and finances while representing it in a spectrum of business dealings.
Director Types in Indian Company
Mentioned below are the distinct kinds of directors in a company in India
Executive Directors: The individual serves as a full-time director within the company, carrying greater responsibilities and facing heightened expectations. In all interactions with the company’s employees, they are expected to demonstrate effectiveness and precision.
Non-executive Directors: On the other hand, they assume the role of a non-executive director, uninvolved in the company’s day-to-day operations. Occasionally, they receive invitations to contribute to the development of plans or policies. Their role is to encourage executive directors to generate choices and solutions that align with the company’s best interests.
Initial Director: The initial directors are typically listed in the Articles of Association (AOA). According to Regulation 60 of Table F under the Companies Act, 2013, the subscribers to the memorandum, or a majority of them, are responsible for naming the initial directors in writing.
Shadow Directors: Someone not officially appointed to the Board but whose directives are routinely followed by the Board can be held accountable as a company director unless they are providing advice in their professional capacity.
Nominee Director: Directors can be appointed to the board by various entities, including financial institutions, government bodies at the state or federal level, shareholders, third parties through contractual arrangements, or any other individual with vested interests.
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The nomination of a director becomes essential for loan agreements or government investments in a government company. The Board retains the authority to designate a Nominee director, adhering to the stipulations laid out in the Articles of Association.
Alternate Director: An alternate director is a distinct category of director within a private limited company. In instances where a director is absent or abroad for a duration exceeding three months, the company has the prerogative to designate a replacement director.
Such a director assumes the title of an “alternate director” and can be appointed if the company’s Articles of Association (AOA) permit it or if a resolution is proposed during a general meeting.
Managing directors: The company’s managing director holds the authority to make pivotal decisions. For public companies or their subsidiaries with a share capital exceeding five crore rupees, the appointment of a managing director is mandatory.
Resident Directors: As per legal requirements, every company must designate a director who has spent a minimum of 182 days in India during the preceding calendar year.
Additional Directors: An additional director is instated during a board meeting through the adoption of a board resolution or a resolution circulated among board members. Their appointment is valid until the subsequent Annual General Meeting (AGM) of the company. If the AGM is not convened, the additional director is considered to have resigned. Furthermore, an individual who has not previously served on the board cannot be appointed as an additional director.
Rotational Director: Private companies are not legally obligated to appoint rotational directors unless expressly stipulated in their articles of association. In the absence of specific provisions in the AOA, directors are selected by the shareholders during a general meeting.
Certified Directors: Professional directors are non-executive directors enlisted by the company due to their expertise in various fields. They offer guidance to the board within their respective domains of expertise.
Summary: A corporation’s operations are conducted exclusively through its directors, often regarded as the intellectual core of the company. These directors function as emissaries for their respective firms, and their collective contributions are indispensable for the company’s prosperity.
The 2013 Act has conferred specific rights upon the Board of Directors, allowing them to wholeheartedly commit to the company’s well-being.
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In order to prevent the misuse of these powers, the Act imposes various constraints alongside these rights. Directors assume a diverse range of roles and wield distinct authority within their organizations. The separation of powers in a transparent system not only facilitates effective governance but also bolsters efficiency while guarding against the potential for power abuse.
