Appointment of Directors Under Companies Act 2013 | Directors Their Appointment
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Who can be appointed as a Director
Appointment of a Director is not only a crucial administrative requirement, but is also a procedural requirement that has to be fulfilled by every company. Under the Companies Act, only an individual can be appointed as a Director; a corporate, association, firm or other body with artificial legal personality cannot be appointed as a Director.
Appointment of Directors
Generally, in a public company or a private company subsidiary of a public company, two-thirds of the total numbers of Directors are appointed by the shareholders and the remaining one-third is appointed in accordance with the manner prescribed in Articles failing which, the remaining one-third of the Directors must be appointed by the shareholders. The Articles of a public company or a private company subsidiary of a public company may provide for the retirement of all the Directors at every AGM.
In a private company, which is not a subsidiary of a public company, the Articles can prescribe the manner of appointment of any or all the Directors. In case the Articles are silent, the Directors must be appointed by the shareholders.
The Companies Act also permits the Articles to provide for the appointment of two-thirds of the Directors according to the principle of proportional representation, if so adopted by the company in question.
Nominee Directors can be appointed by a third party or by the Central Government in case of oppression or mismanagement.
Appointment of Managing Directors
A Managing Director must be an individual and can be appointed for a maximum term of five (5) years at a time.
A person who is already a Managing Director / Manager of a public company or a private company subsidiary of a public company can become the Managing Director / Manager of only one other company (whether private or public) with the prior unanimous approval of the Board of such company. However, no such restrictions are applicable to a Manager or a Managing Director of "pure" private companies.
In case of a public company or a private company that is a subsidiary of a public company, if the appointment is not in accordance with Parts I and II of Schedule XIII of the Companies Act, such appointment must be approved by the Central Government.
In the case of a public company or a private company which is a subsidiary of a public company, the remuneration payable is subject to the provisions of the Companies Act, and may be determined either by the Articles or, if the Articles so provide, by a special resolution of the company in general meeting.
Qualifications for Directors
The Companies Act does not prescribe any qualifications for Directors of any company. An Indian company may, therefore, in its Articles, stipulate qualifications for Directors. The Companies Act does, however, limit the specified share qualification of Directors which can be prescribed by a public company or a private company that is a subsidiary of a public company, to be five thousand rupees (Rs. 5,000/-).
Conditions for appointment of managing / Whole-time Directors; Disqualifications
The Companies Act, under Schedule XIII, also prescribes certain other conditions that are to be fulfilled for the appointment of a Managing or a Whole-time Director or Manager in case of a public company and a private company that is a subsidiary of a public company. Accordingly, no person shall be eligible for appointment as a Manager, a Managing Director or a Whole-time Director if he or she fails to satisfy the following conditions:
1. He or she should not have been sentenced to imprisonment for any period, or a fine imposed under any of the following statutes, namely:
i. The Indian Stamp Act, 1899;
ii. The Central Excise Act, 1944;
iii. The Industries (Development and Regulation) Act, 1951;
iv. The Prevention of Food Adulteration Act, 1954;
v. The Essential Commodities Act, 1955;
vi. The Companies Act, 1956;
vii. The Securities Contracts (Regulation) Act, 1956;
viii. The Wealth Tax Act, 1957;
ix. The Income Tax Act, 1961;
x. The Customs Act 1962;
xi. The Monopolies and Restrictive Trade Practices Act, 1969 – now the Competition Act, 2002;
xii. The Foreign Exchange Regulation Act, 1973 – now the Foreign Exchange Management Act, 1999;
SOURCE BY http://www.mondaq.com/india/x/151848/Directors+Officers+Executives+Shareholders/Appointment+Of+Directors+Process+Qualifications+Disqualifications