Appointment of Additional Director in a Private Limited Company
In the dynamic corporate landscape, companies often require the appointment of additional directors to ensure smooth operations and strategic decision-making. The Companies Act, 2013 provides for the appointment of an Additional Director under Section 161(1). In this blog, we will delve into the legal provisions, procedure, eligibility criteria, and compliance requirements for appointing an Additional Director in a Private Limited Company.
Appointment of Additional Director in a Private Limited Company
Table of Contents
Legal Provisions Governing Appointment of Additional Director
1. Section 161(1) of the Companies Act, 2013
As per Section 161(1) of the Companies Act, 2013, the Board of Directors of a company may appoint an Additional Director if authorized by the Articles of Association (AOA). Such a director holds office until the next Annual General Meeting (AGM) or the last date on which the AGM should have been held, whichever is earlier.
2. Role of Articles of Association (AOA)
Before appointing an Additional Director, the company must ensure that its AOA permits such an appointment. If the AOA is silent on this provision, the company must first amend the AOA by passing a special resolution.
Eligibility Criteria for Appointment
An individual proposed to be appointed as an Additional Director must meet the following conditions:
- Must be eligible as per Section 164 of the Companies Act, 2013 (not disqualified from being a director).
- Should not have been declared insolvent or convicted of any offense involving moral turpitude.
- Must have obtained Director Identification Number (DIN) before appointment.
Procedure for Appointment of Additional Director
Step 1: Check the AOA
Verify whether the company’s AOA permits the appointment of an Additional Director.
Step 2: Obtain Consent and Declaration
The proposed director must provide:
- Consent in Form DIR-2.
- Declaration in Form DIR-8 confirming non-disqualification under Section 164.
Step 3: Hold a Board Meeting
A Board Meeting must be convened by giving proper notice. The agenda should include the appointment of the Additional Director.
Step 4: Passing of Board Resolution
The Board of Directors must pass a resolution approving the appointment of the Additional Director.
Step 5: Filing of E-Forms with ROC
Post-appointment, the following forms must be filed with the Registrar of Companies (ROC):
- Form DIR-12 – Filed within 30 days of appointment.
- Form DIR-2 and DIR-8 – Attachments to DIR-12.
Step 6: Updating Statutory Records
The company must update its statutory registers, including:
- Register of Directors and Key Managerial Personnel.
- Register of Shareholders (if applicable).
Tenure and Regularization of Additional Director
- An Additional Director holds office only until the next AGM.
- If the company wishes to continue the director, they must be regularized by obtaining shareholder approval in the AGM and filing Form DIR-12 for the change in designation.
Resignation or Removal of Additional Director
- An Additional Director may resign by submitting a resignation letter, and the company must file Form DIR-12 within 30 days.
- The Board may remove an Additional Director before the AGM through a Board Resolution, provided the AOA allows such removal.
Conclusion
The appointment of an Additional Director is a strategic decision for a Private Limited Company. It provides flexibility in board composition and ensures effective management. However, companies must ensure compliance with the provisions of the Companies Act, 2013 and the AOA to avoid any legal repercussions. Proper documentation and timely filing of necessary forms with the ROC are crucial to ensure a seamless appointment process.