Change in Directors Made Easy
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Overview of Change in Directors
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Overview of Change in Directors
A company, being an artificial person, requires human involvement to make decisions and carry out operations. Unlike a living person, a company doesn’t have its own mind, hands, or intentions. Therefore, a director plays a crucial role in steering the company’s actions and decisions.
A director is responsible for the overall management and operation of the company. They are appointed to oversee the day-to-day activities and ensure that the company is compliant with regulations, mainly under the Companies Act, 2013. Directors are accountable to the company and its shareholders, guiding the company towards success, profitability, and long-term growth.
Any change in directors of a company must be officially reported to the concerned Registrar of Companies (ROC). This change must be communicated within 30 days by filing e-Form DIR-12 after a resolution is passed during the company meeting. Proper documentation ensures that the company remains compliant with the law and avoids any legal issues.
What is a Director?
As per Section 2(13) of the Companies Act of 1956, a director refers to any individual who holds the position of a director, regardless of the title used. The Articles of Association of a company typically outline the procedures for their appointment, their duties, retirement rights, and remuneration. These legal aspects help define a director’s role and responsibilities within the company.
Understanding Section 160 of the Companies Act 2013: Appointment of Directors
Under Section 160 of the Companies Act of 2013, the process for appointing a new director (other than a retiring one) is clearly defined. The guidelines for this procedure are further detailed in Rule 13 of the Companies (Appointment and Qualification of Directors) Rules, 2014.
Procedure for Appointment of a New Director
- Apply for DIN
The first step is to apply for a Director Identification Number (DIN) by filing Form DIR-3. This is required for anyone who wishes to become a director, as outlined under Section 66A and Section 266B of the Companies Act. - Board Meeting and Resolution
The company must hold a Board meeting to pass the necessary resolution to appoint the director. - General Meeting Notice
A general meeting must be held at least 21 days before the meeting date, ensuring all stakeholders receive a notice. During this meeting, the appointment of the new director will be finalized by adopting the resolution. - Letter of Appointment
Once the appointment is confirmed, the company must issue a letter of appointment to the new director. - Filing E-Form DIR-12
The company must file E-form DIR-12 with the Registrar of Companies within 30 days of the appointment. This form must be accompanied by the Consent of the director, the Letter of Appointment, and the Certified True Copy (CTC) of the board resolution. - Filing E-Form MGT-14
Additionally, the company is required to file E-Form MGT-14 for the disclosure of interest of the new director in MBP-1.
Qualifications for the Appointment
To be appointed as a director, the individual must meet the following criteria:
- Be of sound mind.
- Be an individual or a person, as per Section 149.
- Be a solvent person, meaning they must not have any financial instability.
- Must not have been convicted of any offense by any court.
By following these steps, a company ensures that the process of appointing a new director is compliant with the law and all necessary legal documents are filed.
Legal Framework for Change in Directors Under Section 168 of the Companies Act, 2013
Under Section 168 of the Companies Act, 2013, the process of Change in Directors is clearly defined, ensuring a smooth transition when a director resigns. This section provides clarity on resignation procedures, which were not explicitly covered in the Companies Act of 1956.
Procedure for Director Resignation
- A director who wishes to resign must submit a formal notice to the company along with a letter stating the reason for stepping down.
- The resignation takes effect from the date the company receives the notice.
- The director must file DIR-11 with the Registrar of Companies (ROC) to officially inform about the resignation.
- Upon receiving the resignation notice, the company must pass a resolution approving the resignation.
- The company is required to file DIR-12 within 30 days from the effective date of resignation with the ROC to update the company records.
Following these legal steps ensures compliance with corporate laws and keeps the company’s director records updated.
Legal Process for Change in Directors Under Section 169
Section 169 of the Companies Act of 2013 outlines the procedure for the removal of a director from a company. It grants shareholders the right to remove a director by passing a resolution in a general meeting, ensuring compliance with corporate governance rules.
Procedure for Removing a Director
- Shareholders can initiate the removal process by passing an ordinary resolution in a general meeting.
- A special notice must be given by the shareholders, stating their intention to remove the director.
- Once the company receives this notice, it must inform all members at least 7 days before the meeting date.
- The concerned director must be informed about the removal and given an opportunity to present their case.
- After passing the special resolution, the company must file Form MGT-14 with the ROC within 30 days.
Following the correct legal procedure is essential to ensure a smooth Change in Directors while staying compliant with the Companies Act of 2013.