The Companies Act prescribes a minimum of two and a maximum of fifteen directors, unless increased by special resolution.
Directors are to be appointed in general meeting via a shareholders resolution. Additional directors can be appointed by the board of directors at a board meeting by passing a board resolution. The new additional director holds office up to the date of the next annual general meeting or the last date, on which the annual general meeting should have been held, whichever is earlier.
Further, it is to be noted that the company shall at all times have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two (182) days in the previous calendar year.
To qualify, as a director and ensure that the Board of Directors fulfils all requirements as per law, the following qualifications must be observed:
However, please note that no specific academic or professional qualifications are prescribed under the Companies Act, 2013. However, there are certain restrictions on the persons who cannot be appointed as directors mentioned as follows:
of five years, who is or has been a director of a company which
Every company having a net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more in any financial year, shall establish a Corporate Social Responsibility Committee of the board, consisting of three (3) or more directors, out of which at least one (1) director shall be an independent director.
However, a private company which is covered under above said provision, which is not required to appoint an independent director, shall have its CSR Committee without such director;
A private company having only two directors on its Board shall constitute its CSR Committee with two such directors.
The Board derives the powers both from the Act as well as from Memorandum and Articles of Association of the company. The board of directors of a company is entitled to exercise all powers, and to do all acts and things, as the company is authorised to exercise and do. However, while exercising such powers the board of directors have to bear in mind that the powers are subject to the provisions of the Companies Act and the restrictions contained in the Memorandum and Articles of Association of the Company as well as the regulations made by a Company in a general meeting.
Further, the board of directors cannot exercise any power or do any such act or thing that is strictly for the general meeting (Shareholders’ meeting) of the Company.
A conflict of interest can arise when a director or a member of his/her immediate family receives improper personal benefits as a result of his or her position as a director of the company without the knowledge of the board. A conflict situation can also arise when a director takes an action or has an interest that may make it difficult for him or her to perform his or her duties, functions and responsibilities objectively and effectively.
Every director, shall, at the first meeting of the board in which he participates as a director and thereafter at the first meeting of the board following the new financial year, or whenever there is a change in his interests, disclose his interests in any organisation (including shareholdings) by providing a notice in writing in accordance with Section 184 of the Companies Act, 2013.
Any transactions which are potentially conflicted must be approved by a resolution of the company. They must also be mentioned into the board’s report to the shareholders, alongside the justification for entering into the agreement or contract.
In addition, a director who is in any way, whether directly or indirectly, interested in a contract or arrangement (proposed or otherwise) to be entered into by the company, shall disclose the nature of his interest at the meeting of the board in which the contract or arrangement is discussed and the interested director may participate in such meeting after disclosure of his interest
If a director of the company fails to comply with the above disclosures, they are liable to imprisonment for a term which may extend to one year and/or a fine between Rs. 50,000 – Rs. 500,000. Additionally, the contract shall be voidable at the request of the company. The company will also have the option to bring action against the director to recover any losses sustained by the company as a result of this contract or arrangement.