Change of Management in Companies – Appointment and Resignation of Director

Introduction –

A company is an artificial entity recognized by law and managed by the board of directors of the company. Directors act as fiduciary support to the company by conducting the affairs of the company in such a manner that establishes the success, profitability, and goodwill of the company.

Directors are appointed as per the provisions of the Companies Act, 2013. The appointment and change in directors is mandatorily required to be done from time to time in the manner discussed in the article –

“As per Section 2(34) of the Companies Act, 2013, Director means a director appointed to the board of directors of the company”   

Change in Management of the company –

Section 149 of the Companies Act, 2013 prescribes the minimum number of directors required by the companies at all times –

• A private limited company must have at least 2 directors 

• A Limited Company must have a minimum of 3 directors

Owing to the above requirement, the director’s appointment and resignation are a part of the regular curriculum of a company. Let’s discuss the process for the same –

Appointment of a Director – 

The appointment of directors is done as per Section 152 of the Companies Act, 2013 to perform the duties and functions of the company.

Checklist for Appointment of Directors –

• DIN (Director Identification Number) and DSC (Digital Signature Certificates) are compulsory for being appointed as a director

• A declaration needs to be furnished by every director that he/she is not disqualified from being a director

• Every proposed director is required to give his/her consent to act as a director of the company in Form DIR 2

• Every company shall file such consent and the appointment with the Registrar of companies (ROC) within 30 days of the appointment in Form DIR-12

Procedure for Appointment of Directors – 

• Every director shall be appointed by the company in the general meeting except the first directors of the company.

• If no provision is specified in the articles, the subscribers of the memorandum act as the first directors of the company until the directors are duly appointed.

• A board meeting is called for passing a board resolution for the appointment of directors and for giving the authorization to perform the acts, deeds, and filing as per the provisions of the act as per section 173 of the Companies Act, 2013

• Once the board of directors approval has been obtained, a 21 days’ notice for a general meeting is circulated to –

               1. Directors

               2. Shareholders

               3. Auditors

• The notice must specify the day, date, time, and venue of the meeting along with the agenda and the items to be transacted

• Convene the General meeting and pass an ordinary resolution for appointment and reappointment of director

• Issue letter of appointment after obtaining DIN and DSC of the director

• File Form DIR – 12 with the Registrar of companies within 30 days of the appointment or re-appointment

Documents required for Form DIR -12 –

1. DIR – 2 (Consent to act as a director)

2. Declaration by the director that he is not disqualified

3. Copy of the resolution passed

Resignation of Director –

• According to section 168 of the Companies Act, 2013, any director can resign from his position by giving a notice in writing to the company along with the reasons for resignation

• The notice of resignation needs to be furnished to the registrar by the director along with the prescribed fees within 30 days of resignation in Form DIR – 11

• Convene a general meeting and present the notice of resignation to the shareholders of the company

• After obtaining the final approval from the shareholders, the company needs to file Form DIR -12 within 30 days of the resignation

Documents required for the resignation of Director (DIR-12)

1. Copy of the notice of the resignation furnished by the director (DIR-11)

2. Copy of the resolution passed

Frequently Asked Questions 

Q.1: Is it mandatory for every director to obtain DIN?

A.1: Yes, it is mandatory. Every company needs to obtain DIN for being appointed as a director of the company by filing form DIR – 3 with the registrar. The documents required for filing Form DIR -3 are –

• Valid Identity Card

• Passport size photograph

• Residential proof of the director

Q.2: Who can be a director of the company?

A.2: An individual who possesses the required DIN and DSC and is not disqualified as per section 164 can be appointed as a director of the company

Q.3: What shall be considered as the effective date of resignation of the director?

A.3: The effective date of resignation will be from these two dates whichever is later –

• The date of receipt of notice by the company

• The date which is specified in the furnished notice

Q.4: Are all the directors appointed by the shareholders of the company?

A.4: Generally, as per the provisions of Section 152 of the Companies Act, 2013, the directors are appointed by the shareholders of the company in a general meeting. But, the appointment of an additional director, alternate director, and appointment of the director through casual vacancy is done by the board of directors in the board meeting.

Q.5: For what purposes DIR – 12 Form is filed?

A.5: DIR – 12 is filed for Appointment, Reappointment, and Regularization and Resignation of the director of the company.

How Compliance Calendar LLP can help – 

Bringing a change in management affects the whole conduct of the company, thus it is prudent to assign the task to a legal professional firm like CCL. Professionals at Compliance Calendar will assist you throughout the process of the appointment or resignation of directors.

To connect with us, write to info@ccoffice.in or Call/WhatsApp at 9988424211

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