Appointment (or) Adding a Director to Your Company

Expand your company’s leadership team by appointing individuals to the board, reinforcing expertise and guiding future direction.

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Overview of DIN

Adding a director to a company in India is governed by the Companies Act, 2013, and related rules. The process begins with obtaining the proposed director’s Digital Signature Certificate (DSC) and Director Identification Number (DIN). The board of directors must then approve the appointment in a board meeting, and the company must file Form DIR-12 with the Registrar of Companies (ROC) within 30 days of the appointment, along with the necessary documents, such as consent to act as a director and a declaration of not being disqualified.

The new director’s details must be updated in the company’s statutory registers and records. If the appointment is made during an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), a special resolution may be required. Compliance with the Companies Act, 2013, ensures the legitimacy of the appointment and maintains the integrity of the company’s governance structure.

blank-paper-sheet-with-small-scooter-table
blank-paper-sheet-with-small-scooter-table

Adding a director to a company in India is governed by the Companies Act, 2013, and related rules. The process begins with obtaining the proposed director’s Digital Signature Certificate (DSC) and Director Identification Number (DIN). The board of directors must then approve the appointment in a board meeting, and the company must file Form DIR-12 with the Registrar of Companies (ROC) within 30 days of the appointment, along with the necessary documents, such as consent to act as a director and a declaration of not being disqualified.

The new director’s details must be updated in the company’s statutory registers and records. If the appointment is made during an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), a special resolution may be required. Compliance with the Companies Act, 2013, ensures the legitimacy of the appointment and maintains the integrity of the company’s governance structure.

Why Add a Director?

Adding a director ensures expert guidance in shaping the vision and execution of a project.

Expertise and Skills
Strategic Growth
Corporate Governance
Investor Confidence
Regulatory Compliance
Network Expansion
Expertise and Skills

Adding a director can bring specialized knowledge or skills to the company, filling gaps in expertise and enhancing decision-making.

Strategic Growth

New directors can provide fresh perspectives and innovative strategies, driving growth and helping the company adapt to changing market dynamics.

Corporate Governance

More directors can strengthen corporate governance, ensuring more comprehensive oversight and more robust checks and balances.

Investor Confidence

Appointing reputable and experienced directors can boost investor confidence in the company's management and future prospects.

Regulatory Compliance

Certain laws and regulations may require a minimum number of directors or specific board compositions, necessitating new appointments.

Network Expansion

New directors often bring valuable networks and relationships that can open up new business opportunities, partnerships, and avenues for expansion.

Types of Director's in a Company

Type of Director Definition Key Characteristics Purpose/Role

First Director

Appointed by the articles of association or named in the incorporation documents.

Not elected by shareholders initially.

Serve until the first general meeting.

Right of Anyone to Become a Director

Subject to meeting legal requirements, almost anyone can become a director.

Must not be disqualified under the Companies Act.

Enhance board diversity and expertise.

Rotational & Non-Rotational Director

Rotational directors retire by rotation at AGMs; non-rotational do not.

Rotational directors provide fresh insights; non-rotational offer continuity.

Ensure board renewal and stability.

Additional Director

Appointed by the board between AGMs.

Serves until the next AGM.

Address immediate board requirements.

Alternate Director

Appointed to act in the absence of an original director for a period.

Must meet qualifications of the original director.

Ensure representation when original directors are unavailable.

Nominee Director

Appointed by certain shareholders, creditors, or institutions.

Represents the interests of the appointer.

Protect the interests of specific stakeholders.

Casual Vacancy Director

Appointed by the board to fill a sudden vacancy.

Serves until the term of the original director.

Ensure board functionality is maintained.

Women Director

Mandatory in certain companies to promote gender diversity.

Female.

Enhance board diversity and decision-making.

Indian Resident Director

At least one director must be a resident of India.

Must have stayed in India for at least 182 days in the previous calendar year.

Comply with statutory requirements for local representation.

Small Shareholder Director

Appointed by small shareholders.

Represents small shareholders' interests.

Give voice to small shareholders in the boardroom.

Directors Appointed by Proportional Representation

Appointed to ensure minority shareholders have representation.

Elected by a system that allows small shareholders to have a say.

Prevent majority shareholders' dominance and protect minorities.

Managing Director

An executive director responsible for daily operations.

Often a board member with substantial powers.

Oversee company's operations and strategy implementation.

Whole-Time Director

A director employed full-time in the company.

Involved in day-to-day management.

Contribute to operational and strategic decisions.

Manager

An individual who is in charge of managing the company's affairs without being a board member.

Might not be a director but has substantial powers.

Manage daily business operations.

Independent Director

Non-executive director not involved in day-to-day management.

Provides unbiased judgment on board matters.

Enhance corporate governance by offering independent oversight.

Min & Max Number of Directors based on type of Company

Documents Required to Appoint a Director

• PAN card of the director

• Identification proof, such as Voter ID, driving license, Aadhaar card, etc

• Proof of residence, such as utility bills, rental agreement, etc

• Passport size photograph

• Digital Signature Certificate (DSC)

Procedure for Appointment a Director in a Company

Appointing a director in an Indian company involves a structured process in accordance with the Companies Act, 2013. The procedure ensures compliance with legal requirements and involves several key steps and documents:

Selection: The Board or shareholders identify a suitable candidate based on skills, experience, and the company’s needs.

Eligibility Check: Verify the candidate’s eligibility, ensuring no disqualifications under the Companies Act, 2013.

Description: The first step is to obtain a Digital Signature Certificate (DSC) for the proposed Directors of the company. DSC is necessary for applying DIN (DIR-3)

Process: DSC can be obtained from government-recognized certifying agencies. The applicant needs to provide a self-attested copy of their identity and address proof.

Validity: DSCs are typically valid for one or two years and can be renewed.

Description: If the proposed director does not already have a DIN, they must apply for one using Form DIR-3, as per the Companies Act, 2013.

Process: DIN can be obtained by filing Form DIR-3 on the MCA portal. PAN and Aadhaar are mandatory for Indian nationals, and a passport is required for foreign nationals.

Validity: Once obtained, DIN is valid for the lifetime of the director.

Consent to Act as Director (DIR-2): Obtain a written consent from the candidate using Form DIR-2, indicating their willingness to serve as a director.

Declaration of Non-Disqualification (DIR-8): The proposed director must provide a declaration in Form DIR-8, confirming they are not disqualified from becoming a director under Section 164(2) of the Companies Act, 2013.

Interest in Other Entities (MBP-1): The appointee must disclose their interest in other entities in Form MBP-1 at the first Board meeting in which they participate as a director, and annually thereafter.

  • Convene a Board Meeting by giving at least seven days’ notice (or shorter, if permissible) to all directors, proposing the appointment         of the new director.
  • Pass a Board Resolution for the appointment during the meeting

General Meeting (If Applicable)

  • For certain appointments, like additional directors becoming regular directors, convene a General Meeting of shareholders.
  • Pass an Ordinary Resolution (simple majority) or a Special Resolution (if required under specific circumstances) for the appointment.

File Form DIR-12 with the Registrar of Companies (RoC) within 30 days of the appointment, along with the required documents, including:

• Certified true copy of the Board Resolution or Shareholder Resolution for the appointment.
• Consent to act as a director in Form DIR-2.
• Declaration of non-disqualification in Form DIR-8.
• Disclosure of interest in Form MBP-1

A formal letter of appointment is issued to the director, detailing their role, responsibilities, and terms of appointment.

If the company is listed, inform the concerned stock exchanges about the director’s appointment, as per the listing agreements and SEBI regulations.

In some cases, the company may need to publish a notice of the director’s appointment in newspapers or on the company’s website, depending on regulatory requirements or company policies.

Post-appointment compliance MBP-1 DIR-3KYC Update Company Records


Post-appointment compliance for a new director involves fulfilling regulatory filings, disclosures, and adherence to corporate governance standards

Disclosure of Interest (MBP-1)

Initial Disclosure: At the first board meeting in which the director participates, they are required to disclose their interest in other entities. This is a declaration of their directorships in other companies, if any, and is mandated under Section 184(1) of the Companies Act, 2013.

Annual Disclosure: The directors need to make this disclosure annually in the first board meeting of the financial year, detailing any changes to their interests.

KYC of Directors (DIR-3KYC)

Annual Filing Requirement: Every individual who has been allotted a DIN must submit the DIR-3KYC form annually, by the 30th of September of the immediately following financial year. This is a KYC (Know Your Customer) verification process.

Information Update: In case there are any changes to personal details such as address, mobile number, or email, the director must update this information through the filing of DIR-3KYC.

Deactivation of Non-Compliant DINs: Failure to submit DIR-3KYC within the stipulated timeframe can lead to the deactivation of the DIN, which can be reactivated upon submission of the form along with the prescribed fee.

Updating Company Records

Finally, the company should update its registers:
    Register of Directors
    Register of Key Managerial Personnel
    Registers of contracts and arrangements        in which directors are interested (using            Form MBP-4).

Submit Required Amendment Applications Under the Following Legislation

If you need to make amendments or modifications to your business operations or compliance with various regulations, you may be required to file necessary amendment applications under the following acts:

 

► Goods and Services Act
► Shops & Establishment Act
► Factories Act
► Foreign Exchange Management Act
► Inter-State Migrant Workmen Act
► Private Security Agency Act
► Employees’ Provident Fund (EPF)
► Employees’ State Insurance (ESI)
► Other Labor Laws
► Industry-Specific Laws


These applications are crucial to ensure your business is in compliance with the ever-evolving legal landscape, and they may vary depending on your specific circumstances and the nature of your business. Always consult with relevant authorities or legal experts for guidance on filing the necessary amendments under these acts.

  • Regulatory Guidance

    Expert advice on the regulatory requirements and compliances needed for the appointment of a director, ensuring adherence to the Companies Act and other relevant regulations.

  • Documentation Assistance

    Assist’s in preparing and compiling all necessary documentation, including consent forms, appointment resolutions, and filings with the Ministry of Corporate Affairs (MCA).

  • Digital Signature Facilitation

    Help’s in obtaining the required Digital Signature Certificates (DSC) for the new director and for filing forms electronically with the MCA.

  • Filing and Submission

    Manage the entire process of electronically filing the necessary forms, such as DIR-12, with the MCA, ensuring timely and accurate submission.

  • Board Meeting Coordination

    Assist in organizing and documenting the board meeting where the resolution to appoint a new director is passed, including drafting minutes and resolutions.

  • Post-Appointment Compliance

    After the appointment, we will assist in post-appointment compliances are met, including updating company records and registers, and advising on the director's ongoing compliance obligations.

Required Documents for DSC Application Submission

What is the process of adding a director to a company?

To add a director, the company needs to obtain their consent, ensure they meet the qualifications, and follow a formal appointment process through board meetings and general meetings

Who can be appointed as a director?

Any eligible individual, subject to certain disqualifications and regulatory requirements, can be appointed as a director.

Do I need to get the director's consent before appointing them?

Yes, obtaining the director's consent is a necessary step. This consent is typically provided through Form DIR-2.

Are there any disqualifications for becoming a director?

Yes, there are several disqualifications, such as being declared insolvent, having certain criminal convictions, or failing to meet regulatory requirements

How do I apply for a Director Identification Number (DIN)?

You can apply for a DIN electronically using Form DIR-3 and provide the required documents.

Can a person be a director in more than one company?

Yes, but there is a limit on the maximum number of directorships a person can hold, as per Section 165 of the Companies Act.

What is the role of the board in appointing a director?

The board plays a crucial role in proposing and appointing directors. They must pass a resolution to approve the appointment

Do I need to hold a general meeting to appoint a director?

Yes, the appointment of a director usually takes place during a general meeting, often referred to as an Extra-Ordinary General Meeting (EGM).

What documents are required for director appointment?

You'll need various documents, including the director's consent (Form DIR-2), a declaration of qualification (Form DIR-8), and proof of identity and address.

How long does it take to get a Director Identification Number (DIN) allotted?

How long does it take to get a Director Identification Number (DIN) allotted?

Can a foreign national become a director in an Indian company?

Yes, foreign nationals can become directors in Indian companies, subject to compliance with relevant regulations.

Is there a maximum age limit to become a director?

There is no maximum age limit for directors, but they must meet other eligibility and regulatory requirements

Can a director be removed once appointed?

Yes, directors can be removed through a general meeting by passing a resolution, subject to the provisions of the Companies Act.

Are there any special requirements for appointing women directors?

Yes, certain categories of companies, like listed companies and those meeting specific financial criteria, are required to appoint at least one woman director.

Are there industry-specific rules for director appointments?

Industry-specific laws and regulations may impose additional requirements or restrictions on director appointments. It's important to be aware of such rules if they apply to your business.