The Companies (Appointment and Qualifications of Director) Rules were introduced by the Government of India (GOI). The regulations for the appointment and qualification of directors were created to outline the process for appointing and qualifying a company’s directors. Women directors, independent directors, small shareholder directors, and KYC directors are all described in length in the guidelines. The Companies Appointment and Qualifications of Directors Rules are discussed in depth in this article.

Women On The Board Of Director

At least one woman director should be appointed to the following types of companies:

  • All publicly-traded companies that are eligible under the Companies Act of 2013
  • Other publicly traded corporation
  • A fully paid-up share capital of Rs.100 crores
  • Rs.300 crores in revenue

If a vacancy occurs on a regular basis, the Board should fill it. After the immediate meeting, or within three months of the vacancy, the Board should fill the vacancy.

Number Of Directors Who Are Independent

Companies Rules

Companies in the following categories should have at least two directors:

  • A public business with a paid-up share capital of Rs.10 crores or higher.
  • A public corporation with a turnover of Rs.100 crores
  • A public corporation with more than Rs.50 crores in outstanding loans, deposits, and debentures.

However, due to the audit committee’s composition, the public corporation must appoint a greater number of independent directors. Furthermore, if a corporation fails to meet the above parameters for three years, it is not required to follow the rules until it meets the requirements. If a law requires a corporation to have more independent directors, that company must abide by the law.

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Independent Director Qualifications

A skilled and experienced independent director is required. They should also have expertise in one or more issues related to the company’s business, such as law, finance, sales, management, administration, marketing, research, technical operations, corporate governance, or other disciplines. The corporation, subsidiary, holding, associate company, promoters, or directors should not owe anything to the independent director’s relatives. They shall also provide any guarantee of security in connection with the debt to any third party in the amount of Rs.50 lakhs for the next two fiscal years.

Independent Director’s Required Compliance

Every independent director who has been appointed or who wishes to be nominated must apply online to the institute to have their name added to the data bank. The name might be included for a year, five years, or for the rest of your life. Furthermore, anyone, even if they do not have a DIN, can freely ask to have their name added to the data bank. Within 30 days of its expiration date, the individual can seek renewal. The compliance declaration is required of every independent director.

To be included, the person must complete an online proficiency self-assessment test within a year after being added. If they don’t succeed, the name will be removed. Furthermore, if an individual has served as a director or managerial staff in a listed public business, an unlisted public company with a paid-up share capital of Rs.10 crores or more, or a body corporate under the stock market for 10 years or more, they are exempt from taking the online test. However, if a person has worked in two or more places, only one is considered.

Director For Small Shareholders

Companies Rules

If the number of small shareholders is less than 1000 or one-tenth of the total, they can elect a director. Nothing, however, prohibits a listed firm from appointing a director to represent small shareholders. The shareholders must provide the corporation notice of the person they are nominating at least 14 days before the meeting. They should include the proposed director’s name, address, shares, and folio number. Along with the notification, the proposed director must have a signed declaration indicating the DIN, that he or she qualifies under the Companies Act of 2013, and that they consent to serve as a director. By rotation, such a director cannot retire. The director’s term will be limited to three years.

Under Section 164 Of The Companies Act, 2013, Non-Eligibility Disqualifies A Person

  • Section 167 causes the office to become vacant.
  • Does not match the criteria for independent eligibility.

Consent To Serve On The Board Of Directors

The consent must be submitted to the corporation in Form DIR-2 by the nominated director. Furthermore, the consent must be filed with the Registrar in Form DIR-12 within 30 days.

Application for DIN Allotment

The newly appointed director of an established firm must apply for a DIN online using Form DIR-3 and pay a fee. If the proposed directors do not have authorized DIN, the firm can name three directors and Form Spice will issue DIN to all three. The Ministry of Corporate Affairs’ webpage will have Form DIR-3 available. After completing the application, the applicant must attach a photograph, evidence of identity, and proof of domicile. The applicant must produce a digital signature certificate that he or she has signed. The form will be verified by the company secretary, managing director, CEO, CFO, or director. If the candidate lacks a surname, his father or grandfather’s name will be used instead.

A DIN Number Is Assigned To A Person

After submitting the form, the applicant will be assigned an application number. Following the generation of the application number, the Central Government processes the application. Furthermore, the Central Government makes a decision on the DIN’s approval or rejection within a month. However, if there is a flaw in the application, the Central Government notifies the applicant. The applicant has 15 days to correct the errors and resubmit the form. The Central Government has the authority to require the applicant to file a fresh form if there is a problem. If you are rejected, you will not receive a refund. The allotted DIN, on the other hand, is valid for life.

DIN Notification To The Company

The director must inform the firm or companies of the DIN using Form DIR-3B. Following receipt of the notification, the company will notify the director’s DIN using Form DIR-3C.

DIN Deactivation, Surrender, Or Cancellation

The DIN Can Be Canceled For Any Of The Following Reasons:

  • If the DIN number is duplicated
  • Obtaining a DIN in a deceptive manner
  • The individual’s death
  • The person is declared to be of unsound mind by the court.
  • As a result, he was declared insolvent. However, such a person will be given the opportunity to speak.
  • The DIN holder can surrender the DIN by filling out Form DIR-5 and indicating that the DIN was never used. Before deactivation, the central government conducts checks.
  • If the applicant fails to provide the information requested in Form DIR-3-KYC, the DIN will be deactivated by the authorized directors.

With the completion of the form DIR-3-KYC, the DIN can be reactivated for a cost.

Notification Of Changes In Specifics

If the applicant has to make any revisions to the DIN application, he or she can use Form DIR-6 to do so. The form must be digitally signed by a chartered accountant, a company secretary, or a cost accountant in practice. After the central government is satisfied with the revisions, it will be implemented. The adjustments will also be communicated to the Ministry’s DIN cell. After that, the applicant must notify the employer within 15 days.

Notice Of A Person’s Candidature For Directorship

The corporation must notify the candidate for the position of director seven days prior to the general meeting. They should send electronic and written notices to all members. They should also keep the company’s website up to date. Individual notification to members is not required if the notice is published in a vernacular or English newspaper.

Directors’ Disqualification

In Form DIR-8, the board of directors must notify the company of its disqualification. If the company fails to file financial statements or annual returns, if it fails to repay deposits, dividends, or interest, or if it fails to redeem debentures, it must file Form DIR-9. If the corporation fails to file the Form DIR-9 within 30 days after failing to take these steps, the directors will be disqualified. In addition, Form DIR-10 is used to file a disqualification application for the directors.

Resignation Notice And Copy

The corporation must notify the Registrar in Form DIR-12 within 30 days of receiving the director’s notice of resignation. After 30 days, the director should resign and transmit a copy of his resignation to the Registrar. He shall enclose a copy of the copy in Form DIR-11, together with a fee amount and the explanation for his resignation. A chartered accountant or a company secretary, a cost accountant in practice, or a resident director must certify and sign Form DIR-11 in the case of a foreign director.

Every corporation should keep a register that includes the following information about the director and key management personnel:

  • DIN
  • Surname and given name
  • Previously known as and surname
  • Names of father, mother, and spouse, as well as their surnames
  • Occupation
  • Year of birth
  • Nationality
  • Address of residence
  • The day on which the board makes the appointment is determined by a resolution.
  • Date and reasons for the office’s closure
  • They work at any other business office.
  • The Institute of Company Secretaries of India’s membership number
  • PAN

In addition to these facts, the company should also keep the following records:

  • Date of acquisition and price (or other paid consideration)
  • The securities’ description, number, and nominal value
  • Date of disposal, as well as the money or other consideration received
  • The method of acquiring securities
  • Forms-holding mode (physical or dematerialized)
  • If the securities are pledged or encumbered in any way

In addition, the corporation must complete Form DIR-12 with the Registrar to return the appointment details.