Compliances-Procedural

Addition of Director

Appointment of Director who has DIN and DSC- allied paperwork with filling and submission of Form(s) at an all-inclusive price, including Government Fees*

Complete By* : 03 Mar, 2024

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Traditional CA/CS Price : ₹ 7,500 /-

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Addition of Director- How?

 

Appointment of Director is governed by the provisions of Companies Act, 2013 and the Rules made thereunder.

Here we are dealing with OPC, Small Companies, Private and Closely-held Public Companies.

 

Directors can be appointed by the Board of Directors, the shareholders or by Banks/Financial Institutions to the Board of the Company.

 

 

Documents Required

Copy of the Board Resolution appointing Director

Consent Letter from Director

Identity Proof: A copy of the Director's PAN card or Aadhaar card or passport must be attached.

Address Proof: A copy of the Director's driving license or voter ID card or passport or bank statement or electricity bill or telephone bill, not more than two months old, must be attached.

Photograph: A passport-size photograph of the Director must be attached.

* (All documents in Pdf scanned. Image file in jpeg format)

* (All documents to be Self Attested and signed on each page)

Compliances-Procedural

Addition of Director

Addition of director through Appointment

Steps for Addition of director

Collect information and documents

Check if Articles of association permit such appointment

Consent from director

Notice for Board Meeting

Appointment at Board Meeting

Issue appointment letter to director

File form with all attachments

Different ways of

Director appointment

The Companies Act, 2013 provides for different ways of appointment of Directors to the Board of a company. In all cases, the appointment of Directors must comply with the provisions of the Act, including eligibility criteria, qualifications, and disclosures. The Act also requires companies to maintain a register of Directors, their appointments, and their shareholding in the company. These include:

Appointment by Board of Directors

The Board of Directors can appoint Additional Directors, who will hold office only until the next Annual General Meeting of the company.

Appointment by Shareholders

Shareholders can appoint Directors by passing an Ordinary Resolution in a General Meeting.

Appointment by Small Shareholders

Small shareholders, who hold not more than a certain percentage of the company's total share capital, can jointly nominate a person to be appointed as a Director.

Appointment by Nomination

Companies, that have taken loans from financial institutions or have government investment, may have a provision for appointment of Directors by nomination from the government or other stakeholders

Who is a Director?

Section 2(34) of the Companies ct, 2013 defines “director” to mean a director appointed to the Board of a company;

 

The Merriam Webster dictionary gives it meaning as follows:

: one who directs: such as

a:      the head of an organized group or administrative unit (such as a bureau or school)

director of religious education

a communications director

b:      one of a group of persons entrusted with the overall direction of a corporate enterprise

          on the board of directors for a large corporation


 

Contd…

 

Contd…

 

As per the Companies Act, 2013, a Director is an individual who is appointed to the Board of Directors of a company. The Act defines a Director as "a director appointed to the Board of a company," and goes on to state that a person who is a director of a company by whatever name called is deemed to be a director for the purposes of the Act.

 

The Act also provides for different types of directors, such as executive directors, non-executive directors, independent directors, and nominee directors. Each type of director has different roles, responsibilities, and qualifications as per the Act.

 

Overall, the role of a Director is to oversee the management and operations of the company, ensure compliance with legal and regulatory requirements, and act in the best interests of the company and its stakeholders. Directors are also responsible for making strategic decisions, setting policies, and monitoring the performance of the company.

 

Appointments:

Appointment of a Director by Board

If a Director is appointed at a Meeting of the Board, by the Board of the Directors, they are called Additional Directors. Their term is only till the next Annual general Meeting of the Company.

Appointment of a Director at a General Meeting

A director can be appointed by the Company at a General Meeting. In case of a Private Company, such a Director holds office till the resigns or is removed from office. Private companies do not need to retire directors by rotation

Appointment of an Alternate Director

The Board of Directors of a company may, in a general meeting, appoint a person, not being a person holding any alternate directorship for any other director in the company or holding directorship in the same company, to act as an alternate director for a director during his absence (the absence should be for a period of not less than three months from India)

Appointment of a Nominee Director

The Board may appoint any person as a director nominated by any Bank/Institution in pursuance of the provisions of any law for the time being in force or of any Agreement.

Appointment of Director in Casual Vacancy

If the office of any director appointed by the Company in a General Meeting is vacated before his/her term of office expires in the normal course, the resulting casual vacancy may be filled by the Board of Directors at a meeting of the Board which shall be subsequently approved by members in the immediate next general meeting.

 

Types of Directors:

 

The Companies Act, 2013 provides for various types of Directors, each with its own roles, responsibilities, and qualifications. The different types of Directors under the Act are:

 

Executive Director: An Executive Director is an employee of the company who also serves as a Director. They are involved in the day-to-day management and operations of the company. Ex. Managing Director.

 

Non-Executive Director: A Non-Executive Director does not have any employment relationship with the company and does not engage in the day-to-day management. They provide independent oversight and contribute to strategic decision-making.

 

Independent Director: An Independent Director is a Non-Executive Director who is independent of the company's management and has no material or pecuniary relationship with the company. They are appointed to provide unbiased and impartial advice and oversight.

 

Woman Director: Certain companies are required to appoint at least one woman Director on their Board, as per the Act. The Woman Director can be any type of Director, such as an Executive or Non-Executive Director.

 

Nominee Director: A Nominee Director is appointed by a shareholder or a lender who has a significant financial interest in the company. They represent the interests of the shareholder or lender who has nominated them.

 

Additional Director: An Additional Director is a Director appointed by the Board of Directors at a meeting of the Board of the company. The appointment of an Additional Director is temporary and must be confirmed by the shareholders of the company at a General Meeting.

 

Alternate Director: An Alternate Director is appointed by the Board of Directors to act in place of a Director who is absent for a period of time. The Alternate Director has the same powers and duties as the original Director during their absence.

 

Update to appointment of Directors- requirements

 

The Ministry of Corporate affairs amended the previously prevailing The Companies (Appointment and Qualification of Directors) Rules 2014 vide notification number - G.S.R. 410(E) dated 1st June, 2022.

 

The amendment states that if any individual, who seeks to be appointed as a Director, is a national of a country which shares land borders with India, like China, Pakistan, Bhutan, Myanmar, Nepal, Bangladesh and Afghanistan, has to get necessary security clearance from the Ministry of Home Affairs, Government of India.

 

As per the latest amendment to the Companies (Appointment and Qualification of Directors) Rules 2014 vide notification number - G.S.R. 410(E) dated 1st June, 2022

 

Any person, who is a national of a country which shares land borders with India, seeking appointment as director in a Company in India, has to get necessary security clearance from the Ministry of Home Affairs, Government of India


 

This has to be attached to:

Alongwith a declaration to be given in the consent form DIR-2.

When applying for DIN in Form - DIR 3 

 

Appointment of Director at a General Meeting

The process of appointing a Director to the Board of Directors of a company under the Companies Act, 2013, at a Gneral Meeting  involves the following steps:

 

Check Eligibility: The first step is to ensure that the person being considered for the position of Director is eligible as per the provisions of the Act, the company's Articles of Association, and any other relevant rules and regulations.

 

Consent from director: The Company must seek consent from the Director in Form DIR-2 alongwith the declaration as per DIR 8.

 

Issue Notice: The company must issue a notice to all its shareholders, stating the proposed appointment of the Director and seeking their approval. The notice must be issued at least 21 days before the General Meeting.

 

Hold General Meeting: A General Meeting of the shareholders must be held, where an Ordinary Resolution must be passed to appoint the Director. The resolution must be approved by a simple majority of shareholders present and voting.

 

File Appointment Form: After the appointment is made, the company must file a Form DIR-12 with the Registrar of Companies within 30 days, along with the required documents and fees.

 

Update Register of Directors: The company must update its Register of Directors with the details of the newly appointed Director, including their name, address, date of birth, qualification, experience, and other relevant information.

 

Issue Appointment Letter: The company must issue an Appointment Letter to the Director, stating the terms and conditions of their appointment, including their remuneration, responsibilities, and obligations.

 

It is important to note that the appointment of a Director must comply with the provisions of the Act, including the eligibility criteria, qualifications, disclosures, and other requirements. The company must also ensure that the Director is fit and proper to hold the position and act in the best interests of the company and its stakeholders.

 

Appointment of Director at a Board Meeting

The process of appointing a Director at a Board meeting under the Companies Act, 2013, involves the following steps:

 

Check Eligibility: The first step is to ensure that the person being considered for the position of Director is eligible as per the provisions of the Act, the company's Articles of Association, and any other relevant rules and regulations.

 

Issue Notice: The company must issue a notice to all its Directors, stating the proposed appointment of the Director and seeking their approval. The notice must be issued at least 7 days before the Board meeting.

 

Conduct Board Meeting: A Board meeting of the Directors must be held, where a resolution must be passed to appoint the Director. The resolution must be approved by a majority of Directors present and voting.

 

File Appointment Form: After the appointment is made, the company must file a Form DIR-12 with the Registrar of Companies within 30 days, along with the required documents and fees.

 

Update Register of Directors: The company must update its Register of Directors with the details of the newly appointed Director, including their name, address, date of birth, qualification, experience, and other relevant information.

 

Issue Appointment Letter: The company must issue an Appointment Letter to the Director, stating the terms and conditions of their appointment, including their remuneration, responsibilities, and obligations.

 

It is important to note that the appointment of a Director at a Board meeting must comply with the provisions of the Act, including the eligibility criteria, qualifications, disclosures, and other requirements. The company must also ensure that the Director is fit and proper to hold the position and act in the best interests of the company and its stakeholders.

 

Role of a Director

 

The role of a Director as per the Companies Act, 2013 is multi-faceted and crucial to the success and smooth functioning of the company. The Act sets out various provisions and obligations that Directors must fulfill, including:

 

Duty of care and diligence: Directors must act with reasonable care, skill, and diligence while performing their duties, exercise independent judgment, and act in good faith to promote the company's interests.

 

Fiduciary duty: Directors have a fiduciary duty towards the company and its shareholders, which requires them to act in the best interests of the company and avoid any conflict of interest.

 

Strategic decision-making: Directors are responsible for making strategic decisions, setting policies, and providing overall direction to the company.

 

Oversight and monitoring: Directors must oversee the management and operations of the company, monitor its financial performance, and ensure compliance with legal and regulatory requirements.

 

Appointment and remuneration: Directors are involved in the appointment and remuneration of senior management personnel and play a key role in succession planning.

 

Disclosure and transparency: Directors must ensure that the company maintains accurate and timely records, discloses relevant information to stakeholders, and maintains transparency in its dealings.

 

Overall, the role of a Director is to act in the best interests of the company, its shareholders, and other stakeholders, and to ensure that the company operates in a sustainable and responsible manner.

 

Tenure of appointment:

 

Appointment of Additional, Alternate and Nominee Directors or in casual vacancy requires to be first authorised by the Articles of Association of the Company.

 

Additional director holds his office upto date of AGM. If AGM is not held, then he will still vacate the office on the last date on which the AGM should have been held

 

An alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed,and shall vacate the office, if and when the director in whose place he has been appointed, returns to India.

 

Any person appointed in Casual vacancy shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated.

 

If all the directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government appoints the required number of directors who shall hold office till the directors are appointed by the company in general meeting.

 

Difference between DIR-3 KYC (E-form), DIR-3 KYC (Web Form) and Form DIR-6

 

Form DIR-6

Every Director who has been allotted a DIN on filing Form DIR-3, needs to file Form DIR-6 in the event of change of any of the particulars (except phone number and email address) mentioned in Form DIR-3 duly certified by a Practicing CA/CS/CMA. The director also needs to intimate the company within 15 days of such change.


 

Details required in DIR-3 (Any Change in this details have to be effected through Form DIR-6)

  • Name
  • Fathers Name
  • Photograph
  • Citizenship
  • Residency
  • Occupation
  • E-mail
  • Educational Qualification
  • Date Of Birth
  • PAN, Aadhar, Passport, Voter Card No, Driving License No
  • Permanent Residential Address
  • Present Residential Address
  • Phone

 

Form DIR-3 KYC (E-form)

Every individual who holds DIN on 31st March of a F.Y has to mandatorily file DIR-3 KYC (E-form) within 30th September from the end of that F.Y. Applicants need to download the file from MCA website, fill it up, get it duly certified by a Professional and then submit it by paying required fee.

 

Form DIR-3 KYC (Web Form)

Individuals who have already filed DIR-3 KYC (E-form) for any previous F.Y. has to submit this web form for the subsequent years, by logging into the MCA website on confirmation of their mobile number and email through OTP. This is a hassle free process that does not involve financial cost.

 

Key Difference between DIR-6 and DIR-3 KYC (E-form)

 

In case an individual desires to update his personal mobile number or the e-mail address, as the case may be, he shall update the same by submitting Form DIR-3 KYC (E-form) only. In case of any other details, the director needs to file Form DIR-6.


 

What is eform DIR 3 KYC?

 

  • The eform DIR 3 KYC is filed pursuant to Rule 12A and Rule 11 (2) and (3) of The COmpanies Act 2013 (Appointment and Qualification of Directors) Rules 2014 which states as follows :-
  • Rule 12A: Every individual who has been allotted Director Identification Number (DIN) as on 31st march of a financial year shall file eform DIR 3 KYC to the central government till 30th September of the next financial year.
  • Rule 11 (2): Any DIN holder who defaults to intimate his particulars in DIR 3 KYC shall result in deactivation of his DIN with a penalty of Rs 5000/-

 

What is DIR 3 KYC web based?

 

  • Any DIN holder who has filed DIR 3 KYC in previous year shall be required to file his/her particulars in web based format provided there is no change in his/her KYC details.

 

Introduction of DIR 3 KYC in MCA V3

 

It is one of the nine forms that are being converted from MCA version 2 to version 3 and the new web form will have features enlisted below :-

 

Header

Details

Type of processing 

The form will be processed in (Straight Through Processing) STP mode.

Due date of filing 

30th September of every year. In case of default penalty of Rs 5000/- will be charged

Enhancements Proposed 

  1. Form has been made web based i.e. form will be filled online through MCA portal
  2. Few additional data has been included such jurisdictional police station in address column.
  3. Other miscellaneous additions such as pre-filing of data or repositioning of fields etc. 

Documents Required

  • Copy of the Board Resolution: A copy of the Board Resolution passed by the company's Board of Directors to appoint the Director must be attached.
  • Consent Letter: A Consent Letter in Form DIR-2, signed by the proposed Director, confirming their appointment and stating that they are not disqualified from being appointed as a Director, must be attached.
  • Identity Proof: A copy of the Director's PAN card or Aadhaar card or passport must be attached.
  • Address Proof: A copy of the Director's driving license or voter ID card or passport or bank statement or electricity bill or telephone bill, not more than two months old, must be attached.
  • Educational Qualification: A copy of the Director's educational qualification certificate, such as a degree or diploma, must be attached.
  • Experience Certificate: A copy of the Director's experience certificate, if any, must be attached.
  • Photograph: A passport-size photograph of the Director must be attached.