Appointment of Additional Director

As per Indian law, an individual who is not associated with the business but possesses the necessary abilities and expertise to be a director, may become an “additional director” and contribute new insights to the management of the company.  We look at how to appoint such a director below, along with how having more directors might spur business expansion.

How many more directors are permitted?

The maximum number of full directors permitted for private, single-person, and public businesses is fifteen. If more are needed, a special resolution may be passed during the general meeting to raise the maximum number of directors even further. 

If the board of directors determines that additional directors are necessary for the company and that their experience is necessary, they may be appointed to the remaining slots in each of the various types of companies that are not already occupied by directors.

Why is the Need for More Directors Necessary?

Typically, the hiring of extra directors is done to cover a void in the knowledge or experience that the board of directors needs. There are numerous possible causes for this, including:

• A particular endeavor or endeavor requiring certain skills or experience.
• To guarantee a wider range of viewpoints and ideas, diversity on the board is essential.
• A director’s departure or passing leaves a knowledge void on the board.
• A need for a non-executive director to oversee the business’s activities independently.

What is the duration of the scheduled meeting?

Usually, the additional director’s role is kept until the following annual general meeting, at which point it is chosen whether to dismiss them or keep them in that capacity. Nonetheless, extra directors may petition to become full-time directors at the annual general meeting.

If approved, these qualified additional directors may then be chosen to become full-time directors by following the standard method for appointing directors.The procedure for designating an extra director begins with the Director Identification Number (DIN):

1. If the director already has a DIN, confirm that it is still valid and hasn’t been cancelled as a result of the director failing to file the DIR-3 KYC.
2. If the Director does not currently hold a DIN: In the event that the Director is not currently holding a DIN, he must get a Digital Signature Certificate (DSC) and submit a DIN application using DIR-3 Form. 

To recommend the director’s appointment, a separate board meeting must be held. The application must be submitted with a copy of the board resolution from the company recommending that he be appointed as a director. 

The necessary paperwork is:

1. Identification proof, proof of address, a photo, and a copy of the board resolution that suggested he be appointed as a director
2. Get the proposed director’s written consent and declaration: Obtain written consent in Form DIR-2 indicating his willingness to serve as a director and a declaration in DIR-8 listing the names of the companies he has previously served as a director for.
3. Request an appointment by calling a board meeting:

To approve the resolution authorizing the appointment of the additional director, call a board meeting. Permit a director to submit the appointment return to the Registrar of Companies as well.

4. Notice of Appointment: Upon passing the resolution in the board meeting, the Company will mail the director a notice of appointment along with the effective date.
5. Registrar of Companies (RoC) Return of Appointment Filing:

Within 30 days following the appointment, submit the Return of Appointment on Form DIR-12 to the Registrar. The details of the new director will be posted in the MCA portal against the relevant company once Form DIR-12 has been filed with the ROC.

Conclusion

One helpful aspect of the Companies Act 2013 that enables corporations to take advantage of specialized expertise and abilities is the appointment of additional directors. Businesses must make sure that the appointment of new directors is carried out openly and responsibly, taking into account the company’s unique needs as well as the eligibility requirements. Companies that take this action can fortify their boards and improve their capacity to make well-informed decisions that protect the interests of all parties involved.