Type of Directors in a Company in India

The directors through the board of directors manage a company by making decisions, devising strategies, and ensuring the organization meets its objectives. Every type of director has specific authority, but they work together to advance the business’s interests and represent the organization. Let us delve into the realm of the Type of Directors in a Company in India.

TABLE OF CONTENT

Who is a Director?

In Section 2(34) of the Companies Act 2013, a “director” is a person appointed to the board of directors of a company. The directors are the group on the board of directors responsible for the supervision, management, and control of the company’s operations. They act as officers and custodians of the company’s assets and funds and act as trustees in transactions. The term director is therefore a person designated by the Companies Act of 2013 to perform the duties and activities of a company director.

Company’s Minimum-Maximum Number of Board Members

The minimum and maximum number of directors are specified under the Act. The following is the minimum number of directors in the case of:

• Public Limited Company, three directors
• Private Limited Company, two directors
• OPC, one director.

The maximum number of directors that a company can have is fifteen. However, the company may designate additional directors by a special resolution passed in the general meeting.

Types of Director

The types of directors in a company are-

1.Resident Director Every company must designate a Resident Director who spent at least 182 days in India during the previous year.

2.Independent Director Independent directors assist the corporation in raising governance standards and corporate reputation. An independent director is a non-executive director with no company affiliation that could compromise their objectivity. They serve for five consecutive terms but can be reappointed upon approval of a special resolution in the board’s report. A minimum of one-third of directors in a listed public company must be independent directors.

• Public companies with paid-up capital of Rs. 10 crores or more,
• Public companies with a turnover of Rs. 100 crores or more, and
• Public companies with total outstanding loans, deposits, and debentures of Rs. 50 crores or more

These are among the unlisted public companies that are required to appoint at least two independent directors.

3.Small Shareholders Director A listed company may allow the small shareholders to elect a director after receiving notice from at least 1,000 of them, or 10% of all the small shareholders, whichever is lower.

4.Women Directors Every private or public company must select at least one woman director if a business fits any of the following requirements:

The company is a listed company and its securities are listed on the stock exchange.

• Such a company has paid up capital of at least Rs 100 crores and gross turnover of at least Rs 300 crores.

5.Additional Director An additional director may be selected, and they may serve in that capacity until the following annual general meeting. This period would expire on the day the general meeting was scheduled to take place if one was not conducted.

6.Alternate Director An employee designated by the Board of Directors as an alternate director may serve as a director if the director is away from the nation for more than 3 months.

7.Nominee Director Nominee directors could be appointed by a class of shareholders, banks or lending financial institutions, third parties under contracts, or the Union Government in cases of oppression or mismanagement.

8.Executive Director The executive director is a full-time director of the company and looks after the affairs of the company. They have a higher responsibility towards the company. They must be diligent and careful in all their dealings.

9.Non-Executive Director A non-executive director is a non-working director who doesn’t directly manage a company but can participate in planning and policy-making, challenging executive directors to make decisions in the company’s best interest.

10.Managing Director A Managing Director (MD) is a director entrusted with the essential powers of the management of the company through the company’s AOA i.e. articles of association, a contract with the company, a resolution of the company’s general meeting or the board of directors.

Role of Directors

The director has various roles-

• Agent: The Company’s board members, as artificial beings, oversee operations on behalf of investors. As a representative of the shareholders, the director strives to advance business objectives, generate revenue, increase the intrinsic value of the shares, and increase profitability.
• Employee: A full-time director, nominated by the board of directors and mandated by the shareholders, manages the day-to-day operations of the company as an employee.
• Officer: A director, as a director of a company, is subject to criminal penalties under various laws if the activities of the company violated the Companies Act, Income Tax Act, FEMA regulations, and industry-specific laws.
• Trustees: The director is considered the administrator of the company, who has exclusive access to the funds and property of the office.

What are the Duties of Directors?

According to Section 166 of the Companies Act 2013, the director shall perform the following duties:

• Act by the company’s articles of association.
• To act in good faith to further the objectives of the company for the benefit of its members as a whole and in the best interests of the company, its employees, shareholders, society, and for the protection of the environment.
• Performs duties with due and reasonable care, skill, and diligence and exercises independent judgment.
• Not to interfere in a situation in which he may have a direct or indirect interest that conflicts with, or may conflict with, the interests of the company.
• He shall not obtain or attempt to obtain any undue gain or advantage for himself or his relatives, partners, or associates and if such director is found guilty of obtaining any undue gain, he shall be liable to pay an amount equal to such gain to the company.
• The assignment made shall be void as he shall not assign his office.

If a director of the company contravenes the provisions of this section, he shall be liable to a fine which shall be between Rs. 1,00,000 and Rs. 5,00,000.

Conclusion

The board of directors makes the organization function through them. Each of these directors represents their respective companies and their responsibilities are critical to their success. The Companies Act 2013 gave additional rights to the board of directors which allowed them to devote themselves fully to the company. In addition to these powers, the law also creates restrictions that prohibit these authorities from being oppressors. Directors hold different positions and functions in the company. The division of powers contributes to the transparency of the system. In addition, separation of powers prevents abuse of power and improves efficiency.

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