What are the different types of directors in a Private Limited Company in India
What type of Director are you in the company?
Once a client registers a Private Limited Company, we get queries regarding duties of directors. (We have a separate series of articles for roles of director of a company.) These roles of director are majorly based on the type of directorship a director holds. Below in this article we discuss the important types of directors mentioned in the Company Act governing Companies in India.
Managing Director is a director who is entrusted with substantial powers of management of the affairs of the company
Subject to any regulations in the Articles of a company, the subscribers to the Memorandum of Association, shall be deemed to be the Directors of the company, until such time when Directors are duly appointed in the annual general meeting ("AGM").
Whole Time Director
A Whole-time Director includes a Director who is in the whole-time employment of the company, devotes his whole-time of working hours to the company in question and has a significant personal interest in the company as his source of income.
They can be appointed by certain shareholders, third parties through contracts, leading publice financial institutions or banks, or by Central Government in case of oppression or mismanagement.
A Person, who is not appointed to the Board, but on whose directions the Board is accustomed to act, is liable as Director of the company, unless he or she is giving advice in his or her professional capacity.
Every company shall at all times have one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
The Agreement defines an "Independent Director" as a non-executive Director of the company who:
- apart from receiving Director's remuneration, he does not have material pecuniary relationships or transactions with the company, its promoters, its Directors, its senior management, or its holding company, its subsidiaries, and associates which may affect independence of the Director;
- he is not related to promoters or persons occupying management positions at the board level or at one level below the board;
- he has not been an executive of the company in the immediately preceding three (3) financial years;
- he is not a partner or an executive or was not a partner or an executive during the preceding three (3) years, of any of the following:
- the statutory audit firm or the internal audit firm that is associated with the company, and
- the legal firms and consulting firms that have a material association with the company;
- he is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect the independence of the Director; or
- he is not a substantial shareholder of the company, i.e., owning two percent (2%) or more of the block of voting shares; and
- he is not less than twenty-one (21) years of age.
Nominee directors appointed by an institution that has invested in, or lent money to, the company are also treated as independent Directors.
A particular director can take different roles in a Company, depending upon his choice or the choice of stakeholders. I hope you have liked this article on different types of directors in a Private Limited Company in India, if yes please comment below. For more information you can visit www.registrationsindia.com
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