Types of Directors: Qualifications & Disqualifications of Directors
Definition of a Director
Under the Companies Act, 2013, a ‘director’ is one who is appointed as a director to the Board of a company.
Main Responsibilities of a Director
The Board of Directors is primarily accountable for:
- the appointment of senior management;
- deciding and shaping the company’s strategies & objectives;
- governing & guiding the company towards achieving its aim;
- company’s accounts and finances, etc.
Minimum Number of Directors Required In Various Companies:
- One Person Company:- One Director
- Private Ltd. Company:- Two Directors
- Public Ltd. Company:- Three Directors
Classification of Directors
1. Residential Director
Section 149(3) of the Companies Act, 2013, states that every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
2. Independent Director
According to Section 149(6), an independent director is a director other than a Managing Director or Whole Time Director or Nominee Director. According to Rule 4 of Companies (Appointment and qualifications of Directors) Rules, 2013, the following type of companies have to appoint a minimum of 2 independent directors:
- Public Companies which have paid-up share capital of Rs.10 Crores or more;
- Public Companies which have a turnover of Rs.100 Crores or more;
- Public Companies which have total outstanding loans, debenture, and deposits of Rs. 50 Crores or more.
3. Additional Director
As per Section 161(1) of the Companies Act, 2013, any Individual can be appointed as an Additional Director by a company.
4. Alternate Director
As per Section 161 (2) of the Act, an alternate Director can be appointed by a company, if its articles confer such power to it or if a resolution is passed; in eventuality if a director is absent for more than three months from India.
This appointment comes with certain clauses:
- An alternate director shall not hold office longer than the term of the director in whose place he has been appointed;
- Such a director shall vacate the office as and when the original director returns to India.
5. Women Director
According to Section 149 (1) (a) of the Companies Act, there are certain companies that should have at least one woman as a director on their Board.
Such companies are:-
- A listed company, or
- Any public company having
- a turnover of Rs. 300 crore or more, or
- paid-up capital of Rs. 100 crore or more.
6. Small Shareholders Director
All listed companies may have one small shareholders director that means a director elected by people possessing shares of nominal value.
The Act mandates that such listed companies may by notice to not less than a thousand or one-tenth of the total shareholders, whichever is lower, shall appoint one small shareholder’s director.
7. Shadow Director
A Shadow Director is a person who is not actually appointed as a director but on whose directions the board is accustomed to act, and can be deemed to be Director of a company.
8. Nominee Director
These can be nominated by shareholders, third parties through contracts, leading public financial institutions or banks, or by the Central Government in case of mismanagement.
The qualification and disqualification of directors are enumerated in detail in the Act, and vary depending on the type of director and also whether it is a public ltd. or private ltd. entity.
One qualification that stands mandatorily for all is that only an individual can be appointed as a director; stating clearly that a firm or a corporate or an association, etc. cannot hold the office of director.