Everything you need to know on Types of Directors

In this blog, there is a detailed understanding on the type of Directors for a company, different types of Directors in a Private Limited Company, and information on types of Directors in companies act 2013. Directors are in charge of overseeing, managing, and directing a company’s operations. In the company, he/she has various responsibilities. As a result, a Director serves as an employee, an agent, a trustee, and an officer in a company.

Introduction on Type of Directors for a Company

The term “Directors” refers to the part of the Board of Directors that is in charge of overseeing, managing, and directing a company’s operations. Directors serve as trustees for the company’s property and funds, as well as acting as agents in transactions on the company’s behalf.

Information on Number of Directors

Section 149 of the Companies Act of 2013 defines the number of directors.

• A minimum of two directors must be present in any Private Limited Company.

• The maximum number of directors that a firm can designate is 15.

• After passing a special resolution in a general meeting, a firm may select more than 15 directors without the approval of the federal government.

Different types of Directors in a Private Limited Company

• Executive Directors

He/she is the company’s full-time working director. They are held to a higher standard by the organization. They are expected to be efficient and cautious in all transactions between the organization and its personnel.

• Non-executive Directors

He or she is a non-working director who is not involved in the day-to-day operations of the organization. They may be invited to participate in the planning or policy-making process. They challenge the executive directors to make decisions and provide solutions that are in the company’s best interests.

• Shadow Directors

Unless he or she is giving advice in his or her professional role, a person who is not appointed to the Board but on whose directives the board is accustomed to act is accountable as a director of the corporation.

• Professional Directors

Professional directors are non-executive directors who are experts in various subjects and are appointed by the company. They provide advice to the board in areas where they are knowledgeable.

• Managing Directors

The managing director of the company has decision-making authority. For a Public Company or a subsidiary of a Public Company having a share capital of more than Five Crore Rupees, a Managing Director is necessary.

• Resident Directors

Every company must appoint a director who has spent at least 182 days in India in the previous calendar year, according to the law.

• Additional Directors

By approving a board resolution or a resolution by circulation, an additional director is appointed during a board meeting. Additional directors are only allowed to serve until the company’s next Annual General Meeting (AGM). If the AGM is not convened, the director is presumed to resign on the last day of the general meeting’s scheduled date. A person who has not previously served on the Board of Directors is ineligible to serve as an extra director.

• First Director

The names of the first directors are included in the Articles of the Association (AOA). The name of the first directors is determined in writing by the subscriber to the memorandum or a majority of them, according to Regulation 60 of Table F of the Companies Act, 2013.

• Nominee Director

Any Financial Institution, National or State Government, Banks, some shareholders, third parties through contracts, or any other person who recovers his interest can designate a director to the board of directors. Any loan arrangement or government participation in a government company requires the appointment of a nominee director. Subject to the provisions of the Articles of Association, the Board may nominate a Nominee director.

• Alternate Director

In a Private Limited Company, an alternate director is one of the types of directors. If a director is absent or on leave from India for more than three months, the firm may nominate another director in his place. An alternate director is a term used to describe such a director. He can be appointed if the articles allow it or if a resolution is passed at a general meeting.

• Rotational Director

Unless the company’s Articles of Association mandate it, Private Companies are not required by law to select rotational directors. If the AOA (Article Of Association) is silent, the shareholders nominate directors in a general meeting.

Director’s Liabilities

• If a Director was knowingly a party to the fraud(s) while carrying out the business, he could be held personally accountable for the company’s debts or other obligations.

• If the Director fails to acquire the qualification shares within the specified time limit and the company goes into liquidation after that time has expired, the Official Liquidator will demand payment for the shares he was due to purchase.

• Unless and until fraud on the part of the director can be proven, a director is not personally accountable for any of the company’s debts.

• Every director of a private business during the relevant preceding financial year is liable, jointly and severally, for payment of any tax payable from the private company with respect to an income of any prior year that is not recovered from the private company under the Indian Income Tax Act.

Conclusion

Directors, it has been stated, as a company’s brain, and a corporation can only act via them. All of these directors represent their companies, and their roles are critical to their success. The Companies Act of 2013 has granted the Board of Directors certain rights so that they can give their all to the organization.

Along with these rights, the Act also establishes several limitations in order to prevent abuse of such powers. In a corporation, diverse positions and powers are held by directors. The separation of powers aids in the maintenance of a transparent system. Furthermore, the division of control prevents misuse of authority and boosts efficiency.