Directors- Various Types As Per MCA

A company is an artificial person who can’t act or take decisions by itself; therefore, it requires a person to perform the actions, which raises the need for different types of directors. 

As per the Companies Act, 2013, a director plays an essential role in any company to manage the day-to-day affairs, including financial and statutory obligations of a corporation. They are the professionals (known as the Board of directors) who direct the company’s affairs and make decisions in favor of its company and members.

Minimum and maximum directors in a company 

Section 149(1) of the Companies Act, 2013 specifies the minimum number of directors in a company. However, the maximum number of directors a company can have is 15. Further, the company can increase this limit after passing a special resolution in a general meeting. 

Different types of directors in the company 

The Companies Act, 2013 has prescribed the qualifications and appointment criteria of different types of directors. Besides that, it is not necessary that every corporation must have all kinds of directors; however, the Act has specified the conditions when it is mandatory for a company to appoint the director. 

Executive and non-executive directors 

Ø Executive director 

The executive director is the full-time working director in the company. They are responsible for managing routine business operations and help to conduct smooth functioning among different departments of a company.

Ø Non-executive director 

Non-executive directors are not much active as the executive directors as they are not involved in the everyday activities of a company. Instead, they take part in the decision-making processes to frame policies during the board meetings. 

Independent director

An independent director has no direct relationship or interest with the company. Their decisions are independent and have no personal interest. The following companies need to appoint independent directors:

• A listed public company must have independent directors at least 1/3 of the total number of directors.
• Every unlisted company fulfilling the below-mentioned criteria:

Ø Paid up share capital amounting to Rs 10 Crore or more.

Ø Turnover of Rs 100 Crore or more.

Ø Aggregate loans, debentures, and deposits exceeding Rs 50 Crore or more.

Women director

One of the mandatory types of directors is “Women director.” As per the companies act, 2013 every listed company and every public company fulfilling the below criteria must have a women director:

Ø Paid-up share capital of Rs. 100 crore or more 

Ø Turnover of Rs. 300 crore or more

Resident director

The resident director is a director who has lived for at least 182 days in India in a previous calendar year. Further, every company must have a residential director. 

Additional director

The appointment of additional directors is governed as per the provisions of the Article of association. The Board appoints such directors between the two annual general meetings. An additional director holds office up to the next AGM or the last date on which AGM should have been held, whichever is earlier. 

Alternate director

In the absence of the original director for more than three months, the company’s Board of directors appoints an additional director. Such directors are selected only when the articles authorize or the resolution passed by the company in the general meeting. He acts as a director until an original director joins the company, i.e., temporarily. 

Nominee director 

Nominee directors are appointed/nominated by the specific shareholder’s group, financial institutions, government, or any other third party having its interest. Nominee directors come into the role when the board members misuse their power or perform mis-management.

Small shareholder’s director 

Every listed company must have a small shareholder, which the small shareholders appoint. Small shareholders are those who hold shares of the nominal value of not more than Rs. 20,000 or as may be prescribed.  

Further, to appoint a small shareholder’s director, there must be the consent of not less than 1000 members or one-tenth of the shareholders, whichever is lower.

Managing director 

The managing director can take significant decisions related to the company affairs and solely responsible for the outcomes. 

Shadow director 

The Shadow director is not officially appointed in the company; however, he still provides instructions. It shall be deemed director of the company, and all the duties of a director apply to him. 

Conclusion 

Different types of directors hold different positions and power in the companies. The allocation of roles and responsibilities among the different types of directors increases efficiency and reduces the chances of misuse of power.

Also, non-appointment of different types of directors as required by the Companies Act may attract penal provisions. Therefore, it is advisable to follow the provisions and rules prescribed under the Act.