Change in Director

Change in director means either

  • removing a director from the Board of Directors
  • or appointing a new director to the Board of Directors as an additional director.
  • Change in designation of a director

Any changing in the Board of Directors (BD) of a company should be made as per

  • the provisions given in the Companies Act of 2013,
  • the AOA of the company,
  • and also as per the agreed service agreement, if any.
  • the need for changing director in a company must be duly justified
  • and approved by the shareholders of the company.

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    Procedure

    Procedure for Change in Directors

    How to Change Company Director

    In general, the processes involved in the whole procedure for change in directors in a private limited or a public limited company, are the following:

    The appointment of a new director should be first approved in the Annual General Meeting and the Board of Directors of the company, stating and justifying the grave need of appointing a new director. The passed resolution in this connection should be informed to the proposed director as earlier as possible. Again, the new director shall give a written consent for acting as a director in the company in Form DIR-2.

    In case of resignation from the Board of Directors, the resigning director has to give a notice to the BD, and the company is required to conduct a Board meeting and then a General meeting to inform about the said resignation and approve the same through taking a resolution by a simple majority. The resigning director also needs to submit a copy of the specified resignation to the concerned ROC in Form DIR-11, within 30 days.

    In either of the cases of resignation or appointment, the related company is required to submit a copy of the resolution taken in Board meeting or General meeting of shareholders, along with the Form DIR-12 to the concerned ROC, within 30 days from the effect of the resolution.

    Lastly, the related company needs to make necessary entries in its Register of Directors, maintained in accordance with the provisions of the Section 170 of the new Indian Companies Act of 2013.


    Key Points

    • Every director must apply for Director Identification Number (DIN) by prescribed form.
    • The requirement of a minimum number of directors should be complied with.
    • The director must be of minimum 18 years of age.

    Different Categories of Directors

    • Women Director
    • Resident Director
    • Additional Directors
    • Independent Director
    • Alternate Directors
    • Nominee Director
    Reason

    Why Add and Change Directors

    Get new talent on board

    The business world is extremely competitive and that is why it is so important for companies to stay on top of their game at all times. As businesses grow and evolve, they undergo several upheavals with regard to strategies, policies, and objectives. Therefore, sometimes companies need to get new talent on board to help formulate new strategies and business plans. Furthermore, as new alliances form between corporations, new talent is required to bridge gaps and ensure the smooth functioning of the organization. As companies expand and venture into new areas, team leaders and experts can move from their managerial position into the role of a director to help the company stay on track.

    No dilution of ownership

    Directors are primarily responsible for the day-to-day operations of a company. Adding or appointing an additional director helps the shareholders assign more operational responsibilities without losing any strategic control. As a Director does not subscribe or own any share capital, the ownership and the voting rights that come along with it, remain with the shareholders, preventing any dilution.

    The inefficiency of existing directors

    The existing directors may or may not be able to serve the company faithfully, in certain cases. In such circumstances, maybe even due to retirement, family problems, other personal reasons or physical ailments, the company adds new directors to make sure their productivity is unaffected. Hence, from time to time, companies need to process the termination and addition of new directors, so as to ensure their continued growth and success.

    To meet the statutory limit

    In certain cases, due to sudden death or plans of retirement from existing Directors, companies fall short of the minimum required directors as prescribed by the Companies Act. Therefore, such Private and Public companies need to appoint new directors within 6 months to continue functioning as a legally valid entity.
    Documentation

    Documents required for Adding New Director


    Passport


    Identification proof (PAN card)- Self-attested

    Proof of residence

    (electricity bill, rental agreement, Aadhar Card, Voter ID, Passport, Driving License)

    Passport size photograph

    Digital Signature Certificate of the proposed Director

    (PAN card: Mandatory for an Indian Applicant Passport: Mandatory for a foreign Applicant)
    Process

    Process of Change in Director

    1
    According to Section 161(1) of the Companies Act, 2013, check if the Articles (AOA) of the company supports adding an additional director. If there are no such provisions in Articles of the company then modify the Articles of the company in a way to add an additional company director.
    2
    Secondly, apply for the DSC (Digital Signature Certificate)
    3
    Apply for DIN (Director Identification Number)
    4
    If the person who is supposed to become the new Director does not have DIN, the same must be notified to the company. In such a case, the Company must pass a Board Resolution and then apply for a DIN for the proposed person. This Resolution must be filed along with Form DIR 3.
    5
    Once obtained, the DIN serves as a lifetime identification number of the Director.
    6
    Collect the basic documents and information required for the process
    7
    Recording of Form DIR-2, Form DIR-12 and Form DIR-8 at ROC has to be done.
    8
    The proposed Director must give his or her consent to act as the Director via Form DIR-2. This is one of the most important documents needed to add a new director, and hence, must be obtained before proposing anyone to be the Director.
    9
    Take Consent/Approval of the individual who is to be selected as a Director of the organization in the recommended design.
    10
    If the company wants to appoint him as a director then regularize the person as a director in General Meeting by Shareholder Resolution.
    Next

    After the process


    Call the Board Meeting.
    The Director must be appointed in a General Meeting and so the Company must issue a notice for holding an Extra-Ordinary General Meeting. Care must be taken to ensure that this notice is issued in accordance with the laws stated in the Companies Act, 2013 and abides by the rules mentioned in the Secretarial Standards issued by the Institute of Company Secretaries of India.

    Pass resolution for the appointment of an additional director.

    Issue the Letter of Appointment.
    Once the appointment letter has been issued, and the payment terms have been negotiated, the Company must file Form DIR-12 to the Registrar of Companies within 30 days from the date of appointment.
    Next, the company must make necessary entries in the Register of Directors and Managerial Personals as required.
    Furthermore, the Company must apply for the necessary changes in the Director’s details with regards to GSTN and other Certificates, as and when required.

    Thereby, you will have the new company director’s name on the MCA website.

    For more information on Change in Directors, consult Vyapar formations.

    Our team will guide you through the complete process of change in directors required for your company.

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