Appointment of Directors in India – Complete Guide

A Director is an individual appointed to the Board of a company to manage and oversee its affairs. The appointment of directors is governed primarily by the Companies Act, 2013 and the rules notified under it.

1. Legal Provisions for Appointment of Directors

2. Eligibility Criteria for Appointment

A person cannot be appointed as a director if they:

1. Are below 18 years of age

2. Are undischarged insolvent

3. Have been convicted of an offense involving moral turpitude

4. Have been disqualified by a tribunal or court

5. Are of unsound mind, as certified by a competent authority

Additional Eligibility for Certain Companies:

• Independent directors must meet independence criteria (not a relative or employee of the company, not holding substantial shares, etc.)

3. Types of Directors

4. Procedure for Appointment of Directors

Step 1: Obtain DIN (Director Identification Number)

• Mandatory for all directors.

• Apply via MCA portal using DIR-3 form.

Step 2: Board Resolution for Appointment

• Board of Directors approves the appointment of a new director.

• For public companies, approval may also require shareholder consent.

Format of Board Resolution Example:

“Resolved that Mr./Ms. [Name] (DIN: XXXXXXXX) be and is hereby appointed as Director of the Company w.e.f. [Date].”

Step 3: Consent of Director

• Director must provide written consent in Form DIR-2, stating they are not disqualified and agree to act as director.

Step 4: Filing with MCA

• Form DIR-12 must be filed within 30 days of appointment.

• Attachments include:

  • Copy of Board Resolution

  • Consent of Director (DIR-2)

  • Copy of identity and address proof

Step 5: Update Register of Directors

• Company maintains a Register of Directors and Key Managerial Personnel (KMP) as per Section 170.

5. Appointment in Different Company Types

6. Tenure of Directors

7. Disqualification of Directors

A director may be disqualified under Section 164 if:

• They fail to pay calls on shares held by them

• They become undischarged insolvent

• They are convicted of offense with imprisonment ≥6 months

• They default in filing annual returns / financial statements for 3 consecutive years

MCA can remove disqualified directors from DIN database.

8. Documentary Requirements for Appointment

1. DIN of Director

2. Written consent (DIR-2)

3. Identity proof (PAN / Passport)

4. Address proof (Aadhaar / Utility bill / Passport)

5. Board Resolution (approved by existing board)

6. Updated register of directors

Note: For foreign directors, notarized passport and address proof are mandatory.

9. Filing Forms with MCA

10. Advisory Notes / Best Practices

1. Check DIN status of all directors before appointment

2. Ensure no disqualification under Section 164

3. Document board approvals carefully

4. Maintain accurate register of directors

5. Inform shareholders if required under Articles

6. Foreign directors should complete FEMA / RBI compliance if investing in Indian subsidiary

7. For independent directors, ensure compliance with Schedule IV of Companies Act

11. Timeline for Appointment

12. Penalties for Non-Compliance

• Failure to file DIR-12: ₹5,000 per default

• Appointment of disqualified director: fines for company and officer in default

Appointment of Directors in India – Complete & Exhaustive Guide

1. Definition of Director

A Director is a person appointed to the board of a company to manage and oversee its business operations. Directors act as agents of the company but have fiduciary duties to shareholders, employees, and stakeholders.

Legal Basis: Companies Act, 2013 (Sections 2(34), 149–172).

2. Types of Directors

3. Eligibility Criteria

A person cannot be appointed as director if they:

1. Are under 18 years old

2. Are unsound mind (certified by competent authority)

3. Are undischarged insolvent

4. Are disqualified by a tribunal or court

5. Have conviction for offense involving moral turpitude

6. Have been removed as director by Company Law Tribunal (CLT)

7. Are barred under any special law applicable to the sector

Additional for Independent Directors: Must not hold substantial shares, should not have business ties with the company or its subsidiaries.

4. Maximum & Minimum Number of Directors

Note: Maximum 20 directorships for an individual across companies, and max 10 in public companies.

5. Appointment Procedure

Step 1: Obtain DIN

• DIN (Director Identification Number) mandatory under Companies Act, 2013.

• Apply via DIR-3 Form on MCA portal.

• DIN is lifetime but requires annual e-KYC update.

Step 2: Board Resolution

• Board approves appointment via Board Meeting.

• Resolution format:

“Resolved that Mr./Ms. [Name] (DIN: XXXXXXXX) be and is hereby appointed as Director of the Company w.e.f. [Date].”

• Independent Directors must also pass a Board evaluation and acceptance process.

Step 3: Director Consent

• Must provide DIR-2 consent form, stating:

  • They are not disqualified

  • Will comply with Companies Act duties

• File before or along with DIR-12 with MCA.

Step 4: Filing with MCA

• File DIR-12 (Notice of Appointment / Resignation / Change) within 30 days.

• Attachments:

  1. Board Resolution

  2. Consent of director (DIR-2)

  3. Copy of PAN / Passport / Address proof

  4. Any other approvals if required

Tip: Foreign directors must provide notarized documents.

Step 5: Update Statutory Registers

• Maintain Register of Directors and Key Managerial Personnel (KMP) under Section 170.

• Register should include:

  • Name, DIN, Date of Appointment

  • Address, PAN, Aadhaar / Passport

  • Details of shareholding and remuneration

Step 6: Additional Approvals

• Foreign Directors: FEMA / RBI approval if investing or receiving salary

• Sector-specific approvals: Banking, NBFC, Telecom, FDI regulated sectors

6. Tenure of Directors

7. Disqualification of Directors

Under Section 164 of Companies Act, 2013:

• Non-filing of financial statements / annual return for 3 consecutive years

• Declared unsound mind or insolvent

• Conviction of offense with imprisonment ≥6 months

• De-barred by Company Law Tribunal (CLT)

Effect: Disqualified directors cannot hold directorship; MCA can remove DIN.

8. Types of Director Appointments

9. Documentary Requirements

For Indian Directors:

1. DIN

2. PAN card

3. Aadhaar card or Passport / Voter ID / Driving License

4. DIR-2 consent

5. Board Resolution

6. Address proof

For Foreign Directors:

1. DIN

2. Passport (mandatory)

3. Proof of foreign address (bank statement / utility bill)

4. DIR-2 consent

5. Notarized documents if required

6. FEMA / RBI approval for investment

10. Compliance & MCA Filings

Additional: For listed companies, SEBI compliance for independent directors and disclosure in annual report.

11. Penalties for Non-Compliance

• DIR-12 not filed: ₹5,000 per default

• Appointment of disqualified director: Penalty for company and officer in default

• Failure to maintain register of directors: ₹25,000 fine

• Non-compliance with independent director provisions: Penalty up to ₹1,00,000

12. Advisory Notes / Best Practices

1. Verify DIN status and KYC of director before appointment

2. Ensure eligibility and no disqualification under Section 164

3. Maintain accurate board resolutions and registers

4. Foreign directors must comply with FEMA / RBI regulations

5. Independent directors should pass Schedule IV evaluation

6. Keep scanned copies of all documents for audit and MCA inspections

7. Annual e-KYC update is mandatory to avoid DIN deactivation

13. Timeline Summary