A private limited company is a separate legal entity. The director acts on behalf of it and fulfils the managerial duties. Along with that, he takes decisions for the company and keeps it compliant. The Board of Directors represents the company.
The following are the types of directors:
H/she is the full-time working director of the company. They have a higher responsibility towards the organization. The company and its employees expect them to be efficient and careful in all the dealings.
H/she are non- working directors and are not involved in the everyday working of the company. They might take part in the planning or policy-making process. They challenge the executive directors to come up with decisions and solutions that are in the best interest of the company.
They have a substantial ability to make decisions, manage and direct other members of the company. A Public Company or a subsidiary of a Public Company that has a share capital of more than Five Crore rupees must have a Managing Director.
They are the ones who do not have any direct relationship with the company. Their experience is their asset and gives expert advice to the board when required. Public companies who have paid-up share capital, turnover, or outstanding loans of Rs. 100 Crores, Rs.100 Crores, and Rs.50 Crores or more need two independent directors.
Qualifications to be an independent director:
- Must have expertise and experience;
- Must be a person of integrity;
- Should not be a promoter of the company or its subsidiaries;
- Should have no relations (financial/personal) with the promoters, or directors of the company;
- Should not have been key managerial personnel of the company or any of its holdings and subsidies;
- Should not hold total voting power exceeding two percent in such company.
A director who has lived in India for at least 182 days is a residential director. A company should have one residential director.
Small Shareholder Directors
They are the ones who can appoint a single director in a listed company. By issuing a notice to at least 1000 shareholders or 1/10th of the shareholders whichever is lesser, to approve this action.
The companies who have their securities listed on the stock exchange or have a paid-up capital of Rs. One hundred crores/turnover of Rs. Three hundred crore or more must have a women director.
An individual can act as an additional director by taking the position of a director until the next Annual General Meeting.
When a director is absent for more than three months; an alternate director comes on board on his behalf. He acts as a director for a temporary period. And can only hold office as permissible to the director whose office this director holds.
Shareholders, central government or third parties appoint them. Nominee directors come on board when there is grave mismanagement or the board members abuse their powers.
Directors hold different positions and powers in a company. The division of power helps in maintaining a fair and transparent system. Moreover, the distribution of control keeps a check on abuse of power and increases efficiency.