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You must have heard the Term “Director” very frequently. Director is someone who gives direction, who has the responsibility to manage the affairs and who plays the pivotal role in every kind of organisation. In this article, we shall discuss about meaning, types and appointment of Director in a Company.
Director of a company is a person elected by the shareholders for managing the affairs of the company as per the Memorandum of Association (MOA) and Articles of Association (AOA) of a company. Members of the Company do not manage the affairs of the company on regular basis, thus, they appoint Directors to look after the business. Since a company is an artificial judicial person created by law, it can only act through the agency of natural persons. Thus, only living persons can be Directors of a company and the management of a company is entrusted to the Board of Directors. Appointment of Directors can be required for a company from time to time based on the requirements of the shareholders of the business.
To appoint a director, the person proposing to become a Director must obtain a Digital Signature Certificate (DSC) and Director identification number (DIN). The nationality or residency status of the DIN applicant does not matter. Hence, Indian Nationals, Non-Resident Indians and Foreign Nationals can obtain DIN and be appointed as Director of a company in India.
Types of Director in a Company
- Managing Director
Managing Director is a Director, who by virtue of Articles of Association of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of managed of affairs of the company. He is the person who has substantial decision making power to take decisions related to business of a Company.
- Ordinary Director
Ordinary Director means a simple Director who attends the Board Meetings of a company and participates in the matters put before the Board of Directors. These Directors are neither whole-time Directors or Managing Directors. The are not regularly involved in day to day operations of a Company.
- Additional Director
Additional Director is someone appointed by the Board of Directors between two Annual General Meetings (AGM) subject to the provisions of the Articles of Association of a company. Additional Directors can hold office only upto the date of next annual general meeting of the Company.
- Alternate Director
Alternate Director is someone appointed by the Board of Directors in a general meeting to act for a Director called the original director during his/her absence for a period of not less than three months. Generally, alternate Director are appointed for a person who is a Non-Resident Indian or Foreign Collaborators of a company.
- Executive Director
Executive Director is a Director, who is in full-time employment of the company. Hence, executive directors are regulary involved with the management of the company and managing affairs of the company.