Becoming a Director in an Indian Private Limited Company: A Comprehensive Guide

Becoming a Director in an Indian Private Limited Company: A Comprehensive Guide

A company needs a director to handle all the company processes and make important decisions. In India, a private limited company plays a significant role in boosting the economy’s growth rate. The director is essential during the company’s incorporation and post-incorporation process. There are many rules to becoming a company director, and one must abide by them. In this blog, we shall cover all aspects of being a Director in a private limited company.

Meaning of Director:

Companies Act, 2013 defines the term “Director” as someone appointed to the Board of a company. The Board of Directors means a group of those individuals elected by the shareholders of a company to manage the affairs of the company. Since a company is an artificial legal person created by law, it is necessary to act only through the agency of natural persons. It can only act through human beings, and it is the Directors through whom mainly the company acts. Therefore, the management of a company is entrusted to a body of persons called “Board of Directors”.

Types of directors of the company:

The following are the types of Director in the Company:

Managing Director

A “Managing Director” means a Director who, by 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 management of affairs of the company.

Whole-time Director or Executive Director
An Executive Director or whole-time Director is someone in full-time employment of the company.

Ordinary Director
An “Ordinary Director” means a simple Director who attends the Board meetings of a company and participate in the matters put before the Board of Directors. These Directors are neither whole-time Directors or Managing Directors.

Additional Director

An Additional Director is someone appointed by the Board of Directors between two annual general meetings subject to the provisions of the Articles of Association of a Company. Additional Directors shall hold office only upto the date of the next annual general meeting of the Company. Number of Directors and additional Directors of a company together shall not exceed the maximum strength fixed for the Board of Directors by the Articles of Association.

Alternate Director
An 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 absence for a period of not less than three months from India. Generally, alternate Directors are appointed for a person who is a Non-Resident Indian (NRI) or for foreign collaborators of a company.

Professional Director
Any directors possessing professional qualifications and do not have any pecuniary interest in the company are called Professional Directors. In large companies, Professionals are sometimes appointed to the Board to utilize their expertise in the management of the Company.

Nominee Director
Banks and Private Equity investors who grant debt or equity assistance to a company generally impose a condition as to the appointment of their representative on the Board of the concerned Company. These nominated persons are called nominee Directors.

Who can be a director of a company?

Apart from being a natural person, there are specific eligibility criteria for becoming a director:

•    Age Limit: Directors must be at least 18 years old and capable of entering into a contract. The prescribed age limit for Full-Time, Independent, and Managing Directors is 21 to 70 years.

•    Nationality: While there are no restrictions on nationality for directors in a Private Limited Company, at least one board member must be an Indian national to incorporate a company in India.

•    DIN Requirement: Individuals aspiring to be directors must have a valid Director’s Identification Number (DIN), a unique number for each person, to maintain records with the Ministry of Corporate Affairs.

•    Valid Directorship: According to Indian laws, an individual can only be a director in up to 20 companies simultaneously, with a limit of 10 public companies. Directors must ensure compliance with these thresholds to avoid exceeding them and may need to resign from positions in excess companies if necessary.

Documents Required to Appoint a Director

To appoint a director, the following documents are needed:

•    PAN card of the director

•    Identification proof (Voter ID, driving license, Aadhaar card, etc.)

•    Proof of residence (utility bills, rental agreement, etc.)

•    Passport-size photograph

•    Digital Signature Certificate (DSC)

Process of appointment of a director:

Step I – obtain the consent of the proposed directors
The consent of the would-be director is the initial and the most important step. The company must obtain Form- 
DIR- 2 before proposing the name of the new director.
Step II – Digital Signature Certificates of the Proposed Directors

If the proposed directors do not have their digital signatures, they should apply for it immediately. It must be ascertained that the would-be directors of the company possess a digital signature.

Step III – Get the Director's Identification Number (DIN)
If the proposed directors do not have a director identification number, then the companies must apply for the DIN for the director. This must be attached to the form DIR- 3. The DIN allotted can be used for a lifetime. 
Any adult can apply for and obtain a DIN. 
Since there is no restriction regarding Nationality, Indian Nationals, Non-resident Indians, and even foreign nationals can obtain the DIN.

Step IV – Obtain KYC Documents
The company should also collect the KYC and the educational qualification documents required for the appointment of a director. 

Note: There is no minimum educational qualification required to be a director of a company in India.

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