Company law

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alfred (Querist)
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01 November 2012
Dear Sir / Madam,

I would like to know the different types of directors in an indian company and their legal and financial obligations.

What kind of directorship should I opt for to be legally and financially safe?

Ajay Mishra

Ajay Mishra (Expert)
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01 November 2012 Hi

6.Types of Directors

Following are the categories of directors who constitute 'Board' of a company:—
6.1. Ordinary Directors

Ordinary directors are also referred to as simple directors who attends Board meeting of a company and participate in the matters put before the Board. These directors are neither whole time directors nor managing directors.
6.2. Managing Director

Managing Director is a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or, by virtue of its Memorandum or Articles of Association, is entrusted with substantial powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called.
6.3. Whole-time/Executive Directors

Whole-time Director or Executive Director includes a director in the whole-time employment of the company.
6.4. Additional Directors

Additional Directors are appointed by the Board between the two annual general meetings subject to the provisions of the Articles of Association of a company. Additional directors shall hold office only up to the date of the next annual general meeting of the company. Number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the Articles.
6.5. Alternate Director

An Alternate Director is a person appointed by the Board if so authorised by the Articles or by a resolution passed by the company in the general meeting to act for a director called "the original director" during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held. Generally, the alternate directors are appointed for a person who is Non-resident Indian or for foreign collaborators of a company.
6.6. Professional Directors

Any director possessing professional qualifications and do not have any pecuniary interest in the company are called as "Professional Directors". In big size companies, sometimes the Board appoints professionals of different fields as directors to utilise their expertise in the management of the company.
6.7. Nominee Directors

The banks and financial institutions which grant financial assistance to a company generally impose a condition as to appointment of their representative on the Board of the concerned company. These nominated persons are called as nominee directors.
6.8. Independent Directors

Independent director as per Clause 49 of the Listing agreement amended vide SEBI Circular No. SEBI/ CFD/DIL/CG/1/2004 dated 29th October, 2004 and further amended on dated 29th March, 2005 shall mean non-executive director of the company who—
(a) apart from receiving director's remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates which may affect the independence of the director;
(b) is not related to promoters or persons occupying management positions at the Board level or at one level below the Board;
(c) has not been an executive of the company in the immediately preceding three financial years;
(d) is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following:—
(i) the statutory audit firm or the internal audit firm that is associated with the company;
(ii) the legal firm(s) and consulting firm(s) that have a material association with the company.
(e) is not a material supplier, service provider or customer or a lessor or lessee of the company which may effect the independence of the director; and
(f) is not a substantial shareholder of the company, i.e. owning two percent or more of the block of voting shares.

alfred

alfred (Querist)
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03 November 2012 can an individual in India become a director of a company while he is an employee in another company in india?

alfred

alfred (Querist)
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03 November 2012 Is 2 directors enough for a private Limited company ?

Also Can an import export company with 100% FDI in India have only one foreign promoter cum director?

Ajay Mishra

Ajay Mishra (Expert)
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03 November 2012 Hi

Yes, an employee of other company can hold directorship other than executive post. So you can appoint him as professional director or promoter in private limited company.

Ajay Mishra

Ajay Mishra (Expert)
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03 November 2012 Hi

Yes, minimum 2 directors required for private limited company as per section 252 of the Companies Act, 1956.

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