Related Directors & additional director query

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Akshay (Querist)
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30 January 2021 In a company with two directors (both shareholders), 1 director wants to exit from directorship and also sell the shares. Since Pvt Ltd n3eds minimum 2 directors first Board will appoint an additional director at BM (this additional director is spouse of director who will stay back) and then director who wants to exit will resign.

Now my query is:

1. Will additional director be counted for minimum 2 directors limit in pvt ltd. Since he holds office till AGM, during AGM there'll be only one director right? Isn't this non compliance?

2. Are there any filings or declarations to be done in case directors are related (like husband and wife)?

Thank you friends.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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10 July 2024 Here are the responses to your queries regarding the scenario of directors in a private limited company:

1. **Additional Director and Minimum Director Requirement:**
- In a private limited company, as per the Companies Act, 2013, a minimum of two directors are required at all times. The additional director appointed at the board meeting can indeed count towards meeting this requirement.
- However, it's important to note the tenure of the additional director. Typically, an additional director holds office only until the next Annual General Meeting (AGM). During the AGM, if the director who wants to resign actually resigns and there are no further appointments or changes, the company might temporarily have only one director until a new director is appointed.
- To ensure compliance, the company should aim to appoint a new director before the existing additional director's tenure expires, or ensure that the director who wants to resign remains in office until a new director is appointed to maintain the minimum requirement.

2. **Related Directors (Husband and Wife):**
- When directors of a company are related, such as husband and wife, there are no specific filings or declarations required solely because of their relationship.
- However, it's essential to ensure that the company's governance and decision-making processes remain independent and transparent. This includes avoiding conflicts of interest and ensuring that decisions are made in the best interests of the company.
- In certain sensitive matters, having clear declarations of interest and abstaining from voting on related matters may be advisable to uphold corporate governance standards.

### Steps to Ensure Compliance:

- **Appointment of Additional Director:** Ensure that the appointment of the additional director is properly recorded in the minutes of the board meeting and that all necessary resolutions are passed.
- **Resignation Process:** Facilitate the smooth resignation process of the director who wishes to exit, ensuring all resignation formalities are completed as per legal requirements.
- **Maintaining Compliance:** Continuously monitor the composition of the board to ensure there are always at least two directors. If there are fluctuations due to resignations or appointments, take prompt action to rectify any shortfall in the number of directors.

By adhering to these steps and keeping compliance at the forefront, the company can navigate the transition of directors smoothly while meeting statutory requirements. If there are specific complexities or uncertainties, consulting with a company secretary or legal advisor can provide tailored guidance based on the company's unique circumstances.

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