Use of designation as director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2017 Can an employee be designated as Director viz. Production Director/Sales Director etc. even if he is not appointed as director in of Board of Directors. Kindly clarify position under Companies Act 2013.

CS Sanchita Bhardwaj

CS Sanchita Bhardwaj (Expert)
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05 June 2017 A director can be appointed on Board only. Also, an employee can be non-executive director and not executive.

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2017 Dear Mam,
The question is not related to appointment of a director in BOD but to designate an employee as director, who is not a member of BOD. Company wants to designate its senior employees as director- finance, director - production, director - operational. Can it do so as per provisions of Companies Act 2013? it would be really helpful if you can share relevant provisions/ circulars.

CS Sanchita Bhardwaj

CS Sanchita Bhardwaj (Expert)
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05 June 2017 In my view, there is no such thing as designating as director. Both are same -designating and appointing. since the word 'director' is covered under CA 2013, you must follow appointment rules. Else, you may proceed with any other designation.

Querist : Anonymous

Querist : Anonymous (Querist)

07 June 2017 As per Companies Act 2013 ―"director" means a director appointed to the Board of a company. What is the position in case someone is not appointed on the board yet called/ designated as director?
An employee, who is not appointed in the board and yet he is called as 'director production or director -sales'. is it non-compliance of provisions of Companies Act?
Does a company not have designations like this? (Earlier there was a circular NO.2/82, DATED 20.1.1983 under Companies Act 1956 in this regard, what is the position under companies Act 2013?)

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here’s a clear summary of the position on using the designation **“Director”** (like Production Director, Sales Director) for employees who are **not actual directors on the Board**, under the **Companies Act, 2013**:

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### 1. **Definition of Director under Companies Act 2013**

* Section 2(34) of the Companies Act, 2013 defines **“director”** as a person **appointed to the Board of a company**.
* So, legally, the term **“director”** implies membership of the Board of Directors.

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### 2. **Can an employee be designated as Director without Board appointment?**

* Using the title “Director” (e.g., Production Director, Sales Director) **for employees who are not appointed on the Board** is **not in line with the legal definition**.
* The **Act does not provide any scope to designate an employee as a ‘director’ unless they are appointed as such on the Board**.
* So calling an employee “Director” without Board appointment **could be considered misleading or non-compliant**.

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### 3. **Practical position & past guidance**

* Earlier, under Companies Act 1956, **MCA Circular No. 2/82 dated 20.01.1983** clarified that the use of “Director” designation is reserved for Board-appointed directors.
* The **same principle applies under Companies Act 2013**, though no fresh circular has replaced this explicitly.
* Many companies **use alternate designations like ‘General Manager – Production’, ‘Head of Sales’, ‘Vice President – Finance’** to avoid confusion.

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### 4. **Consequences of misuse**

* Misuse of the designation “Director” for non-board employees can lead to:

* Regulatory scrutiny for misrepresentation.
* Potential legal or compliance issues.
* Confusion regarding authority and responsibilities.

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### 5. **Recommendation**

* **Avoid designating employees as “Director” unless they are appointed to the Board.**
* Use functional or senior management titles without the word “Director” (e.g., Production Head, Senior Manager – Sales).
* If the company wants these employees on the Board, they must be formally appointed following the procedures in the Act.

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If you want, I can help draft a formal advisory note or provide references to relevant sections. Would you like that?

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