Updated on July 08, 2024 10:41:02 AM
A private limited company is managed and governed by shareholders and board of directors in a company. Shareholders are the people who are the owners of the company whereas a director may be appointed by the shareholders among themselves or may be from outside the company. It is not mandatory for a director to hold the shares in a company.
The position of a director is a very responsible position in a company as all the important decisions are taken by the board of directors in the view of objectives of the company.
According to the Companies Act, 2013, the term “Director” is defined as a person who is appointed to the board by the shareholders to manage the affairs of the company. A company is a separate entity as defined by the law, and it needs people to manage its operations and affairs to ensure the achievement of objectives of the company.
The management of the company is entrusted to a group of people known as the “Board of Directors”. A director is someone who directs, controls and administers something. He is a person elected by the shareholders of the company to manage and direct company policies and thrive for the growth of the company in the long run.
The directors in a company need to act and exercise powers as a Board of Directors but the shareholders or the board committee may delegate some specific responsibilities to a particular director. We will discuss all the roles and responsibilities of a director below:
A company director has to adhere to and act in accordance with the powers and objectives as led down in the Articles of Association(AoA) by the company. A director must act according to the powers delegated to him as a board member and he must exercise his powers only to attain the purpose of the company and not otherwise.
The intention and purpose of a director must be to work according to the objectives mentioned in the Articles of Association of the company and ensure attainment of company goals within a given time.
A director must act in accordance with the powers led down in the company constitution and take decisions considering all the stakeholders such as employees, investors, creditors, suppliers, customers and objectives of the company to build its reputation and success in the long term.
The director must act and take important decisions by adhering to the company’s constitution and making personal decisions. He may consult someone he wishes to, but must take final decisions based on his own experience and personal will.
The decisions for the company must not be biased and or fulfilling his personal motive or taking favours from third parties in carrying out decisions for the company.
While making important decisions for the company the AoA must be obeyed and the decision must be based on the personal will and not be based on someone else.
When there are multiple directors in the board of directors, there are chances of conflicts arising between the directors in making important decisions for the company. You must avoid situations in which conflict may arise among the members of the company or the shareholders.
The directors in a Private limited company can broadly be categorised as executive and Non-executive directors and further it can be divided based on powers and duties performed by them as a board of directors in the company.
The post of Managing Director is a very responsible position in the company, as an MD is responsible for implementing company policies, directing other members and serving as the main representative of the company in managing company affairs as per the constitution of the company.
A whole time director is someone who is elected by the members for the whole time being in the company for managing company affairs by following the objectives as mentioned in the constitution of the company. He is responsible for the daily operations of the business and responsible for making important decisions in the company.
A nominee director is a director who is appointed by the banks and other financial institutions to be a part of the board of directors. Appointment of nominee director is a subject mentioned in the Articles of Association of the company to manage its affairs smoothly.
Alternate directors can be appointed by the members or the shareholders of the company, as a substitution of the principal director when he is unable to attend the board meetings or Annual general meetings of the company.
To incorporate a private limited company there must be at least two directors while applying for the company incorporation process. It is also not mandatory for the director to hold the company shares as a shareholder. As per the companies Act, 2013 there is a minimum and maximum requirement of directors in a Pvt Ltd Company.
The post of a director is a very responsible post in a company, he is responsible for making all the important decisions in the company in the view of fulfilling the objectives of the company. A director must not engage in the favours from the third party, he must take decisions which are for the benefit of the company and not for personal gains.
15 Directors, a Pvt Ltd company can have a maximum of 15 directors.
The three types of directors in a Pvt Ltd company are executive director, non-executive director and independent director.
A person cannot hold the office as director in more than 20 companies at the same time.
A director cannot be appointed without the possession of a valid DIN, it is a unique number issued to a director and he can use the same DIN to be a director in any number of companies not more than 20 companies.
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