A Private Limited Company is one of the most common business entities in India. In such companies, the Directors play an important role during the company incorporation process and the post-incorporation process. This article will cover all the aspects of being a director in a private limited company.
Definition of Director:
As per Companies Act, 2013 defines the term “Director” as someone who is an appointment to the company board. The Board of Directors means a group of those individuals who are elected by the shareholders of a company to manage the affairs of the company. Since a company is an artificial legal person which is created by law, it must act only through the agency of natural persons. It can only act through human beings, and it is the Directors with the help of whom mainly the company acts. Therefore, the management of a company is entrusted to a body of persons who are called the “Board of Directors”.
Another definition of a Director is someone who administers, controls, or directs something, especially a member of a commercial company; or one who supervises, controls or manages; or a person who is elected by the shareholders of a company to direct the company’s policies; the person appointed or elected according to law, or who are authorized to manage and direct the affairs of a company.
However, for a person to become a director at the time of private limited company registration, he/she is required to have a Director Identification Number (DIN Number). DIN Number can be obtained from any person who is over the age of 18 by applying to the DIN Cell.
DIN is a unique 8- digit Director Identification Number. This number is allotted by the Central Government to any person who is going to be a Director or is an existing director of a company and obtaining a DIN is a very easy task. The DIN number has lifetime validity. With the help of the Direct Identification Number(DIN), the details of the directors are maintained in the database.
A company can have different types of directors such as:
A “Managing Director” refers to a Director who, by the virtue of the Articles of Association of the company or by an agreement with the company or by a resolution passed at its annual general meeting, or by its Board of Directors, is entrusted with the substantial powers of the management of the affairs of the company.
Whole-time Director or Executive Director
An Executive Director or a whole-time Director is someone who is in full-time employment of the company.
An “Ordinary Director” refers to a simple Director who attends the Board meetings of a company and he also participates in the matters that are put before the Board of Directors. These Directors are neither the whole-time Directors nor the Managing Directors.
The Maximum and the Minimum Number of Directors in a Private Limited Company.
Only an Individual (living person) can be appointed as a Director of a Company. A body corporate or a business entity cannot be appointed as a Director of a Company. A company can, however, have a maximum of fifteen Directors and it can be increased further by passing a special resolution.
Thus the Minimum Number of Directors that are required n different types of Companies are as follows:
- For a Private Limited Company – Minimum two Directors
- For a Limited Company – Minimum three Directors
- For One Person Company – Minimum one Director
However, in recent years, there has been a change according to which, the private limited company who is having a paid-up share capital of Rs.100 crore rupees or more or a turnover of Rs.300 crores or more are required to appoint at least one woman Director. But there is no women Director requirement for private limited company registration.