What is Director Appointment and Resignation?

It is well said that Directors are the brain of the company. They are the managerial staff who control and administer the company's services. The revolution of directors takes place in one or another way – either by the selection of new director or withdrawal of existing. Endeavor to carry out the change of directors is always to guarantee an optimum blend of experts on board for the interest of the company. The authorization to approve the resignation of the director lies with the parts of BoD, whereas the appointment must be made through the consent of shareholders. Whether it is an appointment, removal, or resignation, the change does not take effect continuously; the intimation is made to 'Ministry of corporate affairs.

Different Categories of Directors

1. Women Director
2. Resident Director
3. Additional Directors
4. Independent Director
5. Alternate Directors
6. Nominee Director

Documents needed for Appointment and Resignation of Director

1. Photograph: Passport size photo of the Director to be designated
2. PAN Card: Self-attested PAN card of the Director to be designated
3. Proof of Residency: Aadhar Card/ Voter ID/ Passport/ Driving License director to be appointed
4. Digital Signature Certificate: DSC of the ongoing Director and Director to be eliminated/removed
5. Identity proof before-mentioned as Passport/Election card/Driving License/Aadhar card
6. Mobile number and Personal & official email id of the Director
7. It is mandatory to apostille all the documents apostilled if the Director is a non-resident of India
8. Notice of resignation filed with the company
9. Proof of dispatch
10. Acknowledgment of form, if received.

Why Add and Change Directors

Get new talent on board
The business world is extremely competitive and that is why it is so important for companies to stay on top of their game at all times. As businesses grow and evolve, they undergo several upheavals with regard to strategies, policies, and objectives. Therefore, sometimes companies need to get new talent on board to help formulate new strategies and business plans.
Furthermore, as new alliances form between corporations, new talent is required to bridge gaps and ensure the smooth functioning of the organisation. As companies expand and venture into new areas, team leaders and experts can move from their managerial position into the role of a director to help the company stay on track.
No dilution of ownership
Directors are primarily responsible for the day-to-day operations of a company. Adding or appointing an additional director helps the shareholders assign more operational responsibilities without losing any strategic control. As a Director does not subscribe or own any share capital, the ownership and the voting rights that come along with it, remain with the shareholders, preventing any dilution.
The inefficiency of existing directors
The existing directors may or may not be able to serve the company faithfully, in certain cases. In such circumstances, maybe even due to retirement, family problems, other personal reasons or physical ailments, the company adds new directors to make sure their productivity is unaffected. Hence, from time to time, companies need to process the termination and addition of new directors, so as to ensure their continued growth and success.
To meet the statutory limit
In certain cases, due to sudden death or plans of retirement from existing Directors, companies fall short of the minimum required directors as prescribed by the Companies Act. Therefore, such Private and Public companies need to appoint new directors within 6 months to continue functioning as a legally valid entity.

Removal of the director when he submits the Resignation by himself

Sometimes, a director of the company, for any reason, may wish to resign from the post he holds. In such a scenario, the company must follow the below-mentioned steps to complete the process of removal of directors in company law.
Firstly, the company will have to provide seven days’ notice to hold a board meeting. The notice period would exclude the day on which the notice is sent and received.
In the board meeting, the board members would decide whether to accept the resignation submitted by the director or not. The board members will discuss among themselves and will also hear from the concerned director before reaching a proper decision.
After the resolution is passed, form DIR-11 needs to be filed by the director who will be relieved from his/her directorship post. Along with Form DIR-11, the Board Resolution, Proof of delivery of the resignation letter and copy of the resignation letter will be attached.
The director is accountable for the filing of DIR-11 whereas it is the responsibility of the company to file the Form DIR-12 with the Registrar of Companies (RoC) along with the Registration letter and the Board Resolution.
When all the forms are filled and the formalities for removal of the director are done, the name of the Director, who wants to resign, will be removed from the master data of the company in the Ministry of Company Affairs (MCA) website.

If the director remains absent in 3 Consecutive Board Meetings in a year

If a director remains absent from the Board meetings of the company on 3 consecutive occasions in 12 months (a year), then the absenteeism has to be taken seriously. The duration is calculated from the day on which he/she was not available from the first meeting and to any of the meetings, even after sending him/her due notice for all the meetings. It will be considered that he/she has abandoned the office. Necessary steps will then be taken as per section 167 of the Companies Act, 2013 for his removal for the directorship of the company.
A Form (DIR-12) must be filed on the missing director’s name.
Upon completion of the formalities, the concerned director’s name will be removed from the database of the Ministry of Corporate Affairs (MCA).
What are the consequences of not filing the form DIR-12?
Within 30 days from the date of resignation, if the company fails to or doesn’t file the form DIR-12, then the following penalty will be applicable. e-Form DIR-12 is also available for submission.
One-time payment of actual Government fees until 15 days;
If it exceeds 15 days, twice the actual government fee need to be paid by the company A penalty of 4 times the actual government fee is applicable if the period exceeds 30 days to 60 days
In case it exceeds 180 days, 10 times the actual government fee is applicable If the company fails to file the form DIR -12 within 300 days from the date of passing the resolution, then it has to pay 12 times the actual government fee and will be booked for the compounding offense as well.

FAQ on Director Appointment and Resignation

Q. Can a Director resign himself or herself from the company?
A. Yes, any director can voluntarily resign from the company if they wish to do so. In such a case, they must first serve a notice of resignation to the Company stating their reason for resigning and also mentioning the date of resignation.
Furthermore, they must also file a form to intimate the MCA regarding their impending resignation from the company. This e-form must be filed within 30 days of the resignation. Furthermore, if the vacancy results in a shortage of the minimum required Directors, the Company must appoint a new Director within 6 months to continue functioning

Q. Is there any eligibility criteria for adding a new Director?
A. Yes, there is and it is as follows
The proposed individual must be a major.
He or she must qualify as per the laws mentioned under the Companies Act, 2013.
The Members of the Board must consent to the appointment of the proposed individual.
It must be noted that the Companies Act does not mention any educational qualification in order to be eligible to become a Director.

Q. Should I apply for another DIN, if I already have one?
A. No, a DIN or Director Identification Number is permanently allotted and can hence, be used for a lifetime. Therefore, once it is allotted, the same number may be used for multiple appointments and resignations.