A company is an Artificial legal personality which is a creation of law. It can be created and wound up only after following due process of law. A Company works through Managers, Directors and other Key Managerial persons.
Directors work in a fiduciary capacity in a company and are the guardians who look after the affairs. No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number (DIN). Any person intending to become a director in an existing company needs to make an application in eForm DIR-3 for allotment of DIN. The application can be made online a web portal http://www.mca.gov.in.
The individuals who are subscribers to the memorandum shall be deemed to be the first directors of the company until the directors are duly appointed and in case of a One Person Company, an individual being member shall be deemed to be its first director. Usually, every director shall be appointed by the company in general meeting. The consent of the person to hold the office of director needs to be filed with the office of the ROC within thirty days of his appointment. A director may be Wholetime director, Additional director, Alternate director, Nominee director, Independent director, Women director, small shareholder director etc.
Companies Act, 2013 put a ceiling on the number of companies in which an individual can act as director concurrently. Section 165 Companies Act, 2013 mandates that no person after the commencement of Companies Act, 2013 shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time. The directorship in a dormant company shall not be included.
The ceiling limit of directorship in case of public companies is a maximum of ten companies. The directorship in private companies that are either holding or subsidiary company of a public company shall be included.
The Companies Act. 2013 has given cooling period of one year to the persons who were holding directorship in more than 20 companies at the time when the provisions u/s 165 were notified w.e.f. 01.04.2014. The directors were required to choose companies in which they wished to continue to hold the office of director and were supposed to resign in the other remaining companies and inform the ROC office accordingly.
Any director who accepts an appointment as a director in more than 20 companies at a time may be prosecuted by the ROC in the competent court and can be held liable to a penalty of five thousand rupees for each day after the first during which such contravention continues.
