How do Director Elections Take Place in General Meetings?

Shareholders of the company usually appoint directors of a company during the general meeting that takes place once annually to appoint or remove new or existing directors. This article seeks to provide steps laying out the process of how directors get elected during general meetings.

First Director

According to Section 152 of the Companies Act, 2013 first directors, all companies are mentioned in the articles of the company. Therefore, subscribers to the memorandum are known as the first directors until more are appointed. The individual member in a one-person company is known to be the companies, first director.

Independent Director

All independent directors are listed on the website of the Ministry of Corporate Affairs and under Section 150 of the Companies Act, the company in question must perform due diligence to select a viable candidate, and upon doing so, the appointment of the director has to be finalised by the shareholders of the company.

Information Required for Eligibility

Under Rule 6 (2) of the Companies Act, for an individual to be listed on the list of independent directors of the Ministry of Corporate Affairs, documents such as director identification pin, income tax pan card, educational qualifications and so on need to be listed.

Appointment of Independent Directors

Under Section 152 of the Companies Act, an appointment of an independent director can be for a period of up to five years on the board. For reappointment of another five years, the special resolution would need to be passed to do so.

Appointment by Other Directors

The existing directors of a company may appoint a new director as to when a vacancy or a new post unexpectedly arises. After the appointment, the appointment needs to be confirmed by the shareholders of the company via voting during the general meeting of the company.

General Provisions

As per Section 152 of the Companies Act, 2013, all appointments to the post of the director are to take place through a voting mechanism during the general meeting of the company in question. Upon successful appointment by the shareholders of the company, the individual becomes a director.

Director Identification Number

Every potential director in a company needs to have a director identification number to be appointed as a director of a company. These potential directors need to showcase their director identification number before the election to prove they are not disqualified from becoming directors under the rules of the Companies Act.

Submission of DIR-2 Form

The consent of the potential new director of the company has to be submitted before or after his appointment to the position of director of the company. The DIR-2 form submitted by the company acts as the consent needed for the act as a director of the company.

Punishment

As per the Companies Act, 2013 if any of the provisions mentioned in Sections 152, 155, 156 of the act are punishable by law. If the company or the individual potential new directors of the company violate any of the sections, then they would be punishable with imprisonment or a fine.

Additional Directors

The board of directors and the shareholders of the company have the power to appoint additional directors who would hold the position of director until the next annual general meeting if such a provision exists in the articles of association of the company.

As can be seen from the above steps, the appointment of directors to a company is astringent and long procedure. It requires the participation of all the directors as well as the shareholders of the company. Therefore, it is essential for potential users of these sections to diligently follow the rules outlined in the Companies Act for the appointment of directors.