Director Addition or Removal
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Director Addition or Removal
In any company, the Directors are the people who give direction to the business. They are the people who make the vision of the company a reality. They control and give shape to the business. Based on the company’s performance, goals and achievements, the directors are changed, replaced, inducted or added to the company through a Board Resolution. The change or addition of directors is done to ensure the right combination of skillsets to grow the company to the next level.
While the resignation of a director can be accepted by the Board of Directors, the addition of a new director is done with the consent of the shareholders. In most of the cases, the directors are also the shareholders in the company. The change is directors comes into effect only after the same is updated with the Ministry of Corporate Affairs.
EOB helps with this process and assists businesses with completing these formalities.
Possible reasons for change of directors.
In cases where a Director resigns or the tenure of the Director comes to an end or any such situation, adding a new Director on board is necessary.
As the company starts to grow and progress, there is a need to bring in fresh talent and skillsets to achieve the goals set for the company. A good leadership team makes a significant difference in this growth trajectory.
Expanding the footprint of the company would mean more responsibilities for the Directors. Adding a new director will help distribute the responsibilities more evenly and ensure the performance of the company is in line with the expectations. Adding a director need not dilute the shareholding of the company.
There are situations where the Director of the company resigns or any other unforeseen reason, leading to the Director count falling below 2 or 3. In such cases a new Director has to be inducted into the company with 6 months as per the regulations of the MCA.
Director Addition or Removal
Documents required for Addition or Removal of director
THE PROCEDURE
Procedure for addition or removal of directors
There are a series of steps before the company formation is completed. They are listed below for easy reference. The entire procedure takes 10 to 12 working days to complete (Based on standard government processing time).
- Discuss the requirement for change or addition of Directors
- Provide list of documents needed for the procedure.
- Document collection as per check list.
- Apply for DSC & DIN in case the new director doesn’t have a DSC & DIN.
- Application for DSC & DIN (for director to be appointed)
- Resolution and Documents to be drafted.
- Send documents for necessary signatures.
- Apply online for the changes.
- Follow up on update in the MCA Master Data
- Convey to the client.
FREQUENTLY ASKED QUESTIONS
Explore Add or Remove Director
What are the qualifiers to add a director in company?
The basic qualifier is that the individual should be a major as per law and under the Companies Act 2013. The consent of the shareholders is also a important part of this procedure.
Is it mandatory to have 2/3 directors in any company?
Yes. A minimum of 2 directors are mandatory for every Pvt Ltd company and 3 for a Public Ltd company. If the number of directors is less than this, the company has to appoint a director with 6 months to fulfil this criterion.
Is it mandatory for the directors to hold shares in the company?
No. A director need not be a shareholder of the company. But this depends on how the AoA of the company is defined. If it is defined in the AoA (Articles of Association), then the same must be followed.
Can we have foreigners or NRIs as directors in the company?
Yes. It is mandatory to have one resident Indian as a director in the company. Apart from that NRIs or Foreign Nationals can be inducted as Directors in the company. To be appointed as a Director, the NRI or Foreigner should first obtain a Director Identification Number (DIN).
What needs to be done if a Director of a company resigns?
On acceptance of the Director’s resignation, the same should be intimated to the MCA. The changes should reflect in the MCA portal. If this brings down the number of directors below the mandatory level, a new director must be inducted with 6 months.
What happens to the shares of a Director who has resigned or ends the tenure with the company?
Unless defined specifically in the AoA, the director who has resigned can continue to be a shareholder in the company. If it is defined in the AoA with conditions, then the shares will also have to be disposed of as per the directions given in the AoA.
What is the procedure for transfer of shares with a change of Director?
The share transfer deed must be executed along with the required stamp duty to be paid as the regulations of the state. EOB assists you with the share transfer process.
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