Change of Directors in a Private Limited Company

A private company needs at least two directors and may have up to fifteen, or more by special resolution (section 149(1) of the Companies Act, 2013). At least one director must stay in India for not less than 182 days during the financial year (section 149(3)). A new director needs an active DIN with an up-to-date DIR-3 KYC (section 152(3) and rule 12A). He or she gives the company consent in Form DIR-2 and a declaration in DIR-8 of not being disqualified (rules 8 and 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014). A national of a country sharing a land border with India attaches security clearance from the Ministry of Home Affairs. Where the articles allow, the board appoints the person as an additional director, who holds office up to the next annual general meeting or the last date on which it should have been held, whichever is earlier (section 161(1)); the shareholders then regularise the appointment. The company files DIR-12, with the consent, within 30 days (section 170(2) and rule 18).

A director resigns by notice in writing. The resignation takes effect from the date the company receives the notice or the date the director specifies, whichever is later, and the director remains liable for offences that occurred during his or her tenure (section 168). The company files DIR-12 within 30 days of receiving the notice (rule 15), and the director may also send a copy with reasons to the Registrar in DIR-11 within 30 days (rule 16). Shareholders can remove a director, other than one appointed by the Tribunal under section 242, by ordinary resolution after special notice and a reasonable opportunity of being heard (section 169). The special notice comes from members holding at least 1% of the voting power, or shares on which at least ₹5 lakh has been paid up. It reaches the company at least 14 days, and not earlier than three months, before the meeting (section 115 and rule 23 of the Companies (Management and Administration) Rules, 2014).

A director's office also falls vacant if he or she is absent from all board meetings held during twelve months, with or without leave (section 167(1)(b)). It also falls vacant on disqualification. For instance, where a company has not filed its financial statements or annual returns for three continuous financial years, its directors are disqualified under section 164(2) and vacate office in every other company (proviso to section 167(1)(a)). Because the board must never fall below two directors, the firm plans an incoming appointment and an outgoing resignation together, and where the change goes with a change of shareholding, alongside the share transfer.