A director is an elected person who, along with other directors, is responsible for the operation of a company. Listed companies must have at least 3 directors whereas private companies must have a minimum of 2 directors, and one-person companies shall have a minimum of 1 director.
Independent directorsIndependent directors are non-executive directors of the company, helping the company improve corporate credibility and governance. In other words, independent directors are non-executive directors that have nothing to do with the company and have independence in their judgments. Independent directors have a maximum term of 5 years; however, they will have the right to re-elect through special resolutions, which will be disclosed in the report of the board of directors.
- A company, whether private or listed, must appoint at least one female director if any of the following conditions are met: The Company is a listed company and its securities are listed on the stock market. The paid capital of the company is Rs.100 crore or more, and its turnover is Rs Rs.300 crores or more.
- A person may be appointed as an additional director and may hold office until the next annual general meeting. In the absence of an annual general meeting of shareholders, the term of office shall end on the date on which the annual general meeting of shareholders should have been held.
- Alternate Directors refer to persons appointed by the board of directors to occupy directors who may be abroad for more than 3 months.
- Nominee directors may be appointed by contract by specific types of shareholders, banks or financial lending institutions, third parties, or by the federal government in case of mismanagement or oppression.
Whole-time Directors and Part-time Directors
- A Whole-time Director is a person that is engaged in whole-time employment of the Company and includes the Managing Director.
- Internal directors work for the benefit of major shareholders, managers, and employees. His expertise comes from his experience in the company.
- Internal directors will not receive additional compensation for attending meetings or providing guidance, because these functions are included in their job descriptions.
- Outside or independent directors are not internal employees. When outside directors attend meetings or provide guidance, they are usually paid extra because these responsibilities are not part of their formal work. The experience of independent directors comes from the cooperation with other companies and the work in the entire industry. Since they are not as interested in business as internal directors, independent directors can view more objectively how the company achieves its goals and how to resolve disputes.
Duties and responsibilities of company directorsThe main objective of the board of directors is to pay attention to the financial situation of the company and “promote the success of the company for the benefit of all its members. General Directors Responsibilities include:
- Establishment of the company objectives and implementation of company policies
- Adoption of bylaws
- Hiring, supervision, and dismissal of senior executives
- Formulation of dividend policies and payment of compensation to executives
- Issuance of additional shares
- Prepare a directors report at the end of each fiscal year.
How are the new directors appointed?
- Directors are typically appointed by shareholders at the company’s annual general meeting. The appointment is subject to a vote, and if the majority of the shareholders vote in favor of the appointment, the appointment will be approved.
- In some cases, it may be necessary to vote at an Extraordinary General Shareholders’ Meeting, for example, if a director resigns suddenly or an unexpected vacancy occurs. In this case, the remaining directors may temporarily appoint new directors, but the new appointments must be confirmed by a vote of the shareholders as soon as possible.
- The procedures for appointing new directors vary from company to company, and the specific procedures are generally stipulated in the company’s articles of association.
- Whenever a new director is appointed, the company must notify the company building within 14 days of the appointment.