Text of the provision of Section 161(1) of Companies Act, 2013: The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any timewho shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.
- Board of Directors can exercise the power to appoint Additional Director only if authorized by Articles of Association.
- If authorized by Articles of Association, Board can appoint any person as Additional Director other than a person who fails to get appointed as Director in a general meeting.
- Additional Director can be appointed by passing a resolution in Board meeting or by circulation.
- An additional director holds office only upto the date of the next Annual general meeting of the company or the due date of next Annual General Meeting, whichever is earlier.
The following procedure is to be followed for appointment of an additional director :-
1. Ensure that the Articles of the Company authorize the Board of Directors to appoint an Additional Director. If not, alter the articles of association accordingly. [Refer Procedure for Alteration of Articles] (Section 161 (1)of Companies Act, 2013)
2. Ensure that the individual proposed to be appointed as an additional director does not suffer from any disqualification mentioned under Sections 164 and 165 of the Act.
3. Ensure that the individual proposed to be appointed as an additional director by the Board of Directors, has not failed to get appointed as a director in a general meeting. (Section 161(1) of Companies Act, 2013).
4. Ensure that the person who is proposed to be appointed as Additional Director must have a valid Director Identification Number (DIN) before being appointed as director. [Section 152(3)]. If he does not have DIN, follow the procedure prescribed for obtaining DIN.
5. Ensure that person proposed to be appointed as a director has furnished his DIN to the Company and a declaration in Form DIR.8 stating that he is not disqualified to become a director under the provisions of Companies Act, 2013. [Section 152(4) and Rule14(1) of Companies (Appointment & Qualification of Directors) Rules, 2014] .
6. Before appointing a person as Director, Obtain his written consent to act as Director in Form No. DIR-2 along with the following documents:
- a. Valid ID Proof
- b. Valid Address Proof
- [Section 152(5) and Rule 8 of Companies (Appointment and Qualification of Directors) Rules, 2014].
7. A: If resolution for appointment is proposed to be considered at BM:
7.A.1 Issue not less than 7 days notice and agenda of Board meeting, or a shorter notice in case of urgent business, in writing to every director of the company at his address registered with the company. [Section 173(3). Also follow the procedure prescribed for issuing and signing of notice of Board Meeting].
7.A.2 Hold a meeting of Board of Directors-
- Pass the necessary Board Resolution for appointment of an additional director to hold the office upto the date of the next Annual general meeting of the company or due date of next Annual General Meeting, whichever is earlier.
- To authorize Company Secretary or any Director to sign and file the relevant form with Registrar of Companies and to do such acts, deeds and things as may be necessary to give effect to the Boards decision
7.B: If resolution for appointment is proposed to be considered by circulation:
7.B.1 The Chairman of the Board or in his absence, the Managing Director or in his absence, the Wholetime Director and where there is none, any Director shall decide, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation. (Point 6.1.1 of Secretarial Standards -1)
7.B.2 The draft resolution for appointment of an additional director to hold the office upto the date of the next Annual general meeting of the company or due date of next Annual General Meeting, whichever is earlier together with necessary papers shall be sent to all the Directors individually on the same day by hand/speed post/registered post/courier/e-mail/any other recognised electronic means to his email or postal address registered with the Company and in the absence of such details, to any address appearing in DIN registration details of the concerned Director. (Point 6.2.1 and Point 6.2.2 of Secretarial Standards -1)
7.B.3 The proposed agenda shall be explained by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal, the nature of concern or interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed. The note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond. (Point 6.2.3 of Secretarial Standards -1)
7. B.4 Directors shall not be given more than seven days from the date of circulation of the draft of the Resolution, to respond. (Point 6.2.3 of Secretarial Standards -1)
7.B.5 If min. 1/3rd of Directors require the Resolution under circulation to be decided at a Meeting, the Chairman shall put the Resolution for consideration at a Meeting of the Board. (Point 6.1.2 of Secretarial Standards -1)
7.B.6 The Resolution is passed when it is approved by a majority of the Directors entitled to vote on the Resolution, The Resolution, if passed, shall be deemed to have been passed on the last date specified for signifying assent or dissent by the Directors or the date on which assent from more than two-third of the Directors has been received, whichever is earlier, and shall be effective from that date, if no other effective date is specified in such Resolution. (Point 6.3 of Secretarial Standards -1)
7.B.7 Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meeting. (Point 6.4 of Secretarial Standards -1)
8. Obtain the declaration from the appointed Director regarding his interest in other entities in Form MBP.1 within 30 days of appointment or at the first Board Meeting in which he participates as Director, whichever is earlier. [Section 184(1) read with Section 189(2) of Companies Act, 2013 and Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014]
9. File a return containing the particulars of appointment of director, with the Registrar in E-Form No. DIR-12 along with such fee as may be provided in the Companies (Registration Offices and Fees) Rules, 2014 within 30 days of such appointment. [Section 170(2) and Rule 8 and 18 of Companies (Appointment and Qualification of Directors) Rules, 2014]
Following details/documents are required for filing E-Form No. DIR-12:-
- (a) Details of interest in other entities.
- (b) Extract of the Board Resolution for Appointment;
- (c) Consent of the appointee director in Form No. DIR-2, along with self-attested copy of ID & Address Proof
- (d) Letter of Appointment.
- (e) Any other document as may be applicable and/or prescribed.
10. Obtain the following details from the Director for making entries in Register of Register of directors and key managerial personnel and their shareholding:
- (a) Director Identification Number;
- (b) present name and surname in full;
- (c) any former name or surname in full;
- (d) fathers name, mothers name and spouses name(if married) and surnames in full;
(e) date of birth;
- (f) residential address (present as well as permanent);
- (g) nationality (including the nationality of origin, if different);
- (h) occupation;
- (i) office of director or key managerial personnel held or relinquished in any other body corporate;
- (m) the details of securities held by him in the company, its holding company, subsidiaries, subsidiaries of the companys holding company and associate companies relating to-
- (i) the number, description and nominal value of securities;
- (ii) the date of acquisition and the price or other consideration paid;
- (iii) date of disposal and price and other consideration received;
11. Make necessary entries in the Register of directors and key managerial personnel and their shareholding [Section 170(1) and Rule 17 of Companies (Appointment and Qualification of Directors) Rules, 2014]
12. After appointment, the appointed director shall inform other companies in which he is a director, in Form MBP.1, about his appointment.(Section 184(1) of Companies Act, 2013).
13. Prepare and circulate draft minutes of the meeting within 15 days from the date of the conclusion of the board Meeting, by hand/speed post/registered post/courier/e-mail to all the Directors for their comments. [Follow the procedure prescribed for preparing, circulation, signing and compiling of Board Minutes].
14. Inform all concerned persons/ govt. authorities about the appointment of Director like Central Excise Authorities, Customs Authorities, Sales Tax Authorities, Service tax Department, Chief Inspector of Factories, and Regional Provident Fund Commissioner etc.