Types of Directors in a Company | What are their liabilities in company?

Different types of Directors in a Company

Who are Directors in a Company?

Directors or as they are collectively known Board of Directors are part of any organization or entity. They are direct, manage and control the activities in the entity. They are held as trustees for the company’s money, assets and properties. Directors in a Company are the acting agents in all the transactions done in the firm. They are expected to be knowledgeable, skillful and experienced in their work areas. Every entity having a Company Registration is mandated to appoint directors. The number of Directors in a Company as mandated by the law are; at least three in case of public limited, at least two in case of private limited and minimum one in case of one person or sole proprietorship company. The maximum number of directors can be up to fifteen in a company and there are requirements for more directors then a special resolution must be passed in the General Meeting for hiring them.

Types of Directors in a Company:

  • Managing Directors- Their power and abilities to make decision, direct and manage the institution is totally substantial. Any Public Company or its subsidiary having a capital above Rs. Five Crore is liable to have a managing director.
  • Executive Directors- They work full time in the company. They need to be present at all times and have greater responsibilities. They have to be efficient and careful with all the work in the organization.
  • Non- Executive Directors- They are the part-time or non-working directors and are not involved in the everyday working of the company. They have an important part in influencing the executive directors in the planning and decision making process.
  • Residential Directors- He/ she are the one that have resided in India for a minimum of 182 days. Every company in spite of their nature must have at least one residential director.
  • Nominee Directors- They are nominated by the government, shareholders or third parties. They come in the board at time when there is mismanagement in the company.
  • Women Directors- It is compulsory for all the business firms having its securities listed with SEBI or turnover above Rs. 300 Crore or paid-up share capital above Rs. 100 Crore to have women as directors.
  • Independent Directors- Their relationship with the company is not direct and rather indirect. Due to their experience and diligence they are required to assist and advice and provide guidance to the company as and when required. Any public company having turnover above Rs. 100 Crore, paid-up share capital above Rs. 100 Crore or outstanding loan (if any) above Rs. 50 Crore is liable to have at least two independent directors in the organization.
  • Additional Directors- They are the one that can act as additional director by taking the position of any director in the company until the holding of next Annual General Meeting.
  • Alternate Directors- If any director is absent for more than three months in continuation then an alternate director can act on his behalf with due permission. He/ she is temporary.
  • Small Shareholder Directors-They are the one having power to appoint a single director in any listed company.

Liabilities of Directors in a Company:

  • Liable to pay taxes under the Income Tax Act.
  • He/ she are liable to pay any debt of the company in case of involvement in any act of fraud or forgery. In normal cases they are not liable to pay any debt acquired by the entity.
  • They are liable to pay for the qualification shares if he/ she haven’t acquired them in the stipulated time frame and when after the expiration date the company liquefied.
  • They are liable to pay the share application refund amounts together with the company, if it is not paid within the mandated time period.
  • They have civil liability towards any false or misstatement in the prospectus of the firm.
  • They are liable to pay in cases where it is known to them about any fraudulent activity inside the corporation.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.