The appointment and recruitment of directors is a crucial procedural requirement of a company. In accordance with the Companies Act, 1956, only an individual can be appointed as a director of a company.
● An association, a firm, a corporation or any other body with artificial legal identity cannot be appointed as a director.
● For a public company or a private company, which is a subsidiary of a public company, two-thirds of the total number of directors are appointed by the shareholders. The remaining one-third of the directors are selected in accordance with the manner prescribed in the articles of association of the company, failing which, the remaining one-third is also appointed by the shareholders.
● The articles of a company may provide the conditions for retirement of the directors at every annual general meeting.
● If the articles remain silent, all the directors are appointed by the shareholders.
● Formal, considered and transparent elections can be conducted for election of directors.
● Evaluation of skills and abilities of the board is done from time to time to ensure smooth progress and need for succession in the board.
● Re-elections and re-appointments of the directors are conducted from time to time.
● In case of oppression and mismanagement, third parties or the government may propose for the appointment of nominee directors.
● A statement comprising the name of the first director of the company must be sent to the Registrar of Companies.
● The appointment of the subsequent directors is governed by the articles of association of the company.