Procedure for Appointment of a Director to Fill Casual Vacancy

Introduction

Section 149 of Companies Act, 2013 (hereinafter referred to as CA, 2013) provides that the company to have a board of directors (BOD) consisting of individuals as directors. Further, per Section 152(3) no person shall be appointed as a director of the company unless he has been allotted the DIN (Director Identification Number). If a person is disqualified under Section 164 then such person can’t be appointed as a director of the company. Board’s power to fill casual vacancy is in default of and subject to any regulations in the Articles of Association (AOA) of the company. This power can be exercised by the board only when vacancy arises in the office of a director appointed by the company in general meeting. Note: A person vacating his office is not a case of casual vacancy and the proper course here would be to appoint another person as an additional director.

Any person filling up the casual vacancy shall hold office only up to the date up to which the original director whose place is replaced would have held had it not been vacated. Further, it must be ensured that the maximum number of directorships is not exceeded per Section 165(1) of the Act. In case of listed company, the proposed director should not be debarred from appointment by order of SEBI or any other authority.

Step-by-Step Procedure

Step 1: Obtain Written Consent, Declaration, etc.

Obtain Form DIR-2, a written consent from the person proposed to be appointed as a director of the company. Further, obtain a declaration in Form DIR-8 from the person proposed to be appointed as a director that he isn’t disqualified to be a director under the Act. And obtain a disclosure of interest in Form MBP-1 from the person proposed to be appointed as director of the company.

Step 2: Nomination and Remuneration Committee

Section 178 of the Companies Act provides for a Nomination and Remuneration Committee (NRC) and Stakeholders Relationship Committee. In listed company, the board of directors (BOD) shall constitute NRC consisting of three more non-executive directors out of which ½ should be independent directors.

So, in case a company has to constitute NRC, then the BOD shall recommend the appointment of casual director to BOD of the company.

Step 3: Call a Board Meeting

As per Sections 161(4) and 173 and Secretarial Standards-I, hold a meeting of the Board or pass Board Resolution by circulation. At the meeting, appointment of director to fill casual vacancy shall be considered. Further, authorize a CS/CFO or any director of the company to file requisites form and return with ROC.

In a situation where the proposed director doesn’t have DIN (Director Identification Number) then Board to give in-principle approval for appointment of the proposed additional director. Simultaneously, authorize the CS/CEO/CFO/any director to apply DIN of the appointee. OR board decides to adopt the additional director effective from the date of allotment of DIN and authorize CS/CEO/CFO any director to apply DIN of the appointee.

Step 4: Time Bound Disclosures

As per Regulations 30 and 46(3) of the SEBI (LODR) Regulations, 2015, a listed company has to submit disclosures of such appointment to stock exchanges where shares are listed within 24 hours from the date of Board Meeting.

Further, post the same on the website of the company within 2 working days.

As per Regulation 7(1) of SEBI (PIT) Regulations, 2015, in case of listed company, obtain disclosures in Form B within 7 days of appointment from the director.

Step 5: Form and Documents Filing

The company has to file return of appointment of the director with ROC within 30 days from the date of appointment in Form DIR-12 along with the requisite documents and fees.

Step 6: Update Statutory Register

Necessary entries have to be made in the register of directors and KMP (key managerial personnel) and register of contracts or arrangements in which directors are interested in Form MBP-4.

Step 7: Post Compliances

Appointment should be approved by members in the immediate next general meeting as per Section 161(4) of CA, 2013.

Documents Required

The following documents are required for application for allotment of DIN Form DIR-3–

1. Passport size color photo
2. Identity proof of applicant.
   1. Indian national: Income tax PAN.
   2. Foreign national: passport is mandatory.
3. Residence proof of the applicant- passport, voter ID, ration card, etc.
4. Board resolution proposing his appointment as director in an existing company.
5. Declaration in Form DIR-3A, if required.
6. For return of appointment of alternate director- Form DIR 12, following documents are required,
   1. Written consent in Form DIR-2.
   2. Certified true copy of board resolution.
   3. Details of interest in other entities, if any.

Conclusion

A person can be appointed to fill the casual vacancy subject to AOA of the company. Such power is exercised by the board only when a vacancy has arises with respect to a director appointed in a general meeting of shareholders. Such person replaced the director only for the period that the replaced director would have held the office for. The whole process can take somewhere between 3 days to 40-47 days.