Introduction
Section 161(3) of the Companies Act, 2013 provides that subject to the Articles of Association (AOA) of a company, the board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or State Government by virtue of its shareholding in a Government Company.
A person cannot be appointed as a director of the company unless he has DIN (Director Identification Number) allotted by the MCA as per Section 152(3) of CA, 2013. Further, in case of a listed company, the proposed nominee director should not be debarred from appointment by any order of SEBI or any other authority.
Step-by-Step Procedure to Follow
Step 1: Obtain Written Consent, Declaration, etc.
First, obtain required nomination letter or board resolution from the concerned institution for appointment of nominee to the board. Then, obtain Form DIR-2, a written consent from the person proposed to be appointed as a nominee director of the company. Further, obtain a declaration in Form DIR-8 from the person proposed to be appointed as a nominee 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 nominee director of the company.
Step 2: Call a Board Meeting
As per Section 153, 161(1) and 173 and Secretarial Standards-1 read with rule 9 of the Companies (Appointment and Qualification of Directors) Rules, 2014, hold a meeting of the BOD or to pass resolution by circulation. It would be to consider appointment of a nominee director and to authorize Company Secretary (CS) or Chief Financial Officer (CFO) or any director of the company to file requisite form and return with Registrar of Company (ROC). Further, to take note of the disclosure of interest received from the nominee director.
Step 3: Time Bound Disclosures
In conformity with the Regulations 30 and 46(3) of the SEBI (LODR) Regulations, 2015, a listed company shall submit the disclosures of such appointment to the stock exchange within 24 hours from the conclusion of the board meeting.
Also, the same should be updated on the company website within 2 working days.
Further, as per Regulation 7(1) of the SEBI (PIT) Regulations, 2015, a listed company has to obtain disclosure in Form B within 7 days of appointment, from the director.
Step 4: Statutory Register
As per, Sections 170(1) and 189(1) read with Rule 17(1) of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Rule 16(1) of the Companies (Meeting of Board and its Powers) Rules, 2014, make necessary entries in register of directors and KMP (Key managerial personnel) and register of contracts or arrangements in which directors are interested in Form MBP-4.
Step 5: Form and Documents Filing
To comply with Section 170(2) read with Rule 18 of Companies (Appointment and Qualification of Directors) Rules, 2014, file a return of appointment of Nominee Director with ROC within 30 days from the date of appointment in Form DIR-12.
Documents Required
The following documents are required for application for allotment of DIN Form DIR-3:
- Passport size color photo
- Identity proof of applicant.
- Indian national: Income tax PAN.
- Foreign national: passport is mandatory.
- Residence proof of the applicant- passport, voter ID, ration card, etc.
- Board resolution proposing his appointment as director in an existing company.
- Declaration in Form DIR-3A, if required.
- For return of appointment of Nominee Director- Form DIR 12, following documents are required,
- Written consent in Form DIR-2.
- Certified true copy of board resolution.
- Details of interest in other entities, if any.
Conclusion
A nominated director is appointed by the board in furtherance of an agreement or law or by the Central Government or State Government. A person can’t be made director without DIN. The whole process can take somewhere between 3 days to 40-47 days.
