An Private Limited Company is from Board of Directors managed and supervised. This body essentially combines the board of directors and the supervisory board in one. The members of this “Board of Directors” will Directors called. They are appointed by the shareholders (“shareholders”) and are their representatives.

In this article we shed light on this organ (Board of Directors) and its members (director), as well as their rights and obligations.

Board of Directors

A pair of Board of Directors (BoD) consists of at least 2, up to a maximum of 15, but usually 3 to 5, directors. It must meet at least four times per calendar year (not the financial year!). The maximum period of time between two sessions may not be more than 120 days. (Note: As per the Companies Act, 2013, an Indian tax year always runs from April 1 to March 31).

Video conferences are permitted in principle, but the meetings must be recorded (e.g. via Skype or MS Teams, etc.). A “physical session” of the BoD in India it is no longer mandatory!

Director

The term Director was set out in Section 2(34) of the Companies Acts, 2013 defines and refers to a natural person who is chosen by the Shareholders as managing director in the Board of Directors was appointed.

Indian corporate law differentiates between

  • managing directors (Executive Director), i.e. a full-time director who holds full-time employment (for example as managing director) with the company and receives a salary, and
  • non-executive directors (Non-Executive Directors), for example foreign directors (without salary).

In addition, there are so-called Nominee Directors, Additional Directors or Alternate Directors.

Every director (including foreign ones) must have a digital signature (Digital Signature Certificate; DSC) and a valid one Director Identification Number (DIN).

Managing Director

A pair of Managing Director can, but does not have to, be chosen. He could also run the business alone - within the scope of his powers - and has a number of special powers.

Resident Director

Instead, there is one for every Indian company Resident Director (RD) mandatory. Any of the above Directors may serve as Resident Director. However, the prerequisite is a stay in India of more than 182 days in the current financial year.

It is therefore not possible to fill the board exclusively with people who are not in India. However, it is possible to have only foreigners on the board if at least one of them has their main residence in India.

If a foreigner holds the position of managing director, he or she must of course have a valid work visa in India.

Rights and Responsibilities of Directors

The directors of companies were charged under Section 166 of the Companies Act, 2013 imposed the following duties and tasks:

  • All actions must be based on the company's statutes.
  • You must always act to the best of your knowledge and belief in order to support the achievement of the company's goals.
  • All duties must be performed with due and reasonable care, skill and diligence.
  • One must not engage in situations or actions that create (or could potentially create) a conflict between personal interest and the interest of the Company.
  • No personal gain or advantage may be realized (consequence: disclosure of all personal interests to the BoD).
  • The Board of Directors (or the directors) must shareholders submit the audited financial statements for approval at the Annual General Meeting (AGM).
  • The directors are responsible for developing appropriate systems to ensure that the provisions of all applicable laws (!) are (can be) complied with.
  • Directors must ensure that the company's financial statements (Financial Statements) and the annual or business report (Annual returns) on time at Ministry for Corporate Affairs (MCA).
  • The directors are responsible for ensuring that the company can (and does) meet all financial obligations.
  • The directors are not allowed to divulge and disclose sensitive information of the company.
  • Each director must, at least once every 365 days Board Meeting participate (not calendar year or fiscal year!

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