(5)Explain types of Directors. What are the qualifications and disqualifications of Directors?
1. Types of Directors
The Companies Act, 2013 recognises and regulates various categories of directors based on their role, appointment mechanism, and nature of involvement:
| Type | Provision | Key Features |
|---|---|---|
| Executive Director | Section 2(54) / Section 196 | Whole-time director or MD; involved in day-to-day management; draws salary; has substantive powers delegated by Board |
| Non-Executive Director | Section 149 | Part-time; provides strategic oversight without involvement in operations; brings external perspective |
| Independent Director | Section 149(6) | Non-executive; no material relationship with company/promoters; at least 1/3rd of board in listed companies; 5-year term (max 2 terms) |
| Managing Director (MD) | Section 2(54) | Entrusted with substantial management powers via AoA or Board/GM resolution; must be approved by shareholders at the GM |
| Whole-Time Director (WTD) | Section 2(94) | Director in whole-time employment of the company; devotes full time to company affairs |
| Additional Director | Section 161(1) | Appointed by Board between two AGMs; holds office until next AGM |
| Alternate Director | Section 161(2) | Appointed by Board to substitute an original director absent from India ≥ 3 months; vacates office on original director's return |
| Nominee Director | Section 161(3) | Nominated by lenders/investors/government to protect their interests; not subject to retirement by rotation; removed only by nominator |
| Women Director | Section 149(1) proviso | Mandatory for listed companies and public companies with paid-up capital ≥ ₹100 cr or turnover ≥ ₹300 cr |
| Residential Director | Section 149(3) | Every company must have at least one director who has stayed in India ≥ 182 days in the immediately preceding calendar year |
| Small Shareholders' Director | Section 151 | Elected by small shareholders (holding shares of face value ≤ ₹20,000) of listed companies; represents small investor interests |
2. Qualifications for Appointment as Director
The Companies Act does not prescribe a lengthy list of positive qualifications; the key requirements are:
- Natural person: only an individual (not a body corporate or firm) can be a director — Section 149(1).
- Director Identification Number (DIN): must obtain a DIN from the MCA before appointment — Section 154.
- Written consent: the person must give written consent (Form DIR-2) to act as director and the consent must be filed with the RoC — Section 152(5).
- Age: no minimum age is prescribed by the Companies Act; however, for an MD/WTD, the person must be between 21 and 70 years of age (age >70 requires a Special Resolution — Section 196(3)).
- Specific qualifications: a company's AoA may prescribe additional qualifications (e.g., shareholding qualification), but this is optional and not common in Indian practice.
3. Disqualifications — Section 164
A person shall not be eligible for appointment as director if they:
- Are of unsound mind as declared by a competent court.
- Are an undischarged insolvent or have applied to be adjudicated insolvent (pending application).
- Have been convicted of an offence involving moral turpitude or otherwise and sentenced to imprisonment of 6 months or more — disqualification lasts 5 years after expiry of sentence.
- Have been convicted of any offence under the Companies Act with imprisonment of 7 years or more — permanent disqualification unless specifically provided otherwise.
- Have had an order of disqualification passed by a court or Tribunal — while such order is in force.
- Have not paid any calls on shares held in any company for 6 months or more after the day fixed for payment.
- Have been convicted of offences under SEBI, RBI, IRDA, or NHB laws with imprisonment for 6 months or more — 5-year disqualification.
- Section 164(2) — Director of Defaulting Company: if a company has failed to: (a) file Annual Return or Financial Statements for 3 consecutive financial years; or (b) repay deposits/interest or debentures/dividend/interest for ≥ 1 year, then every director of that company is disqualified from being a director of any company for 5 years from the date the default is documented. This is one of the most significant and far-reaching disqualification provisions — a director of even one defaulting company faces the 5-year bar across all companies.
Gaurav Dalmia v. Union of India (2018) Delhi HC — The High Court upheld the validity of Section 164(2), which disqualifies directors of companies that fail to file annual returns or financial statements for 3 consecutive years; the provision serves the public purpose of ensuring corporate compliance and does not violate fundamental rights.