Types of Directors in the Pvt. Ltd Company or Public Ltd Company

  • June 17, 2016
  • Registrationwala

Director position in the company considered being most important because we all know that company whether public Ltd Company or Private limited company is only a legal person, unlike a living human being. In order to enable a company to achieve its objective and growth, it is necessary to depend on some agency, known as the board of directors.

Members of the Board of Directors of the company are known as directors, who manage a company. In brief, we can say that Directors are the brain of the company.

  1. Managing Director:

Managing director (MD) is the person who is entrusted with the substantial powers of the management of the affairs of the company. Under the new Companies Act, 2013 MD is considered to be KMP (Key Managerial Person). MD draws his power from the articles of association and/or the agreement executed.

  1. Whole Time Director:

Whole time director (WTD) means a person who devotes his whole time to the affairs of the company. Practically, there is no difference between MD and WTD because all legal provisions which are applicable to the both are same except the nomenclature.

  1. Ordinary Director:

The ordinary director is the person who is normally appointed to have a quorum at the board meeting. They are not involved in day to day working of the company. They normally get their compensation in terms of sitting fees. Sitting fees are given to director to attend the board meeting.

  1. Additional Director:

Powers to appoint directors to reside with the shareholders at the AGM (Annual General Meeting) or EGM (Extra Ordinary General Meeting). If a person has to be appointed in between these two meetings then Board of Directors can appoint him if AOA (Articles of Association) of the private limited company or public limited company allows doing so. So, when the person is appointed by the Board in this manner is called additional director. Tenure of the additional director is up to coming to AGM if a person is not appointed at the AGM then directorship of the additional director is ceased w.e.f. the date of AGM.

  1. Alternate Director:

An alternate director is like a proxy director. He is appointed in place of the original/principal director when original director/principal director is absent for a period of not less than 3 months from India. An alternate director is not allowed to hold office for a period longer than that permissible to original director in whose place he is appointed.

  1. Nominee Director:

As the nomenclature itself explains that nominee director is a director who is nominated by the bank or other financial institution on the board of the company. This happens normally when a company takes a loan from a bank or financial institution. The main purpose of appointment of nominee director is to ensure that Borrower Company is complying with all laws. A nominee director is like a watchdog of the financial institution for the safeguard of its money.

  1. Independent Director:

Independent director has an eminent position under the companies act, 2013. This concept of Independent director first time has been codified in the Companies Act, 2013. There are different criteria on the basis of which a person can be appointed as Independent director in the company such as who is related to the promoter of the company or its subsidiary company, who has no pecuniary relationship with the company, who holds not more than 2% of the voting power of the company etc.

Independent director looks after and try to enforce the best governance practices in the working of the Pvt. Ltd or Public Ltd Company. He has to judge independently without any partiality. Therefore, Independent director is a critical instrument for ensuring the good corporate governance in the company.

Appointment of Independent director is mandatory in case of listed companies another class of companies.

These are different classes of directors which you can find in different types of companies.

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