Change in Management

Change in management for private limited and LLP in India refers to the process of altering the composition or structure of the board of directors, partners, managing director, manager, or secretary of a private limited company or a limited liability partnership. This may involve the appointment, resignation, removal, or retirement of any of these persons.

Q: What is meant by a Director in the Company? 

A: A director in a company is a person who is appointed by the shareholders to manage the affairs of the company and act on its behalf. A director has various duties and responsibilities towards the company, such as setting the vision and strategy, overseeing the operations and finances, ensuring compliance with laws and regulations, and representing the company in external matters. A director is also accountable to the shareholders and the regulators for the performance and governance of the company.

Q: Who can be the Director of Company?

A: Any person who is above 18 years of age, of sound mind, not disqualified by law, and has a valid Director Identification Number (DIN) can be a director in a company. A director can be an individual or a representative of a body corporate, such as another company, a trust, a society, or a government entity. A director can also be a resident or a non-resident of India, subject to certain conditions and restrictions.

Q: How to appoint a Director in a Company? 

A: The procedure to appoint a director in a company is as follows:

• Obtain the consent and declaration of the proposed director in the prescribed forms (DIR-2 and DIR-8).
• Check the availability and suitability of the proposed name of the director with the Registrar of Companies (ROC) and the Ministry of Corporate Affairs (MCA).
• Convene a board meeting of the existing directors and pass a resolution to approve the appointment of the proposed director and to call a general meeting of the shareholders for the same.
• Issue a notice of the general meeting to the shareholders, directors, auditors, and other stakeholders, along with the explanatory statement and the draft resolution for the appointment of the director.
• Hold the general meeting and pass the resolution for the appointment of the director by the shareholders.
• File the required forms and documents with the ROC and the MCA within the prescribed time limit and pay the applicable fees and charges. The forms include Form DIR-12 for the intimation of the appointment of the director.
• Update and maintain the statutory records and registers of the company, such as the register of directors, the register of members, the register of charges, etc.
• Inform and communicate the appointment of the director to the relevant authorities and parties, such as the income tax department, the GST department, the banks, the auditors, the clients, the vendors, etc.

Q: How to resign as a Director in the Company?

A: The procedure to resign as a director in a company is as follows:

• Give a notice of resignation in writing to the company, stating the reasons and the effective date of resignation.
• File a copy of the resignation letter with the ROC and the MCA in Form DIR-11, along with the proof of delivery of the notice to the company and the acknowledgement of the company.
• The company will convene a board meeting of the remaining directors and pass a resolution to take note of the resignation and to call a general meeting of the shareholders for the same.
• The company will issue a notice of the general meeting to the shareholders, directors, auditors, and other stakeholders, along with the explanatory statement and the draft resolution for the acceptance of the resignation.
• The company will hold the general meeting and pass the resolution for the acceptance of the resignation by the shareholders.
• The company will file the required forms and documents with the ROC and the MCA within the prescribed time limit and pay the applicable fees and charges. The forms include Form DIR-12 for the intimation of the resignation of the director, Form AOC-4 for the filing of the financial statements of the company, and Form MGT-7 for the filing of the annual report of the company.
• The company will update and maintain the statutory records and registers of the company, such as the register of directors, the register of members, the register of charges, etc.
• The company will inform and communicate the resignation of the director to the relevant authorities and parties, such as the income tax department, the GST department, the banks, the auditors, the clients, the vendors, etc.

Q: How to remove Director from a Company?

A: The procedure to remove a director from a company is as follows:

• The shareholders of the company can initiate the removal of a director by passing a special resolution in a general meeting, subject to certain conditions and exceptions. The conditions include giving a notice of at least 14 days to the director and the company, giving an opportunity to the director to be heard in the meeting, and obtaining the approval of at least 75% of the voting rights of the shareholders. The exceptions include the cases where the director was appointed by the Central Government, the National Company Law Tribunal, or the creditors of the company.
• The company will convene a board meeting of the other directors and pass a resolution to approve the removal of the director and to call a general meeting of the shareholders for the same.
• The company will issue a notice of the general meeting to the shareholders, directors, auditors, and other stakeholders, along with the explanatory statement and the draft resolution for the removal of the director.
• The company will hold the general meeting and pass the resolution for the removal of the director by the shareholders.
• The company will file the required forms and documents with the ROC and the MCA within the prescribed time limit and pay the applicable fees and charges. The forms include Form DIR-12 for the intimation of the removal of the director.
• The company will update and maintain the statutory records and registers of the company, such as the register of directors, the register of members, the register of charges, etc.
• The company will inform and communicate the removal of the director to the relevant authorities and parties, such as the income tax department, the GST department, the banks, the auditors, the clients, the vendors, etc.

Q: What are all the type of director positions available for the Company?

A: The type of directors positions available for a company are:

• Managing Director: A managing director is a director who is entrusted with the substantial powers of management of the company and who is actively involved in the day-to-day operations and administration of the company. A managing director is appointed by the board of directors or the shareholders of the company and is subject to the supervision and control of the board. A managing director may also be the chief executive officer (CEO) of the company.
• Executive Director: An executive director is a director who is also an employee of the company and who performs managerial or operational functions for the company. An executive director is appointed by the board of directors or the shareholders of the company and is subject to the terms and conditions of the employment contract. An executive director may also be the chief operating officer (COO), the chief financial officer (CFO), or the chief technical officer (CTO) of the company.
• Non-Executive Director: A non-executive director is a director who is not an employee of the company and who does not perform any managerial or operational functions for the company. A non-executive director is appointed by the board of directors or the shareholders of the company and is mainly responsible for providing independent and objective advice, oversight, and guidance to the board and the management. A non-executive director may also be the chairman of the board, the lead independent director, or the nominee director of the company.
• Independent Director: An independent director is a director who is not related to the company or its promoters, directors, managers, or shareholders, and who does not have any pecuniary or material interest in the company or its transactions. An independent director is appointed by the board of directors or the shareholders of the company and is mainly responsible for safeguarding the interests of the minority shareholders, the stakeholders, and the public. An independent director may also be the chairman of the audit committee, the nomination and remuneration committee, or the stakeholder relationship committee of the company.

Q: What are all the key managerial positions in the Company? 

A: The key managerial positions in a company are:

• Chief Executive Officer (CEO): A CEO is the highest-ranking executive in a company who is responsible for the overall vision, strategy, direction, and performance of the company. A CEO reports to the board of directors and is accountable to the shareholders and the regulators. A CEO may also be the managing director, the executive director, or the founder of the company.
• Chief Operating Officer (COO): A COO is the second-in-command executive in a company who is responsible for the day-to-day operations, administration, and execution of the company. A COO reports to the CEO and is accountable to the board of directors and the management. A COO may also be the executive director, the general manager, or the vice president of the company.
• Chief Financial Officer (CFO): A CFO is the senior-most financial executive in a company who is responsible for the financial planning, reporting, analysis, and control of the company. A CFO reports to the CEO and is accountable to the board of directors and the auditors. A CFO may also be the executive director, the finance director, or the treasurer of the company.
• Chief Technical Officer (CTO): A CTO is the senior-most technical executive in a company who is responsible for the research, development, innovation, and implementation of the technology and products of the company. A CTO reports to the CEO and is accountable to the board of directors and the customers. A CTO may also be the executive director, the technology director, or the product manager of the company.

Q: Directs Vs Key Managerial Positions like CEO, CFO, CTO, COO, CMO

A: A director and a key managerial position are different roles in a company that have different responsibilities and functions. A director is a member of the board of directors, which is the highest governing body of the company that oversees its strategic direction, policies, and performance. A key managerial position is a senior executive role that manages a specific function or department of the company, such as finance, operations, or technology. A key managerial position reports to the board of directors or the chief executive officer (CEO), who is the head of the company and the leader of the management team.

The difference between a director and a key managerial position can be summarized as follows:

• A director is a part of the board of directors, while a key managerial position is a part of the management team.
• A director oversees the company as a whole, while a key managerial position manages a specific function or department of the company.
• A director sets the goals and policies of the company, while a key managerial position executes the plans and strategies of the company.
• A director is elected by the shareholders or appointed by the board, while a key managerial position is hired by the board or the CEO.