APPOINTMENT AND QUALIFICATION OF DIRECTORS
[CHAPTER XI OF COMPANIES ACT 201 (SECTIONS 149 TO 172) AND THE COMPANIES
(APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES 2014]
Definition of Director [Section 2(34)] – ‘Director’ means a director appointed to the Board of a
Company.
Note – It means that a person shall be regarded as a director only if he is appointed as director by
the company. It inferences that, if a person functions as a director, but he is not designated as
director, he shall NOT be regarded as a director.
Definition of Board of Directors [Section 2(10)] – ‘Board of Directors’ or ‘Board’, in relation to a
company, means the collective body of the directors of the company.
Only Individuals be directors [Section 149] – The Board of Directors of every company shall consist
of individuals only. Hence, NO body corporate, association, firm or Limited Liability Partnership, shall
be appointed as a director.
Prohibition of assignment of office [Section 166] – NO director shall assign his office to any other
person. Any assignment of office made by a director shall be void.
If any director of the company defaults the provisions of section 166, he shall be punishable with
fine not less than Rs. 1 lakh but which may extend to Rs. 5 Lakhs.
Note – Appointment of a director by ‘Will’ (if articles provide) does not amount to assignment of
office. It is due to the fact that where a director dies, the office held by him becomes vacant and
therefore, such office cannot be assigned to any other person.
Duties of Directors [Section 166]
Duty to act as per articles
Duties to act in good faith
Duty to exercise due care
Duty to avoid conflict of interest
Duty not to make any undue gain
Duty not assign his office
Director Identification Number (DIN) [Section 152 (3), Sections 153 to 159 and Rule 9, 10, 10A,
11,12, 12A and 12B of Companies (Appointment and Qualification of Directors) Rules, 2014]
1. Mandatory to have DIN [Section 152(3)] – No person shall be appointed as director of a
company unless he has been allotted with the Director Identification Number.
2. Application for DIN [Section 153] – Every individual intending to be appointed as a director
of any company shall make an application for allotment of DIN. Such application shall be
made to Central Government in such form and manner and shall be accompanied with such
fees as maybe prescribed.
Appointment & Qualification of Directors Page 1
, Note – The Central Government may prescribe any identification number which shall be treated
as DIN for the purposes of this Act and in case any individual holds or acquires such identification
number, the requirements of this section shall not apply or apply in such manner as may be
prescribed.
3. Allotment of DIN [Section 154] – The Central Government shall allot DIN to an applicant in
such manner as maybe prescribed, within 1 month of receipt of application for allotment of
DIN.
4. Prohibition to obtain more than one DIN [Section 155] – No individual who has already
been allotted a DIN, shall apply or obtain or process another DIN. DIN remains valid for
lifetime unless it is cancelled, surrendered or deactivated.
5. Intimation of DIN by the director to the company [Section 156] – Every person who is
already a director, shall intimate his DIN to the company(s) in which he is already a director.
Such intimation must be given within 1 month of receipt of DIN.
6. Intimation of DIN by the company to the Registrar [Section 157] – The relevant provisions
are as below :
a. Every company shall intimate the DIN of all its directors to the Registrar or any other
officer or authority as may be specified by the Central Government.
b. Such intimation shall be given by the company within 15 days of receipt of
intimation of DIN by it under section 156 in Form DIR-3C. [Rule 10A].
c. The intimation shall be furnished in such form and manner as maybe prescribed.
d. If the company fails to intimate DIN as per the provisions of section 157, the
punishment is as follows –
i. The company shall be liable to penalty of Rs. 25,000 and in case of
continuing failure, with a further penalty of Rs. 100 per day, subject to a
maximum of Rs. 1 lakh.
ii. Every officer of the company who is in default shall be liable to a penalty for
not less than Rs. 25,000 and in case of continuing failure, with a further
penalty of Rs. 100 per day, subject to a maximum of Rs. 1 lakh.
7. Obligation to indicate DIN [Section 158] – If any return, information or particulars required
to be furnished under the Act relates to a director or contains any reference to a director,
every person or company shall mention DIN in such returns, information or particulars.
8. Penalty for default of certain provisions [Section 159] – If any individual or director of a
company makes any default in complying with any of the provisions of sections 152, 155 and
156, such individual or director of the company shall be liable to a penalty which may extend
to Rs. 50,000 and where the default is continuing one, with a further penalty which may
extend up to Rs. 500 per day.
Other provisions contained in Companies (Appointment and Qualification of Directors) Rules, 2014
1. Application for allotment of DIN before appointment in an existing company [Rule 9] – The
provisions are as follows –
a. Every applicant, who intends to be appointed as director of an existing company
shall make an application electronically in Form DIR-3, to the Central Government
for allotment of DIN along with such fees as provided under Companies (Registration
offices and Fees) Rules, 2014.
Appointment & Qualification of Directors Page 2
[CHAPTER XI OF COMPANIES ACT 201 (SECTIONS 149 TO 172) AND THE COMPANIES
(APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES 2014]
Definition of Director [Section 2(34)] – ‘Director’ means a director appointed to the Board of a
Company.
Note – It means that a person shall be regarded as a director only if he is appointed as director by
the company. It inferences that, if a person functions as a director, but he is not designated as
director, he shall NOT be regarded as a director.
Definition of Board of Directors [Section 2(10)] – ‘Board of Directors’ or ‘Board’, in relation to a
company, means the collective body of the directors of the company.
Only Individuals be directors [Section 149] – The Board of Directors of every company shall consist
of individuals only. Hence, NO body corporate, association, firm or Limited Liability Partnership, shall
be appointed as a director.
Prohibition of assignment of office [Section 166] – NO director shall assign his office to any other
person. Any assignment of office made by a director shall be void.
If any director of the company defaults the provisions of section 166, he shall be punishable with
fine not less than Rs. 1 lakh but which may extend to Rs. 5 Lakhs.
Note – Appointment of a director by ‘Will’ (if articles provide) does not amount to assignment of
office. It is due to the fact that where a director dies, the office held by him becomes vacant and
therefore, such office cannot be assigned to any other person.
Duties of Directors [Section 166]
Duty to act as per articles
Duties to act in good faith
Duty to exercise due care
Duty to avoid conflict of interest
Duty not to make any undue gain
Duty not assign his office
Director Identification Number (DIN) [Section 152 (3), Sections 153 to 159 and Rule 9, 10, 10A,
11,12, 12A and 12B of Companies (Appointment and Qualification of Directors) Rules, 2014]
1. Mandatory to have DIN [Section 152(3)] – No person shall be appointed as director of a
company unless he has been allotted with the Director Identification Number.
2. Application for DIN [Section 153] – Every individual intending to be appointed as a director
of any company shall make an application for allotment of DIN. Such application shall be
made to Central Government in such form and manner and shall be accompanied with such
fees as maybe prescribed.
Appointment & Qualification of Directors Page 1
, Note – The Central Government may prescribe any identification number which shall be treated
as DIN for the purposes of this Act and in case any individual holds or acquires such identification
number, the requirements of this section shall not apply or apply in such manner as may be
prescribed.
3. Allotment of DIN [Section 154] – The Central Government shall allot DIN to an applicant in
such manner as maybe prescribed, within 1 month of receipt of application for allotment of
DIN.
4. Prohibition to obtain more than one DIN [Section 155] – No individual who has already
been allotted a DIN, shall apply or obtain or process another DIN. DIN remains valid for
lifetime unless it is cancelled, surrendered or deactivated.
5. Intimation of DIN by the director to the company [Section 156] – Every person who is
already a director, shall intimate his DIN to the company(s) in which he is already a director.
Such intimation must be given within 1 month of receipt of DIN.
6. Intimation of DIN by the company to the Registrar [Section 157] – The relevant provisions
are as below :
a. Every company shall intimate the DIN of all its directors to the Registrar or any other
officer or authority as may be specified by the Central Government.
b. Such intimation shall be given by the company within 15 days of receipt of
intimation of DIN by it under section 156 in Form DIR-3C. [Rule 10A].
c. The intimation shall be furnished in such form and manner as maybe prescribed.
d. If the company fails to intimate DIN as per the provisions of section 157, the
punishment is as follows –
i. The company shall be liable to penalty of Rs. 25,000 and in case of
continuing failure, with a further penalty of Rs. 100 per day, subject to a
maximum of Rs. 1 lakh.
ii. Every officer of the company who is in default shall be liable to a penalty for
not less than Rs. 25,000 and in case of continuing failure, with a further
penalty of Rs. 100 per day, subject to a maximum of Rs. 1 lakh.
7. Obligation to indicate DIN [Section 158] – If any return, information or particulars required
to be furnished under the Act relates to a director or contains any reference to a director,
every person or company shall mention DIN in such returns, information or particulars.
8. Penalty for default of certain provisions [Section 159] – If any individual or director of a
company makes any default in complying with any of the provisions of sections 152, 155 and
156, such individual or director of the company shall be liable to a penalty which may extend
to Rs. 50,000 and where the default is continuing one, with a further penalty which may
extend up to Rs. 500 per day.
Other provisions contained in Companies (Appointment and Qualification of Directors) Rules, 2014
1. Application for allotment of DIN before appointment in an existing company [Rule 9] – The
provisions are as follows –
a. Every applicant, who intends to be appointed as director of an existing company
shall make an application electronically in Form DIR-3, to the Central Government
for allotment of DIN along with such fees as provided under Companies (Registration
offices and Fees) Rules, 2014.
Appointment & Qualification of Directors Page 2
