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Know about directors’ change in a company
Directors are then said to be the brain of the corporate. they’re the managerial personnel who control and administer the company’s operations. The rotation of directors takes place in one or the opposite way – either by appointment of the latest director or resignation of existing. Aim to hold out the change of directors is usually to make sure an optimum combination of experts on board for the interest of the company.
The authority to approve the resignation of the director lies with the members of BoD whereas the appointment must be made through the consent of shareholders. Whether it’s a meeting, removal or resignation, the change doesn’t become until the intimation is formed to the Ministry of corporate affairs.
Why changing directors is required?
- Hire new talent on board: With the expansion of business, strategies and alliances are developed, that need inputs of every department that are required for effective planning. Also, with an addition of the new line or department, an expert to steer the team are often hired during a managerial position being a director of the corporate. This benefits the corporate with specialization and focused efforts.
- Assign operational responsibility without dilution ownership: Directors are liable for day-to-day operations. With the appointment of a further director, the shareholders can assign the operational responsibilities to directors keeping strategic control in hand. Here, a director doesn’t require subscribing to share capital, hence, the ownership and voting rights of shareholders don’t dilute with a replacement person on Board.
- Inability to figure by existing directors: The existing directors could also be unable to serve the corporate after a particular period thanks to retirement or other personal reasons. Whether it’s a resignation by the director or his death, the corporate must confirm that its work is unaffected. It must process for both discontinuations by the director and appointment of a replacement director if any.
- The Number of directors falls into statutory limit: The Companies Act has prescribed the minimum number of directors in any company, which is 2 and three for personal and Public company respectively. At any time during the company’s existence, the number of directors shall not reduce below from the limit. the corporate must appoint a replacement director(s) within 6 months if the amount reduces below 2/3.
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