A company being an artificial legal entity, cannot take decisions on its own. As a result, the decision-making authority vests in individuals, who are entrusted with running the company and safeguarding its interests. This body of persons is known as the Board of Directors and the management. A Director is a person appointed to the Board of a company.
The Board’s role is superintendence, direction and control. It has to provide oversight on management’s functions, and hold management accountable. Management in turn is responsible for running the company.
Directors may be classified into different categories, depending on the manner of their appointment and the nature of their role in the company.
Promoter Director – A Promoter Director is one who has control over the company’s affairs and decisions, directly or indirectly, whether arising from ownership (as a shareholder), Board position (as a Director) or otherwise.
Executive Director or Whole-Time Director – An Executive Director/ A Whole-Time Director is the senior executive/ officer of the company. He/she is involved in the day-to-day operations and functioning of the company. Such Directors hold executive authority, and are remunerated by the company for their managerial role.
Managing Director – A Managing Director is the senior-most full-time executive of the company, He/she is overall responsible for the company.
Non-Executive Director – A Non-Executive Director is a Board member who is not involved in the day-to-day operations of the company. He/she is a part-time Director.
Independent Director – An Independent Director is a Non-Executive Director, who has no financial relationship or pecuniary relationship with the company. He/she is not related to the promoters or the management, and is expected to bring an independent and unbiased view to the Board and committee deliberations.
Nominee Director – A Nominee Director is a Non-Executive Director, appointed/ nominated by an institution or authority having a substantial interest in the affairs of the company. These institutions/ authority could be the Central Government, a financial institution, a bank, or some specific class of shareholders. He/she, while acting in the interest of the company, is expected to ensure that the interest of the nominating organisation is not compromised in the functioning of the company.
Woman Director – A Woman Director is a woman serving as a Director on the Board. The Companies Act, 2013 mandates the appointment of at least one woman Director in certain classes of companies, with the objective of promoting gender diversity and balanced representation at the Board level.
Small Shareholders’ Director – A Small Shareholders’ Director, is an Independent Director, elected by the small shareholders of the company. Under the Companies Act, 2013, such an appointment may be made upon a request by at least 1000 small shareholders or 1/10th of the total shareholders, whichever is lower, to provide representation to retail/ minority investors.
Resident Director – A Resident Director is a Director who has resided in India for not less than 182 days in the previous calendar year. The Companies Act, 2013 requires every company to have at least one resident Director.
Alternate Director – An Alternate Director is appointed to act in place of an existing Director, during his/her absence for a continuous period of not less than three months. The Alternate Director holds office until the original Director returns.
Additional Director – Any Director, when first appointed to a Board, is an Additional Director. Such a Director holds office only up to the date of the next general meeting, and continues thereafter only if the shareholders approve the appointment. If the shareholders choose to not appoint him/her, the term of such a Director ends at the conclusion of the general meeting.
Interested Director – An Interested Director is one who is in any way interested in a contract or arrangement, whether himself/herself or through relatives/firm/body corporate/other association.
Shadow Director – A Shadow Director is a person, usually a holder of majority stake of a company, but not its Director, but whose directions or instructions are followed by Directors of the company.
-Nidhi Kapoor