A company is an artificial person and incapable of acting or making a decision on its own. It has to act through a body of persons who have the ability to make decisions, that are in the best interest of the company. This body of persons is known as the Board of Directors. A Director is a person appointed to the Board of a company.
The Board is responsible for the strategic direction of the company. Directors are expected to perform their duties and responsibilities with due care, and diligence.
There are several types/ categories of Directors, based on who appointed them/ the role that they play –
Executive Director or Whole-Time Director – An Executive Director/ A Whole-Time Director is the senior executive/ officer of a company. He/she is responsible for day-to-day functioning of a company. He/she is entrusted with management responsibilities, and is on the payrolls of the company.
Managing Director – A Managing Director is the senior-most full-time executive of the company. He/she is responsible for the performance of the company.
Promoter Director – A Promoter Director is one who has control over the affairs of the company, directly or indirectly, whether as a shareholder, Director or otherwise.
Non-Executive Director – A Non-Executive Director is a person who has a part-time Director position on the Board. He/she is not involved in the day-to-day operations of the company.
Independent Director – An Independent Director is a Non-Executive Director, who does not have any pecuniary/ financial relationship with a company. He/she is not related the promoter or management of the company.
Woman Director – As the name suggests, a Woman Director is a woman who is a Director. The Companies Act, 2013, introduced this term in order to enable the induction of at least one woman on Boards of some categories of companies.
Nominee Director – A Nominee Director, is a Non-Executive Director, who is appointed/ nominated by an institution that has a substantial interest in the affairs of the company. He/she is appointed by the Central Government, a financial institution, a bank, or some specific class of shareholders, by virtue of their shareholding in the company. 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.
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 each Board to have at least 1 Director in this category.
Small Shareholders’ Director – A Small Shareholders’ Director, is an Independent Director, and is elected by the small shareholders of the company. As per the Companies Act, 2013, listed companies are at liberty to appoint a Small Shareholders Director, upon the request of a minimum of 1000 small shareholders or 1/10th of the total shareholders, whichever is lower.
Alternate Director – An Alternative Director is a person who acts as a Director for a temporary period. When a Director is absent for more than three months, he/she can appoint an Alternative Director, to fill his/her position, till he/ she resumes his/her office.
Additional Director – Any Director when first appointed to a Board, is an Additional Director. He/she holds this office till the conclusion of the next General Meeting, where his/her appointment is approved by the shareholders/ members. If the appointment of an Additional Director is not approved by members, his/her term comes to an end with the General Meeting.
Interested Director – An Interested Director is one who is in any way interested in a contract or arrangement, whether himself 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.