No it is not violating companies act as you are creating post legally the person is not director in meaning of companies act this is name of post such as operational director or sales director.
Designation with word 'Director' as per HR policy but Not as per Companies Act
Dear Sir/Madam We want to give our employee designation which is as 1)Director - Marketing or Marketing Director 2)Director -Operations or operational director 3)Associate Director 4)Senior Director And he is not part of board of directors.We won't be applying for DIN. We have seen that many companies follow these practices of having non board directors (meaning marketing director, associate director etc) as per company HR policies, where in that person will not be part of board of directors as he is not director under companies act 2013. I want to know whether this is not violating companies act or any other law. Kindly advise
Asked 6 years ago in Business Law
7 Answers
Whenever any particular responsibility or designation is attached with the ' Director' then the same is a mere office bearer and not the Director within the meaning of Companies Act.
Only the Director. chairman and managing director can be a part of board of directors and no other persons.
If you are appointing some one as director then he must hav e DIN
give said employees designation of Vice President etc if you don’t want him on board of directors
Dear Client,
The Managing/operational etc. Directors have more authority along with duties as they act in their dual capacity of being directors as well as employees with substantial powers over the affairs of the Company.
NO such concept in company law to designate managerial staff as director without say in board. Rest, if article of association permits than can give such designation but their powers should be differentiated and rest up to manager level and no role in board.
It's not voilation of companies Act but there is no legal validity for such designations
1. Using the word "director" and not obtaining DIN would attract Penal prosecution, since this would amount to circumventing the law.
You can keep any designation in your company to appease your employee and to encourage them to promote your company's business.
Whereas the meaning of a director in a company as per company's act is:
Meaning of Director as per the Companies Act, 1956. A company is a legal entity and does not have any physical existence. It can act only through natural persons to run its affairs. ... A Director is any person, occupying the position of Director, by whatever name called.
The definition of Director given in this clause is an inclusive definition. It includes any person who occupies the position of a director is known as Director whether or not designated as Director. It is not the name by which a person is called but the position he occupies and the functions and duties which he discharges that determine whether in fact he is a Director or not. So long as a person is duly, appointed by the company to control the company's business and, authorized by the Articles to contract in the company's name and, on its behalf, he functions as a Director.
The Articles of a company may, therefore, designate its Directors as governors, members of the governing council or, the board of management, or give them any other title, but so far as the law is concerned, they are simple Directors.
So you may re designate them as Manager or any other name instead of director to avoid confusions and legal hassles.
