Among the various types of companies, small companies are one. Number of directors for a small company is also fixed just like the other companies. In this section, we will go over the number of directors for a small company in extensive detail. You must read this particular blog all the way through to truly understand the director’s importance and job. The definition of small companies has been changed many times in India. The reason behind the same is to provide ease of doing business. Compliance of such companies has been reduced and their turnover limit has been increased so that such companies can work with more efficiency. Do continue reading the blog in order to have a clear understanding of such companies.
Who are the Directors of the Company?
There are many types of directors in a company. Directors are the key personals of the company, without having a minimum number of directors, a company cannot form. Designation of director has been defined under section 2(34) of the companies law. The directors are the individuals who look after the company on its behalf. They have sufficient power to make decisions for and on behalf of the company. They are the members of the board. Without them important decisions of the company cannot be taken. Directorship is a very renowned as well as responsible position in a company. They are the people who run the company. It depends on the directors of the company how it is going to work in the future. Hence directors of the company must be chosen wisely.
Understanding the Small Companies in India
It’s not easy to understand the definition of small companies and the structure of the number of directors for a small company. This is because the definition of the small company has changed many times and secondly there are many types of small companies and accordingly the number of directors for a small company varies. The ideal definition of the small companies is provided under section 2 sub-clause 85 of the company law.
In order to understand the same first you need all those definitions which are old ones. The very first change in the definition of such companies was introduced in 2021 by the suggestion of the then finance minister and after that it was again changed by the MCA in 2022. To make the concept of small companies more precise and clear we have come up with the following points:
- A paid-up share capital of Rs.4 crore or less, or a larger sum stated but not exceeding Rs.10 crores.
- A turnover of Rs.40 crore or less, or a greater sum stated but not exceeding Rs.100 crore.
- A Holding Company cannot becomes a small company
- A Subsidiary Company cannot becomes a small company
- Section 8 Companies cannot becomes a small company
- Companies which are registered under any other act except the Companies Act, cannot becomes a small company
Ideal Number of Directors for a Small Company
Some of the companies which has been considered as the small companies with the minimum number of directors for a small company has been discussed below:
Minimum Number of Directors in a Public Limited Company
People get confused here as they think that public companies are big companies. How can they come under the category of the small companies. To clear this myth is very important. If you go through the important points regarding small companies which are mentioned in the current blog you come to know about the minimum and maximum requirements of the small companies. If any public limited company falls under the same criteria it will be considered as the small company. The minimum number of directors required for this type of small company are three.
Minimum Number of Directors for One Person Company
Before 2013, a single individual couldn’t register a business. However, thanks to the updated Companies Act of 2013, a single person can now establish a company, known as One Person Company Registration. In these small companies, only one director is required, making the minimum number of directors in a One Person Company just one. Except for one director, such firms have only one nominee. These two designations are the most important in an OPC.
Minimum Number of Directors for a Private Limited Company
Private Limited Companies are the type of entity preferred by the majority of new entrepreneurs. It is the top option of both startups and large corporations. It is because of the advantages or benefits it provides following its formation. According to Section 149 Sub-Clause One of the Companies Act of 2013, such minor businesses can be founded with a minimum of two directors. Such businesses can be designated small corporations if their paid-up capital falls under the category of small companies.
Conclusion
Small corporations can be of various types, such as Private Limited corporations, Public Limited Companies, One Person Companies, and so on, and the number of directors for a small company varies appropriately. As a result, it is difficult to provide a precise figure for the appropriate number of directors for a small company because it is neither consistent or constant across all sorts of small businesses.
As a result, we covered all of the significant minor companies and the number of directors required for them. In this case, the interpretation of the optimal number of directors was regarded as the least number of directors, and we addressed it accordingly. If you still believe there is something lacking and would like to learn more, please contact us.
