Under the Companies Act of 2013, various types of companies have been given. They have different criteria to register them, and the requirement with respect to shareholders, paid-up capital, directors, etc., is very different. The current blog will discuss about private limited companies. There is a minimum of two directors required to register a company as a Pvt. Ltd. company. Without the minimum number of directors, a company cannot be registered. The entire process of company registration is online and can be completed through the government portal of MCA which is the Ministry of Corporate Affairs. Out of the various necessities to register a company, one is a minimum of two directors required to register a company as a Pvt. Ltd. To know more with respect to directorship, continue reading this blog.
What is a Private Limited Company?
An entity whose minimum paid-up capital is Rs. 1 lakh and can have 2-200 directors is called a Private Limited Company. Such companies can transfer their shares, which is a good thing about them. Such kind of entity is the most preferred among the business owners. Most entrepreneurs registered their business under the ambit of this entity because of the benefits attached to it. The process of registration of this company is completely online. After submission of the application, proper verification will be conducted by the registrar of companies. If everything in the application is fine within 10-15 days one can get the incorporation certificate.
Benefits of Private Limited Company
There are various benefits of registering a company as a private limited. Some of the key benefits are given below:
- Incorporated association
- A legal entity that is distinct from its member
- Artificial person
- Transferability of shares is possible
- Limited liability
- Perpetual succession
- Common seal
- There is only two directors required to register a company as a Pvt. Ltd
Eligibility Criteria to Become the director of the company
To become the director of any private limited company, one must satisfy the following conditions:
- It must not be an unsound mind
- Undischarged insolvent cannot become the director of a company
- One whose application of insolvency is pending cannot become a director in a company
- Any individual convicted by any court will not be able to hold the position of director in any company
- Any individual disqualified by any court of law to become director of a company cannot hold this position
Duties of the directors of the Company
Some of the key duties of the director of the company are given below:
- Must act according to the article of the company
- Promote the objective of the company
- Mut work in good faith for the growth of the company
- Shall exercise independent judgements for the company
- Shall work with due care and skill
- Can’t be involved in such activities where the director’s interest conflicts with the company’s interest
- Shall not take undue advantage of the company
- A director shall not assign his or her office to anyone
Number of Directors in Private Limited Company
There are two directors required to register a company as a Pvt. Ltd in India. This limit of directors can extend up to a maximum of 200 directors in a private limited entity. The Companies Act makes no effort to define their position. They are described sometimes as agents, sometimes as trustees, and sometimes as managing partners. It would be better to say that directors stand in a fiduciary relationship with the company.
The correct description of the directors in a company is that they are the agents of the company. There is a relationship of principal and agent between a company and the directors. The company is the principal, and the directors are agents. The directors of a company are the trustees of the company, and with reference to their power of the funds of the company and for misuse of the power and on their death, the cause of action survives against their legal representative.
What is the Logic Behind Minimum of Two Directors Required to Register a Company as a Pvt. Ltd?
Behind the notion of two directors required to register a company as a Pvt. Ltd there are certain logics which are given below:
- Segregation of the control of the management and affairs of the company
- For the smooth management of the company
- Prevention of fraudulent activities by not giving power to single hands
- Develop a sense of collective responsibility
- Responsibilities will be divided into two hands
- Better services
- Not want to defeat the motive of the one-person company concept
- Easy management of the company
- Different opinion gives different ideas
- If one is not there, the other can fill the gap
Important Provisions Related to Directors Under the Companies Act
Some of the important provisions include the minimum of two directors required to register a company as a Pvt. Ltd are given below:
- Section 149 of the Companies Act talks about the minimum two directors required to register a company as a Pvt. Ltd
- Provisions related to the independent directors are given under section 150 of the company law.
- Appointment of directors has been described under section 151, section 152, section 161, section 162 and section 163 of the company law.
- Director Identification Number and related provisions have been given between section 153 and section 159 of the Companies Act.
- Disqualification conditions for the appointment of directors have been given under section 164 of the company law.
- The duties of the company directors have been given under section 166 of the company law.
- Provisions regarding the vacancy of the office of director have been given in detail under section 167 of the Companies Act.
- The two most important provisions regarding directors’ resignation and removal are given under section 168 and section 169, respectively.
Conclusion
Under the Companies Act of 2013 in India, there is a minimum of two directors required to register a company as a Pvt. Ltd. The requirement of a minimum of two directors for the registration of a Private Limited Company serves crucial purposes such as the segregation of management control, prevention of potential fraud, promotion of collective responsibility, efficient management, fostering diverse ideas and innovation, and ensuring compliance with legal requirements. These directors, subject to specific eligibility criteria and duties, act as agents of the company and trustees of its funds and are integral to upholding the company’s best interests while preventing conflicts of interest, thus contributing to responsible and transparent governance that benefits the company and its stakeholders.
