What are the reasons for replacing directors in a company?

Commonly, people opt to incorporate or modify directors in their company due to the following reasons.

·         To attract fresh talent without compromising ownership integrity

As a company grows, it is important to bring in new talent to meet new challenges. This may involve adding or changing top-level management. However, adding a new director does not reduce the strength of ownership as they are responsible for day-to-day operations, allowing shareholders to assign more operational duties without losing strategic control.

·         Lack of efficiency in current directors

The inefficiency of existing directors may lead to the need of adding new directors. This could be caused by their inability to meet work requirements, retirement, family problems, physical ailments, or other personal reasons. In such situations, it is necessary to bring in new directors.

·         Required limit of directors

Every type of company must have a certain number of directors. If any existing directors die or retire, the company must add another director to meet the required limit.

ADD A DIRECTOR TO YOUR COMPANY USING THIS PROCESS

Adding a director to a company's board is not a simple process. It involves a lot of work and there are various factors that need to be taken into consideration.

STEP 1: ENSURE ADDITIONAL DIRECTOR IS ALLOWED

Before proceeding, it is necessary to verify whether the company's articles (AOA) authorize the addition of a new director. If such provisions are absent, then it becomes necessary to amend the AOA to permit the inclusion of an additional director.

STEP 2: SECURE THE CONSENT OF PROPOSED DIRECTOR

To proceed with the appointment, the proposed director must confirm his or her willingness to act as the director by submitting the relevant director appointment form.

STEP 3: PASS BOARD RESOLUTION FOR APPOINTMENT

The company must pass a board resolution for the appointment of the new director to formalize the nomination.

STEP 4: REGISTER DIGITAL SIGNATURE AND IDENTIFICATION NUMBER

The new director must obtain a DSC (Digital Signature Registration) and a DIN (director identification number) to fulfill legal requirements.

STEP 5: COMPLETE REQUISITE FORMS AND DOCUMENTS

Collect the necessary documentation and information, and complete the necessary forms including Form DIR-2, Form DIR-12, and Form DIR-8 at the ROC to complete the appointment process.