Who is a Director, and the Director Identification Number

In one line

A director must be a natural person, every company must have a Board of a minimum size, and nobody can be appointed a director without first obtaining a unique number from the Central Government.

In exam wording: section 2(34) defines a director as a director appointed to the Board of a company; section 149(1) requires every company to have a Board of Directors consisting of individuals, with a minimum of three, two or one and a maximum of fifteen; and section 152(3) forbids the appointment of any person as a director unless he has been allotted a Director Identification Number under section 154.

Why the law has this at all

A company acts through its Board, so the law has to answer two questions before anything else: who may sit on it, and how many.

Who is answered by the single word individuals in section 149(1). A company cannot be a director of another company. If it could, a chain of companies could be run with no human being answerable anywhere in it, and every duty in section 166 would be owed by an artificial person to another artificial person.

How many is answered by minimums and a maximum. A minimum, because a Board of one can be a company run by one man with no check. A maximum of fifteen, because a Board large enough to be a public meeting decides nothing, and because a very large Board is a way of diluting responsibility.

And the Director Identification Number answers a question nobody had asked until it became a problem. The same man could be a director of forty companies under forty spellings of his name, and no register could connect them. The DIN gives each individual one number for life, which is why section 155 forbids a second one and why section 158 requires the number to appear on every filing that mentions a director.

Some words this chapter uses

The Board is the body of directors. An individual is a natural person. A nominee director is one appointed by an institution or under an agreement. Rotation means retiring and standing again by turns. To intimate is to inform formally. An officer in default is defined in section 2(60).

The definition, and what it leaves out

Section 2(34): "director" means a director appointed to the Board of a company.

That is circular on its face, and deliberately so. The Act does not define a director by what he does, because directors do very different things: some run the company daily, some attend four meetings a year. It defines him by office.

But the Act does reach people who are not appointed. Section 2(60) makes an officer in default include a person in accordance with whose advice, directions or instructions the Board is accustomed to act, and section 2(69) uses the same idea for a promoter. So a person who directs the Board from outside carries a director's liabilities without holding a director's office.