Most of the entrepreneurs raise a doubt on whether they can designate someone as “Director” (either with prefix or suffix – like “Commercial Director”, “Director – Sales” etc) without admitting them on the Board of Directors. Cogzidel has been advising them not to do so, for the reason that the people who interact with them would misunderstand that they are directors of the company, when actually they are not.
Here’s a circular that well-describes this point.
SECTION 197 A
RESTRICTION ON APPOINTMENT OF DIFFERENT MANAGERIAL
PERSONNEL AT THE SAME TIME
Whether appointment of persons styled as special directors, director administration, etc., is desirable and permissible
Instances have come to the notice of the Department where companies have designated executives who are not members of the board as special director, director administration, etc. Such designations give an impression to public at large and those dealing with these companies and the executives that they are full-fledged directors entitled to act as such on behalf of the companies. If in fact these executives are not directors on the board of the companies, it will be patently wrong on the part of the companies to designate them as directors. The Department is, therefore, constrained to advise companies to desist from giving such designations to their executives which tend to mislead.
* CIRCULAR NO.2/82, DATED 20.1.1983.
