The work of a company is in most cases based on a corporate statute, so without exception, all work procedures are carried out taking into account and based on its provisions. All work procedures have a clear and consistent structure that must be followed in all situations. We suggest you learn a little more about what is the procedure to appoint a director and what its importance is for the work of the entire company.
What are the steps of the procedure for selecting and appointing a director?
Like any other working process, the procedure of appointing a director has a sequential nature and mandatory constituent parts. Depending on the specific activities of the company, such procedure may have its peculiarities, but in general, it consists of the following stages:
- Selection of a candidate for the position of director. The decision to appoint a director to the position is made by the board of shareholders, but the final approval requires a selected candidate or several. This can be either professional from within the company or invited candidates. The selection must be based on clear and strict criteria regarding experience, qualifications, and knowledge.
- Putting the appointment on the agenda. Approval of the director nominee takes place exclusively by voting at a general meeting or a shareholders’ meeting – depending on which form of management has more power. In order to vote according to all the rules, the appointment must be placed on the agenda of a future meeting. Virtual portals and bulletin boards can be used for this purpose. In some cases, candidates must give a speech, so including a vote on the agenda will help them prepare to speak.
- Voting and appointments. Like any other issue on the agenda, the appointment of a director must go through a voting process. This can be by a simple or qualified majority vote. The results of the vote must be properly recorded in the minutes. Once a decision has been made, the appointment decision is recorded in a resolution, which is also subject to approval by the board of directors.
In some cases, the number of steps may vary, depending on the nature of the company.
Why is a board resolution to appoint a director necessary?
It may seem strange that the procedure of appointing a director in the company ends with the approval of the board of directors. However, this step is mandatory because the appointment of a director is one of the most important issues in the life of the company and requires the participation of all members of the management structures. It is important not only to comply with the regulatory requirements for the selection and appointment procedure but also to comply with the legal regulations for appointing a director, as required not only by the company’s statute.
The decision to appoint a director is an important legal document that is fundamental to the life of the company. Therefore, it is important when appointing a director not only to go through all the necessary stages but also to formalize the result of this process in the relevant legal and statutory norms. In some cases, the results of the voting and appointment of a director may be challenged, so the regulatory formalization of the results of the voting procedure will help in the process of proceedings and the adoption of a fair decision.