Pradhan Mantri Mudra Yojana (PMMY)

Understanding the Role of a Director

Directors are individuals appointed by shareholders to supervise a company's activities, as guided by the Memorandum of Association (MOA) and Articles of Association (AOA). Since a company is a legal entity and cannot act independently, it functions through its directors. The Board of Directors, composed of these individuals, is responsible for the company's management and decision-making.

In a Private Limited Company, directors hold significant importance. They are tasked with making everyday decisions and overseeing the company's administration. Shareholders rely on directors to manage their investments effectively and ensure the company's growth and success.

Types of Directors of a Company

Directors are categorised into various types based on their roles and responsibilities. Let us take a closer look at each type:

Executive Directors

• Actively involved in the company's daily management.
• Often hold specific executive roles, such as CEO, CFO or COO.
• Responsible for implementing the company's strategies and policies.

Non-Executive Directors

• Do not participate in the company's day-to-day management.
• Provide independent oversight to the company's board and management.
• Offer valuable insights and advice based on their expertise and experience.

Independent Directors

• A subset of non-executive directors with no financial or other vested interests in the company apart from their role as directors.
• Primary responsibility is to safeguard the interests of the company's shareholders.
• Ensure transparency and accountability in the company's operations.

Nominee Directors

• Appointed by third-party authorities or the Government to tackle mismanagement and misconduct.
• Represent the interests of the appointing authority.
• Monitor the company's activities and report any irregularities.

Appointment of Director to Private Limited Company

Specific requirements must be met when appointing directors in a Private Limited Company, these are:

• The maximum directors in a private company is 15. 
• The minimum directors in a private company is 2.
• The limit of 15 directors can be exceeded by appointing additional directors through a special resolution with the support of 75% or more shareholders.
• The appointment of directors must be in accordance with the provisions of the Companies Act 2013.

Provisions of the Companies Act, 2013

The Companies Act 2013 includes several key provisions related to the appointment and roles of directors:

• Section 149: Details mandatory requirements, such as having a certain number of directors, including a female director and a resident director.
• Section 152: Specifies the process for appointing directors at the company's general meeting and mandates the use of the Director Identification Number (DIN).
• Section 161: Provides guidelines for appointing additional, alternate and nominee directors by the Board.
• Section 164: Lists the disqualifications for becoming a director, ensuring that only eligible individuals are appointed to the board.

By adhering to these provisions, companies can establish a well-structured and compliant board of directors.

Reasons for Adding or Changing Directors in a Company

There are several reasons why a company may choose to appoint new directors/board of directors or change its existing board composition:

1. Introducing New Talent: As a company grows, it may become necessary to bring new talent to the board to address new challenges and requirements that come with expansion.
2. Preventing Ownership Dilution: By appointing additional directors, shareholders can delegate more operational responsibilities without relinquishing strategic control.
3. Addressing Inefficiency of Current Directors: A company may appoint new directors to maintain efficiency if existing directors are underperforming due to personal issues.
4. Complying with Statutory Requirements: Companies must maintain a specific number of directors according to the Companies Act 2013. They must promptly appoint new directors to comply with legal requirements if the number falls below the minimum.

Eligibility to Be A Director in a Company

To be eligible for appointment as a director, an individual must meet the following criteria:

• Be at least 18 years old, as minors are not permitted to hold the director position.
• Not be disqualified under the provisions of the Company Act 2013, which include:
  
  • Being an undischarged insolvent
  • Having been convicted of an offence involving moral turpitude
  • Having been convicted of an offence under the Companies Act 2013
  • Having been disqualified by an order of a court or tribunal
• Have mutual consent from the Board of Directors, shareholders and the individual being considered for the directorship.

It is crucial to ensure that the prospective director meets these eligibility criteria before proceeding with the appointment process.

Documents for Director Appointment

When appointing a director, the following documents are required:

1. PAN card
2. Identity proof (Voter ID, driver's license, Aadhaar card, etc.)
3. Residence proof (utility bills, rental agreement, etc.)
4. Recent passport-sized photograph
5. Digital Signature Certificate (DSC)

Procedure for Appointing/Add a Director to a Company

The process of appointing a director involves several key steps:

1. Reviewing the Articles of Association (AOA)

The first step is to review the company's Articles of Association (AOA) to ensure that it includes a clause permitting the appointment or addition of directors. If the current AOA lacks such a provision, it should be amended to include one before proceeding with the director's appointment.

2. Conducting a General Meeting for Director Appointment

The company must formally appoint a director by passing a resolution in a general meeting, either during an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM). 

To arrange an EGM, the company must conduct a board meeting to pass a resolution for holding the EGM. The resolution to appoint the director must be filed in Form MGT-14 with the Registrar of Companies within 30 days.

3. Applying for Director Identification Number (DIN) & Digital Signature Certificate (DSC)

The individual selected for directorship must apply for a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) if they do not already possess these. After obtaining the DIN, the prospective director must provide the company with their DIN along with a declaration affirming that they are not disqualified from being a director.

4. Obtaining Consent from the Prospective Director – Form DIR-2

The individual proposed for directorship must express their consent to serve in this role by submitting Form DIR-2, a formal consent to act as a director. An individual can only be appointed as a company director by explicitly giving their consent. This step is crucial to ensure that the prospective director is willing to take on the responsibilities associated with the position.

5. Issuing a Letter of Appointment to the Director

After obtaining consent from the prospective director, the company should issue a formal Letter of Appointment. This director appointment should detail the terms and conditions of the appointment, including the director's roles, responsibilities and any remuneration or salary. The Letter of Appointment serves as a legal document that outlines the expectations and obligations of both the company and the director.

6. Filing Forms DIR-2 and DIR-12 with the ROC

Once the resolution for the appointment of a director is passed and the individual has submitted Form DIR-2, the company can officially appoint them as a director. 

The company must file both Form DIR-2 and Form DIR-12 (detailing the particulars of the director's appointment) with the Registrar of Companies (ROC) within 30 days of the director's appointment. Failing to file these forms within the prescribed time frame can result in penalties and legal complications.

7. Filing Amendment Applications with GST and Tax Authorities

After appointing a new director, the company must file the necessary applications to update the director's details with various regulatory authorities, including the GST Network (GSTN) and other relevant certificates, to reflect the change in directorship. This step ensures that the company remains compliant with all legal and regulatory requirements related to its directors.

Frequently Asked Questions:

Eligibility

• Must be registered under the Government of India's MSME Development Act of 2006.
• Must be a company registered under the Companies Act of the Government of India and must meet the investment restrictions in plant and machinery or equipment set forth in the Government of India's MSME Development Act 2006.
• Must be a technology incubation enterprise or a startup registered as a company and located in an incubation center or park (in this case, a certification from the incubation center or park is required).
• Must be an STP Unit that has been approved.
• The invention must be in the field of electronics or information and communication technologies.

List Of Important Documents Required

1. Scanned copy of MSME Registration Certificate (For MSME Units)
2. Scanned copy of Company Registration Certificate (For Companies)
3. Scanned copy of STP Registration (For STP Units)
4. Scanned copy of the Registration Certificate issued by a competent authority and a certification from the incubation Centre/Park (For Technology Incubation Enterprise/Startup)
5. Scanned copy of the last audited Balance Sheet
6. Copy of product brochure, if any
7. Copy of latest Annual Report, if any
8. Copy of official filing receipt (OFR) with the Indian Patent Office
9. Copy of waiver under section 39 of the Indian Patent Act (Outside India)
10. Copy of proof of the application under PCT/ Paris Convention or Direct International Filing
11. Copy of technical writeup of invention as per the format of technical writeup
12. Patent search report
13. Scanned copy of Details for transfer of e-payments as per the format
14. Scanned copy of the Declaration form duly signed and sealed as per the format
15. A statement by the auditor of the enterprise that they fulfill the criteria of investment in plant and machinery or investment in capital equipment (as the case may be) as stipulated in the MSMED Act 2006.

Application procedure for Startups

• Visit the official website http://www.ict-ipr.in/sipeit/login.
• Create a User account by logging in after filling out all the details.
• Once “Login” is created, one can apply online for the scheme by submitting the required documents.

Selection OR Acceptance of Startups

The acceptance of startups under this scheme depends on the following criteria:

• For a particular invention, there can be one application for foreign filling.
• An Indian patent attorney firm with at least five years of experience in handling international patent applications handles and processes patent applications.
• Only five applications per financial year will be considered for reimbursement from a single applicant.
• The applicant should have already filed a patent application with the complete specification for the said invention with the Indian Patent Office.
• International patent filing options include the PCT route, the Paris Convention route, or filing directly in a foreign country of the innovator's choice.

Benefits

• This scheme provides financial support for the International filing of patents at different stages, including expenses in filing and processing.
• The maximum amount reimbursed per innovation shall be Rs 15 lakhs or 50% of the total expenditures paid in filing and processing a patent application up to grant, whichever is less.
• Under the scheme, financial support is also provided to Education Institutes, Meity societies, etc., for organizing seminars & workshops on IPR awareness.

Frequently Asked Questions

About the Pharma Company in India

A pharmaceutical company is an entity involved in the development, manufacturing, distribution, and marketing of medicines and healthcare products. Depending on the business model, pharma companies in India are typically classified as:

• Manufacturing companies: involved in the production of drugs and medicines.
• Marketing companies: focus on branding and distribution, often outsourcing manufacturing.
• Wholesale businesses: supply medicines in bulk to retailers, hospitals, and distributors.
• Retail businesses: run pharmacies and directly sell medicines to consumers.

India’s pharmaceutical industry has been expanding rapidly. As of 2025, it is valued at $55 billion and is projected to reach $120–130 billion by 2030. The government has also introduced several supportive measures:

• 100% Foreign Direct Investment (FDI) allowed in greenfield pharma projects.
• ₹15,000 crore PLI (Production Linked Incentive) scheme to promote domestic manufacturing.
• Incentives for Active Pharmaceutical Ingredients (APIs) and medical devices to reduce import dependency.

With this growth potential, starting a pharmaceutical business in India is both a profitable and impactful opportunity.

Choosing the Right Business Structure for a Pharma Company

The first step in starting a pharmaceutical business in India is selecting the proper business structure. The choice depends on the scale of operations, funding requirements, and ownership preferences. Common structures include:

• Limited Liability Partnership (LLP): Offers flexibility with limited liability.
  Private Limited Company (Pvt Ltd): Ideal for manufacturing and marketing businesses due to scalability and investor appeal.
• Public Limited Company: Suitable for large-scale operations planning to raise funds from the public.
• Indian Subsidiary of a Foreign Company: Allows foreign companies to establish a presence in India and leverage the growing market.

India ranks 3rd in the world by volume and 14th by value in pharmaceuticals, making it a preferred hub for domestic and international players. Choosing the right structure ensures smooth registration and compliance.

Eligibility for Registering a Pharma Company

Eligibility criteria are designed to maintain quality and compliance in the pharma sector. Key rules include:

• The applicant must be legally competent to enter into a contract.
• The company must appoint qualified directors and pharmacists, depending on the business type.
• Proper compliance with the Drugs and Cosmetics Act of 1940 is mandatory.
• Only individuals or entities with relevant pharmaceutical qualifications/experience can run such businesses.

Requirements for Registering a Pharma Company

Corporate & Structural Requirements

These are the standard legal requirements for forming a company under the Ministry of Corporate Affairs (MCA).

• Directors and Members: The structure depends on your company type. For a Private Limited Company, a minimum of two directors and two members (shareholders) are required. The same individuals can hold both positions.
• Director Credentials: Every proposed director must have a Digital Signature Certificate (DSC) for online document submission and a Director Identification Number (DIN), a unique identifier issued by the MCA.
• Unique Company Name: Your proposed company name must be unique and not resemble any existing company or trademark. It must be approved and reserved through the MCA portal.
• Registered Office Address: You must provide a physical address in India as the company's official registered office. Proof of address, such as a utility bill or rental agreement, is mandatory for verification.

Pharmaceutical & Technical Requirements

These are specific mandates from the Drugs and Cosmetics Act, 1940, enforced by state drug control departments, which are essential for obtaining a drug license.

Qualified Technical Personnel: 

You must employ qualified individuals to supervise the sale and distribution of drugs. The requirements vary based on the business type:

• For Wholesale Business (Distribution): The operations must be supervised by a "Competent Person." This can be:
  
  • A Registered Pharmacist.
  • A graduate with at least one year of experience in dealing with drugs.
• For Retail Business (Pharmacy): All sales and dispensing activities must be conducted under the direct supervision of a Registered Pharmacist.

Adequate Storage Premises: 

You must have a proper commercial space for storing medicines. The premises are inspected by a Drug Inspector and must meet specific conditions:

• Minimum Area: Typically, a minimum of 10 square meters is required for a wholesale license. This can vary by state.
• Proper Storage Facilities: The premises must be clean, well-lit, and equipped with necessary storage solutions like cupboards, racks, and, crucially, a refrigerator and freezer to store temperature-sensitive drugs like vaccines and serums.

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How to Start a Pharmaceutical Company in India?

The incorporation process is now simplified through the SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form by the Ministry of Corporate Affairs. Steps include:

Phase 1: Business Incorporation

The first step is to register your business as a legal entity with the Ministry of Corporate Affairs (MCA). The modern SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form has streamlined this process significantly.

• Get Director Credentials: All proposed directors of the company must obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN). The DSC is an electronic signature used for filing documents online, and the DIN is a unique number assigned to each director.
• Reserve a Company Name: You must apply for and reserve a unique name for your company. This can be done through the MCA portal's RUN (Reserve Unique Name) service or directly within the SPICe+ form.
• Draft Foundational Documents: Two critical documents need to be prepared:
  
  • Memorandum of Association (MoA): This document defines the company's objectives and the scope of its business activities.
  • Articles of Association (AoA): This document outlines the internal rules and regulations for managing the company.
• File the SPICe+ Form: This single, integrated web form is used to file for incorporation. It combines applications for the company name, DIN allotment, and issuance of important tax numbers like PAN and TAN.
• Receive Certificate of Incorporation: Once the MCA approves your application, you will receive a Certificate of Incorporation. This certificate includes your unique Corporate Identity Number (CIN) and officially marks the legal birth of your company.

Phase 2: Securing Pharmaceutical Licenses

This is the most critical phase and is specific to the pharmaceutical industry. These licenses are granted by the Central Drugs Standard Control Organization (CDSCO) and State Drug Control Departments.

• Drug License: This is the primary license required to deal with drugs and cosmetics. The type of license depends on your business model:
  
  • Manufacturing License: Required if you plan to manufacture drugs. This involves a rigorous inspection of your manufacturing facility to ensure it complies with Good Manufacturing Practices (GMP) and has the necessary technical staff and equipment.
  • Wholesale/Distribution License: Required for stocking, selling, and distributing drugs. This requires having adequate storage premises with proper refrigeration facilities and employing a registered pharmacist.
• GST Registration: Before you can apply for a drug license, you must complete your Goods and Services Tax (GST) registration. The GSTIN is a mandatory requirement for the drug license application.

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Phase 3: Brand and Tax Formalities

With your company and licenses in place, the final step is to protect your brand and manage your finances.

• Trademark Registration: It is highly advisable to register your company name, logo, and the brand names of your pharmaceutical products. This protects your intellectual property and prevents others from using similar names.
• Bank Account Opening: You can open a corporate bank account using the Certificate of Incorporation and other registration documents.

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Documents Required to Register a Pharma Company

Here’s a checklist of essential documents required to open pharma company:

For Indian Directors/Shareholders:

• PAN Card
• Aadhaar Card
• Passport-size photographs
• Address proof (utility bill, bank statement)

For Foreign Directors/Shareholders:

• Passport (notarised and apostilled)
• Proof of overseas address
• Photograph

For the Company:

• Registered office address proof (rent agreement/ownership proof)
• Utility bill of the premises (electricity/water bill)
• MoA and AoA

Other Registrations Required for a Pharma Company

After incorporation, a pharma company must obtain additional registrations and licenses to operate legally:

1. Drug License (under the Drugs and Cosmetics Act, 1940)
   
   
   
   • Manufacturing License
   • Wholesale License
   • Retail License
   • Loan License (for outsourcing manufacturing)
   • Import License (for foreign medicines)
     
     
2. GST Registration – Mandatory for taxation and interstate sales.
3. FSSAI Registration – Required if dealing with nutraceuticals or dietary supplements.
4. Trademark & Patent Registration – Protects brand identity and intellectual property.
5. Import Export Code (IEC) – For companies engaged in pharma exports/imports.

Frequently Asked Questions (FAQs)