Starting a Proprietorship: Can I Legally Use "Director" on My Own ID Card?

I am creating a new proprietorship firm and getting ID cards developed for my employees. Can I also have an ID card for myself with the title "Director," or is it not allowed by law? Please advise?

All your posts show that you are starting a new firm with yourself as the proprietor. Congratulations on that. However, you seem to be both cautious and excited at the same time. It would be better if you sought help from a legal or experienced accounting professional to clarify your thoughts.

Consider Your Role in the Company

One thing I would suggest is to consider yourself an employee of the company, especially in its initial phases. While every employee of your company will know you are the owner, titles like Director and CEO will only emphasize your authority and may impact your personal goals. Presenting yourself as a Senior Manager or General Manager will position you as an employee, making your fellow workers feel more comfortable and attached. This is a natural approach for employees in organizations of any size. Directors or CEOs are typically those who do not attach themselves to the presumed roles.

All the best for your future. Remember, difficulty, discouragement, and disappointment are not signs of failure; they are challenges on your path to success.

Yes, there is no law which says a director cannot have an ID card. I have issued it to my directors in the past as well. A director is as important as an employee.

Yes, the Director is also an employee of the company and should possess an ID card. It helps you prove your identity when you approach other organizations, especially banks.

Thank you.

Understanding Designations in a Proprietary Firm

You are creating a proprietary firm. There is no legal concept of a director in a proprietary firm. Therefore, you should actually have the designation of proprietor.

There is a law that disallows a company from designating any person as a director unless the person is on the board of the company. If you are not a company, this rule does not apply. I can't find any similar law for a proprietor firm. Many organizations have the post of a director to designate the head of a certain function (similar to the president).

Purpose of an Identity Card

What is the exact purpose of the identity card? Is it for identification to outsiders (like courier personnel, telephone service teams) or for internal purposes (such as the watchman checking before allowing entry) or access control (smart card, RFID, biometric asset)? If it is internal, you do not need it. The watchman knows you. If it is external, maybe visiting cards are better. You need to evaluate the purpose and how it fits into your environment.

If you are issuing one to yourself just to appear part of the team (everyone in the office will display it), you can issue it with any designation of your choice, or even without a designation for yourself. There is no legal binding as long as it is not a misrepresentation.

Regards

ID, either digital, magnetic, or non-magnetic, can be obtained by all, including the proprietor and employees. There is no restriction. In fact, it is beneficial in many ways for the proprietor to carry an ID card when visiting various offices or clients. This will also prevent the embarrassment of saying 'I don't have one' when asked to show ID. The proprietor can certainly have one for themselves; the only limitation is they cannot have the luxury of an Employee Number. I'm certain many of my clients already possess one.

Could you kindly highlight which law disallows the designation of Director being conferred upon non-board members? In advertising, the positions of Account Director and Client Services Director are a level below General Manager, and every advertising agency has had this designation for many decades. Similarly, not all HR Directors are board members. Additionally, there are many non-board members who hold titles such as Technical Director, Commercial Director, Finance Director, Executive Director, etc. Since you mentioned that the law prohibits this practice, could you please inform us of the specific law that prohibits it? This information would be enlightening for us.

Regards

Understanding the Role of a Director

The term "director" is legally applicable to companies that fall under the Companies Act. A director is a person who controls a company, which may be a private or public limited company. They have statutory obligations placed upon them that are different from those of a proprietor. Also, remember, a company must have at least two directors.

No law may stop you from using any terminology, but one must understand that people may get misguided if the owner calls themselves a director. There is always a difference between an owner/proprietor and a director.

Understanding Director Titles Under the Companies Act

The Companies Act of 1956 and the new Companies Act of 2013 both define the term "director." Both acts categorically state that someone who is not a member of the board of directors cannot be designated as a director. It is an offense under the act, and the company can be penalized for it. The penalty is quite high.

First, remember that this rule applies only to companies. Partnership firms can appoint anyone as a director.

Second, many companies either deliberately or unknowingly violate this rule. The Registrar of Companies (ROC) has not prosecuted anyone for it unless they have signed official ROC-related documents, but they have the authority to do so.

An art director or movie director in an advertising company, for example, is different. It is commonly understood that this person is not a director under the Companies Act, but rather that their role involves direction. If a Client Services Director is not on the board, that would be a violation of the act, as would be the case for any Executive Director, Finance Director, etc., who is not actually a director.

I am not certain of the exact location where this rule is currently stated. I will verify and provide additional information. The new Companies Act is highly complex, and I have not yet read all sections.

Regards, Anonymous

Thanks for your explanation. I have worked in one of the top advertising agencies as an HR Director. I am currently designated as an HR Director of a large MNC petrochemical company but am not a board member. I was not a board member in any of my previous roles as an HR Director.

I also understand that, as per the Companies Act, it is not a crime to use the title of Director. When I checked with my Company Secretary, he confirmed that it is not against the law to use the title, as a Director is a person who directs the activities of the function/business for which he is responsible, regardless of whether he is a board member or not.

When I mentioned your view to him, he explained that many people mistakenly believe that the term Director implies a board member, which is not the case. If you can provide me with the sections that disallow the use of the term, I will share them with him. I strongly believe that we should not use a title that is prohibited by law.

Regards

I asked some of the corporate lawyers I know, and they confirmed it is not allowed. Director as a Specific Term

Director is a specific term in company law and cannot be used in common terms of direction. If that were the case, you could also be called managing director if you manage directions. That's what we used to call chop logic.

That can, of course, be used for a position of an actual director - art director, etc., which is a common parlance term for the function. Unfortunately, none of us have time to go through the Companies Act to find the relevant section of the act. I hope to check it out next week. Message me separately, and we will discuss it offline.

This is the reason why companies used to use the term "President" instead of directors for top posts. A President need not be a member of the board.

Regards, anonymous

@Saswatabanerjee, Incidentally, the HR heads in Chemplast and also in DeutscheBank in India are designated as MD (HR), and they are not board members. I would like to know the sections under which this practice is banned. My company secretary says there is no such law, and if it did exist, many would have been prosecuted by now. I will also check it out. I just managed to get the Companies Act with commentary.