How to Start a Travel Agency in India: A Proven Guide for 2025

Meaning of Director in Private Limited Company

In a private limited company, a director is an individual appointed to the board of directors, responsible for managing the company's affairs. Directors act on behalf of the company, making high-level decisions to steer the company toward its goals.  For example, appointing key executives, such as a CEO or CFO or approving budgets to support growth initiatives.

Be it any type of company, their role includes overseeing corporate strategies, managing financial risks and ensuring compliance with relevant laws. 

Directors are entrusted with fiduciary duties and expected to act in the company's best interest, as well as that of shareholders and stakeholders. They are key decision-makers and hold significant power in shaping the company's direction, whether in operations, business expansions or financial management.

In short, directors form the backbone of a company’s governance structure and are accountable for its overall performance.

Becoming Director in a Private Limited Company

To become a director in a private limited company, follow these steps:

Step 1. Obtain a Director Identification Number (DIN):

• Apply for a unique DIN via the Ministry of Corporate Affairs (MCA) portal.
• This is a mandatory requirement for anyone seeking an appointment as a director.

Step 2. Prepare Necessary Documents:

• Gather proof of identity (such as a PAN card) and address (such as an Aadhaar card or utility bill).
• Ensure all documents are valid and up-to-date for smooth processing.

Step 3. Submit Documents During Incorporation:

• Provide the required documents as part of the company incorporation or appointment process.

Step 4. Appointment by Shareholders:

• The company's shareholders formally appoint the director during a board meeting.
• Ensure the appointment is in compliance with the company's Articles of Association.

Step 5. Register Appointment with Registrar of Companies (RoC):

• The appointment must be officially registered with the RoC to complete the process.

Step 6. Understand Director Responsibilities:

• Recognise that being a director comes with significant legal, financial, and operational responsibilities.

Private Limited Company Directors Responsibilities

A director in pvt ltd company fulfils various duties and responsibilities that ensure the company’s smooth operation and compliance with laws. Here are some company director duties:

• Act within Powers

Directors must act within the authority of the company's Memorandum and Articles of Association, ensuring all actions are legal and authorised.

Example: A director of a manufacturing firm must seek board approval before signing a contract for a new supplier, as stipulated in the company’s Articles of Association.

• To Promote the Welfare of the Company

Directors must always prioritise the company’s success, avoiding decisions that might harm its operations or financial standing.

Example: A director of a retail chain may opt to delay expansion plans during an economic downturn to ensure the company’s financial stability.

• Exercise Personal Discretion

Directors are expected to use their judgment and discretion in decision-making, ensuring they make independent choices that align with the company’s interests.

Example: A director in a tech startup may choose to invest in a high-potential but risky innovation project after independently analysing market trends, even if other board members are hesitant.

• Avoid Conflict of Interest

Directors must avoid situations where their personal interests conflict with the interests of the company, such as taking part in business transactions that may benefit them personally.

Example: A director owning shares in a vendor company must disclose this relationship and recuse themselves from decisions involving contracts with that vendor.

• Make Independent Decisions

As a director, it’s crucial to maintain the ability to make independent decisions that are in the best interest of the company’s growth and long-term success. 

Example: A director may support a merger proposal after conducting an unbiased evaluation of the deal’s benefits, even if opposed by some stakeholders.

• Crisis Management

During challenging times, directors must manage crises effectively, keeping the company’s long-term goals in mind and navigating risks judiciously.

Example: A director in a logistics company might quickly implement contingency plans during a supply chain disruption, ensuring customer commitments are met while minimizing losses.

The role of a director in a company is a balance of leadership, responsibility and ethics. Every decision you make impacts the company, and you must ensure that the company thrives and adheres to the law.

Types of Directors in Company Law

Private limited companies can have different types of company directors, each with specific roles and responsibilities. Major types of directors in a private limited company include:

• Managing Director(MD)

The Managing Director (MD) is the highest ranking director responsible for overseeing the company’s daily operations and ensuring its goals and strategies are successfully carried out.

As the MD, this director holds significant decision-making authority and is responsible for setting organisational policies, managing resources and leading the team. They work closely with the board to align the company’s strategic initiatives with long-term objectives. 

The MD bridges the board and the company's operational team, driving performance and growth.

• Whole-Time Director

A Whole-Time Director is a full-time employee dedicated to specific operational responsibilities within the organisation. Unlike non-executive directors, they are involved in the company's daily operations, overseeing areas such as finance, HR or marketing. 

Their role is to ensure smooth operational performance and to support the MD and board by managing specific functions and executing company policies. Whole-Time Directors are vital in implementing the board’s strategic decisions on a day-to-day basis.

• Ordinary Director

An Ordinary Director is a member of a company’s board of directors, serving in a non-executive capacity. Their primary role is to attend board meetings, contribute to discussions, and participate in decision-making processes that shape the company's strategy and policies. 

Unlike executive directors or managing directors, Ordinary Directors are not involved in the day-to-day management or operations of the business.

• Nominee Director

A Nominee Director is appointed to represent the interests of a particular stakeholder, often an investor or a lending institution. They serve on the board to ensure that the appointing party’s interests and concerns are considered in key company decisions. 

Nominee Directors may be particularly common in joint ventures or companies with external funding. Their responsibility is to maintain a balanced perspective in the boardroom, ensuring the investor or stakeholder’s views are addressed without compromising the company's broader interests.

• Alternate Director

An Alternate Director is appointed temporarily to act in place of an absent director, usually one who is based abroad or unavailable for a period. The Alternate Director has the same powers and responsibilities as the original director and participates in board meetings and decision-making. 

This role ensures continuity in governance, allowing the company to maintain full functionality even when a permanent director is unavailable.

• Professional Director

A Professional Director is an individual appointed to a company’s board based on their expertise, skills, and experience rather than their relationship with the company’s founders or shareholders. 

Typically, these directors bring specialised knowledge in areas such as finance, law, operations, marketing, or industry-specific expertise that adds value to the board’s decision-making process.

All the types of directors in a company bring specific expertise and focus, helping ensure a well-rounded leadership team.

Number of Directors in Private Limited Company

The number of directors in private limited company depends on the scale and needs of the business. The minimum directors in the private limited company can be 2. However, the maximum number of directors in a private company is 15. A smaller company may only need two or three directors.

It is important to balance the number of directors, as having too few can limit the diversity of opinions and skills, while too many can create inefficiencies in decision-making. 

When determining the optimal number of directors for a company, consider the following factors:

• Company Size and Complexity

Larger or more complex companies benefit from more directors handling diverse functions and providing specialised knowledge in finance, operations and marketing.

• Industry Requirements

Certain industries, especially those highly regulated (e.g., finance, healthcare), may require directors with specific expertise or certifications, potentially increasing the ideal board size.

• Diversity of Skills and Perspectives

A well-rounded board should include directors with diverse skills, professional backgrounds and viewpoints, enhancing decision-making and innovation.

• Corporate Governance Standards

For better governance and accountability, adding more independent or non-executive directors can help provide objective oversight and mitigate conflicts of interest.

• Decision-Making Efficiency

Smaller boards may lead to quicker decision-making, while larger boards can become cumbersome; balance is key for smooth and effective operations.

• Legal and Compliance Requirements 

Local law often sets minimum and maximum limits on the number of directors, so companies must adhere to these regulatory standards.

• Cost Implications

Increasing the number of directors adds to costs (e.g., compensation, meeting expenses), so financial resources must be considered when expanding the board.

• Growth Stage

Early-stage companies may need fewer directors, focusing on core founders, while scaling companies benefit from additional directors with strategic and operational experience.

So, the ideal number of directors depends on the company’s size, the industry and the areas of expertise required.

Company Director Residency Requirement

In India, one of the key legal director requirements for establishing a private limited company is that at least one director must be a resident of India. Under the Companies Act, a resident director is defined as someone who has spent at least 182 days in India during the preceding calendar year. 

This company director residency requirement serves multiple purposes:

• To ensure local governance and effective leadership
• As a safeguard against companies that may be established with little or no physical presence in the country, helping the government ensure that companies are genuinely rooted in the local economy. 
• To enhance accountability and align the company’s operations with India’s regulatory framework, benefiting both the company and its stakeholders.

Conclusion

Directors in private limited companies play a critical role in steering the organisation toward growth and ensuring legal compliance. With increasing complexities in business operations, the responsibilities of directors are more significant than ever. 

As businesses grow and face new challenges, the role of directors will evolve, but one thing will remain constant: the need for both responsible and visionary leadership. Directors must continue to adapt, making informed decisions to lead their companies into the future.

FAQs on Directors in a Private Limited Company

What is a Startup?

A startup is a young company founded to solve a problem through innovation, technology, or a novel business model. Unlike traditional businesses, startups are designed to grow quickly, scale globally, and often operate in uncertain or untested markets.

Key traits of a startup include:

• Innovation-first approach: Either in product, process, or business model
• Scalability: Designed to serve large or global markets with minimal incremental costs
• Technology-driven: Often built on tech platforms or software solutions
• High risk, high reward: Operates in dynamic environments with a focus on fast growth

Startups registered under the Startup India scheme receive benefits such as tax exemptions, fast-track IP protection, and easier compliance processes.

What is an MSME?

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy. They focus more on incremental growth, cost efficiency, and local market needs. MSMEs are generally rooted in traditional sectors, such as manufacturing, retail, and services, and aim for sustainable profitability over rapid scaling.

Unlike startups, MSMEs usually:

• Focus on improving existing processes or delivering standard products/services
• Operate with limited risk appetite
• Prioritise steady revenue and employment generation
• Leverage known technologies and business models

MSMEs are recognised under the Udyam Registration system and benefit from credit schemes, subsidies, and easier access to bank loans.

Growth and Scalability

• Startups are designed for rapid growth, often scaling 10x in short timeframes, especially in sectors like fintech, SaaS, healthtech, or edtech. Growth is typically fueled by technology, network effects, and venture funding.
  
• Conversely, MSMEs prioritise gradual, sustainable growth, often within a well-defined geographic or sectoral niche. Their scaling is rooted in stability, profitability, and local expansion, not exponential leaps.

Risk Appetite and Funding

• Startups thrive in high-risk environments, betting on new ideas or technologies. They actively seek external funding from angel investors, venture capitalists, or startup-specific government schemes (like Fund of Funds for Startups).
  
  
• MSMEs are typically risk-averse, aiming for consistent revenue. They rely on traditional funding like bank loans, government subsidies, and schemes like CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises).

Ready to launch your business? Get expert assistance with Startup registration and unlock exclusive benefits today.

Innovation and Adaptability

• Startups focus on disruption; they aim to change how industries work by introducing new tools, services, or models. Agility, rapid experimentation, and quick pivots are part of their DNA.
  
  
• MSMEs tend to prioritise adapting existing technologies or methods to improve efficiency. Their innovation is often incremental, refining what already works rather than reinventing it.

Regulations and Compliance

Both startups and MSMEs benefit from supportive government policies, but the nature of compliance and regulatory support varies.

For Startups:

• Eligible for benefits under the Startup India scheme
• Tax holiday for 3 years under Section 80-IAC
• Faster IP protection and easier public procurement norms
• More legal scrutiny as they scale, especially in sectors like fintech, health, or data

For MSMEs:

• Registered under Udyam Registration
• Access to collateral-free loans, subsidies, and credit guarantees
• Simplified compliance norms, especially for micro and small enterprises
• Priority in government tenders and incentives for manufacturing/export

Employment Contribution

• Startups create fewer but highly skilled jobs, especially in product development, data science, marketing, and growth. Their contribution lies in creating future-ready roles and digital talent.
  
  
• MSMEs are India’s largest employers after agriculture. They generate mass employment, particularly in manufacturing, services, and rural sectors, contributing significantly to India’s GDP and industrial base.

Market Reach

• Startups often think global from day one. Companies like Freshworks, Byju’s, and Zerodha are built to serve a digital-first, borderless audience.
  
• MSMEs typically cater to local or regional markets, with products tailored to domestic demand. Some medium-sized enterprises expand globally through exports, especially in textiles, handicrafts, or auto components.

Advantages of a Startup

• High innovation potential and the ability to disrupt industries
• Agility in decision-making and operations
• Rapid scalability with lower marginal costs via digital tools
• Access to VC funding, tax benefits, and government grants
• Lean teams and remote-first models reduce operational overhead

These traits make startups ideal for solving complex problems at scale, especially with technology as a lever.

Advantages of an MSME

• Consistent contributors to India’s economic growth
• Flexibility to adapt to local market changes and demands
• Support regional employment and entrepreneurship
• Strengthen local supply chains and ecosystem resilience
• Benefit from low compliance burdens and cost-effective operations

MSMEs play a foundational role in inclusive growth, uplifting rural economies and providing livelihood opportunities at scale.

Frequently Asked Questions

What is a Certificate of Commencement of Business?

The Certificate of Commencement of Business is a mandatory legal document that certain companies in India must obtain before they start their business activities. It is issued by the Registrar of Companies (ROC) under the Companies Act of 2013, and applies specifically to public and private companies limited by shares.

Beyond legal compliance, this certificate also plays a big role in establishing trust. It shows investors, banks, and stakeholders that your company has met all foundational requirements and is operating within the bounds of the law. It also helps prevent fraudulent incorporations by ensuring that companies follow due process from the start.

Significance of Commencement of Business Certificate

The Certificate of Commencement of Business serves multiple purposes:

• Legal Authorisation: It acts as formal approval for a company to start its operations.
  
• Regulatory Compliance: Ensures adherence to the provisions of the Companies Act of 2013.
  
• Prevention of Fraud: Minimises the risk of shell companies or fraudulent incorporations.
  
• Credibility: Enhances trust with investors, financial institutions, and stakeholders.
  
• Access to Funds: Allows the company to exercise borrowing powers and raise capital legally.
  

Commencement of Business under Companies Act 2013 – Old Act and Procedure

Under the Companies Act, 2013, companies with share capital cannot begin operations immediately after incorporation. While companies without share capital may commence business right after receiving the Certificate of Incorporation, those with share capital must secure a Certificate of Commencement of Business as per Section 11 of the Act and Rule 24 of the Companies (Incorporation) Rules, 2014.

This requirement is applicable to all newly formed public and private companies with share capital, highlighting the importance of meeting initial capital commitments and completing registration protocols before beginning operations or seeking external financing.

Position Under Erstwhile Companies Act, 1956

Previously, the Companies Act of 1956 governed the commencement of business for companies in India. Under this law, only public companies with share capital were required to obtain a Certificate of Commencement of Business. Private companies, on the other hand, were exempt and could begin operations immediately after incorporation.

The 2013 Act introduced more stringent rules, bringing private companies with share capital under the same requirements to enhance transparency and accountability.

Certificate of Commencement of Business Under Companies Act 2013

To obtain this certificate under the current law, companies must meet two critical requirements:

1. Declaration by a Director: The director must declare that every subscriber to the memorandum has paid for the shares they subscribed to.
   
2. Registered Office Verification: The company must file verification of its registered office with the ROC.
   

Only after fulfilling these conditions can the company apply for the certificate and begin lawful operations.

Eligibility Criteria for Commencement of Business Certificate

The Certificate of Commencement of Business (COB) is mandatory for the following categories of companies:

• Companies Incorporated on or after November 2, 2018: Any company registered after this date is required to obtain the COB Certificate within 180 days from the date of incorporation.
  
• Companies with Share Capital: Regardless of industry or business type, all companies with share capital must apply for and secure the COB Certificate before starting operations.
  

Which Company is Not Required to File a Certificate of Commencement of Business?

The following categories of companies are exempt from filing for the Certificate of Commencement of Business. These include:

• Companies Incorporated Before November 2, 2018: This exemption applies to companies that were established prior to the implementation of the Companies (Amendment) Ordinance, 2018, specifically before November 2, 2018.
  
• Companies Registered After November 2, 2018, Without Share Capital: Companies that were incorporated after November 2, 2018, but do not have a share capital structure, meaning they haven’t issued any shares, are also exempt from obtaining the COB Certificate.
  

Documents Required to Obtain Commencement of Business Certificate in India

To apply for the Certificate of Commencement of Business, companies must submit the following documents:

• Form INC-20A: A declaration filed by a director.
  
• Board Resolution: Approving the commencement of business.
  
• Proof of Capital Subscription: Evidence that all subscribers have paid their share value.
  
• Registered Office Proof: Utility bill or rental agreement confirming office address.
  
• Certificate of Incorporation: Issued by the ROC.
  

Application Process for Commencement of Business Certificate

Here’s a detailed walkthrough:

1. Log in to the MCA Portal
   Visit the official website of the Ministry of Corporate Affairs (MCA). Log into the MCA portal using your registered credentials (User ID and Password). If you are not registered yet, you must create an account first.
   
2. Navigate to the e-Filing Section
   After logging in, go to the 'MCA Services' tab and select the 'e-Filing' option. This section contains all the necessary forms and submission options for company-related filings.
   
3. Download and Fill out Form INC-20A
   Locate and download Form INC-20A- the specific form used for the Declaration of Commencement of Business. Carefully fill in all the required details, such as company information, paid-up share capital details, and confirmation of compliance with registration requirements.
   
4. Select the Correct Corporate Identification Number (CIN)
   Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
   
5. Attach the Required Documents
   Upload the necessary supporting documents, which typically include:
   
   • The director’s declaration that the subscribers have paid all share capital
     
   • Proof of registered office verification (such as a utility bill, rent agreement, or ownership document)
     
6. Select the Correct Corporate Identification Number (CIN)
   Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
   
7. Submit the Form and Pay the Prescribed Fee
   Once the form and attachments are ready, submit them through the portal. Pay the applicable government fee based on your company's authorised share capital. The payment can usually be made online through various options available on the MCA portal.
   
8. Receive the Service Request Number (SRN)
   After successful submission, the system will generate a Service Request Number (SRN). Save this number carefully, it will help you track the status of your application and any future correspondence regarding your Certificate of Commencement of Business.
   

Time Limit for Filing the Declaration of Commencement of Business

As per Section 11 of the Companies Act, 2013, the declaration must be filed within 180 days from the date of incorporation. Failure to do so can lead to:

• Penalties for the company and its officers.
  
• Potential strike-off from the ROC register
  

Form INC-20A

Form INC-20A is the declaration form filed to confirm the commencement of business. It must be signed by a director and certified by a professional (CA/CS/CWA). The form includes:

• Company details
  
• Paid-up capital confirmation
  
• Registered office address verification
  

Fee For Filing Form 20A and Receiving Commencement of Business Certificate

The fee for filing Form INC-20A depends on the company's authorised share capital:

Consequences of Not Filing Certificate of Commencement of Business

Failing to file Form INC-20A within the 180-day window leads to:

• Penalty of ₹50,000 for the company.
  
• ₹1,000 per day penalty for each defaulting officer, up to ₹1 lakh.
  
• ROC may strike off the company’s name if it remains inactive under Section 11(3).
  

Conclusion

Obtaining the Certificate of Commencement of Business is a critical step that validates your company's readiness to operate in India’s regulatory landscape. For public and private companies with share capital, understanding and complying with this requirement ensures legal clarity, business credibility, and uninterrupted growth. By following the correct process, submitting the necessary documents, and meeting deadlines, companies can avoid heavy penalties and begin their entrepreneurial journey on the right foot.

Frequently Asked Questions