Under Section 161(3) of the Companies Act, 2013, a Nominee Director is a person appointed by a third party or institution, such as banks, financial institutions, or the government, to represent their interests on the board of a company. This ensures that the nominating entity’s rights are protected, especially in cases of loans or equity investments.

Who Can Be a Nominee Director?
A bank or financial institution can nominate a director if they have provided loans or financial assistance to the company.
The Central or State Government can nominate a director if it holds a stake or has strategic interest.
Any body corporate or individual, if permitted by the articles of association or a shareholders’ agreement, can appoint a nominee director.

Eligibility Criteria:
Must be an individual.
Must be capable of entering into a legal contract.
Should not be disqualified under Section 164 or 165 of the Act.
Should possess a valid Director Identification Number (DIN).

Documents Required:
Board Resolution or Letter of Nomination from the nominating authority.
Consent to Act as Director (Form DIR-2).
Declaration of non-disqualification (Form DIR-8).
DIN allotment or intimation, if not already allotted.
Proof of identity and address of the nominee.

Term and Removal of Nominee Director
The tenure is generally defined in the agreement or as per the Articles of Association.
A nominee director can be removed by the nominating authority at any time by issuing a formal communication to the company.
The company must update ROC filings (via Form DIR-12) on removal or resignation.