Director

Director - Transcript

Meaning of a Director

Any person occupying the position of director by whatever name called Sec 2 13

Who are Directors
The persons through whom a company acts and does its business are termed as directors They are collectively known as board of directors They are the brains of a company A director is defined as a person having control over the direction conduct of a company

Who may be appointed as a Director
No body corporate association or firm Only an individual Sec 253

Board of Directors

Board of Directors or Board in relation to a company means the Board of Directors of the Company Sec 2 6

Minimum Maximum Number of Directors
Public Co Minimum 3 Maximum Private Co 2

Both Minimum and Maximum number of Directors may be as provided in the articles

Number of Directorship

A person cannot hold office at the same time as a director in more than 15 companies

Types of Directors
Inside Directors Outside Directors Professional Directors Nominee Directors Special Director or Executive Director Government Directors Whole Time Directors Managing Director Non Executive Director

Qualifications For Directors
Act prescribes no academic professional or share qualifications Articles may provide for any qualifications Where share qualification is fixed by articles then Sec 270 Act provides
Qualification shares must be taken within 2 months after appointment Nominal value of qualification shares not to exceed Rs 5000 or 1 share where it exceeds Rs 5000 Share warrants will not count for this purpose

Disqualifications of Directors
The following persons are disqualified for appointment as directors of a company A person of unsound mind An undischarged insolvent A person who has applied to be adjudicated as an insolvent and his application is pending Person who has been convicted by a court on any offence involving moral turpitude A person whose calls in respect of shares of the company held for more than 6 months have been in arrears

Contd
A person who is disqualified for appointment as director by an order of the court under Sec 203 which deals with powers of the court to restrain fraudulent person from managing co A person who is a director of a public co which has not filed the annual accounts annual returns for 3 financial year commencing on after 1 3 1999 Has failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or pay dividend such failure continues for one year or more



Contd
9 The disqualification mentioned in clauses D E may be removed by Central Govt by notification in official gazette 10 Private co not a subsidiary of a public co may by its articles provide for additional grounds 11 A director who has been removed by the central govt shall not be a director for five years

Appointment of Directors
First Director Appointment of Directors by Company Appointment of Directors by Directors Appointment of Directors by third parties Appointment of Directors by proportional representation Appointment by Central Government Appointment by Small Share Holders

Removal of Directors
By shareholders Sec 284 By Central Government By National Company Law Tribunal

Legal Position of Directors
As Agents As Trustee As Managing Partners As Employees

Contd
Directors have sometimes been called as Trustees or Commercial Trustees and sometimes they have been called managing partners it does not matter much what you call them so long as you understand what their real position is which is that they are really commercial men managing a trading concern for the benefit of themselves and of all the shareholders in it They stand in a fiduciary position towards the company in respect of their powers and capital under their control M R Jessel

Power to be Exercised by Resolutions Passed at Board s Meetings
The power to make calls The power to issue debentures The power to borrow money otherwise than on debentures The power to invest the funds The power to make loans The power to authorize the buyback of shares Others The power to fill causal vacancy in Board Sanctioning of a contract in which a Director is interested Recommend rate of dividend in AGM Power to make political contributions

Restrictions on the Powers of the Board
Restrictions on making political contributions Restrictions on the power to appoint Exemption from liability in respect of negligence etc Holding of office or profit Restriction on the number of Directorships Restriction regarding standing surety for an accused person

Power of the Directors
Board of Directors of a company shall be entitled to exercise all such powers and to do all such acts and things as the company is authorized to exercise and do Sec 291

Powers to be exercised by the company in the general meeting
Sale Lease or Disposal of the undertaking Showing any concession regarding payment of debts Make investment of the amount of compensation received Contribution to charitable and other funds Borrowing money

Duties of Directors
Duty of Good Faith Duty of reasonable care Duty to attend board meetings Personal attendance Duty to disclose interest Audit committee Sec 291A Investor s Grievance Committee

Limitations
Where the Directors actions are found to be malafide Where the Board becomes incompetent to act Deadlock in the Board