Appointment of Directors :

The no. of directors to be appointed to the board of directors of a company is determined by articles . The act provides that there must be atleast 3 directors in public company and 2 directors in private company . Subject to the minimum stated about and maximum fixed by articles,the company can by ordinary resolution increases or decreases the no. of directors. It can also appoint addition directors for one year 1)Mode of Appointment of Directors: a-First director :Person names in the AOA as directors, become the first director of the company. b-Person who signed the MOA, if no. of person is named in the articles as directors, the person who signed the MOA of the company becomes the first director.

c-ELECTION- The normal mode of appointing directors is election by members at the annual election must be provided for the articles.

2) Appointment of Directors by Company:

Section 255 of company Act 1956,directors must be appointed by company in the general meeting .

3) Appointment of Directors by board of Directors: a-Additional Directors-The board of directors

can appoint additional director maximum to the point fixed by AOA of company .such additional directors hold office only upto the date of the next annual general meeting of the company b-Casual Vacancy-The vacncies amount a directors a public company and private subsidaries of public company may be filled by board of directors by nomination. The person will be holding that office for the period during which the director whose post is vacant.

c-Alternate Directors-The B.O.D.of company may be a resolution passed in a general meeting appoint for an alternate director to act for a director during his absence for a period of not less than 3 months.

4-Appointment of Directors by third parties:

impower the debenture holder or other creditors who have advance loans to the company to appoint their nominee to board. b-Nomination by central govt. Under sec.408 of the act the central govt. can (in case of mismanagement and operation) nominate some directors to board. c-Nomination in Statutory Corporation-The govt. can nominate the director to the board of company coming with in the perview of the industrialist(development and regulation act 1951)

Disqualification Of Directors:
Sec. 274 provides that a person shall not be capable of being appointed as a director of a company: a-He has found to be unsound mind by a court of competent jurisdiction. b-He is an undistressed insolvent. c-He has applied to be adjudicated as an insolvent and his application is pending. d-He has not paid any call in respect of shares of e-Sec.203,empowers the court to prohibit a person who is guilty of fraudulent practices of participating in the management of company.

Ques. Who can become a director its qualification? Ans.A director need not have any academic
qualification,he did not have any degree from university,he did not have been to school. From

the above discussion,it can be said that a director must have following qualification: A director must be capable of entering in to contract. (a) He must have attend the age of majority. (b) He must have sound mind. (c) He must not be disqualified from contracting by A director must be a natural person & must not be an artificial person. A director must have the requisite qualification shares. A director must be disqualified, if he is undistressed insolvent or a person convicted by court.

1-Retirement Of Director:
Sec.255 of company act 1956, provides that not less than 2/3rd of the total no. of directors of a public company or of a private company which is a subsidiary of a public company shall be a person whose period of office is liable to terminate by rotation.The articles may be provided for the retirement of all directors at

every annual general meeting, sec. 256 of act, provides that every annual general meeting after the first director,2/3rd of the directors are liable to return from office by rotation.

2- Resignation of Directors:
The companies act 1956, does not provide for resignation of directors but the AOA of company may have express prohibition of it. A director is an agent of company & therefore he can resign his office by notice . An oral resignation is effective if it is expected at the meeting of the company.A resignation is effective only when it is expected by B.O.D. of company.

3-Vacation of Office By Directors:

Sec.283, of the company act 1956,represents that the office of the directors shall be vacant under the following circumstances: *If he fails to obtain with in the due time or cheases of fails to hold the share qualification required by him as per article.

*If he is found to be unsound mind by a court of competent jurisdiction. *If he is applied to be adjuricate an insolvent . *If he is adjudged an insolvent. *If he is convicted by a court of any offence in respect thereof to imprisonment for not less than 6 months. *If he fails to pay any call of shares in the company held by him with in 6 months from the last date fixed for the payment of call. *If he acts in contravention of sec 299,which imposses a duty on directors to disclose their personal interests in any contract enter in to by the company. *If he becomes disqualified by any order of the court under sec.203,which provides that the court can prohibit the person guilty of fraudulent practices from managing a company. *He is removal from post of directors by members.

*If he doesnot from the 3 consecutive meeting of board or from all meetings of board for a continous period of 3 months without obtinina leave of absence from the board.

4-Removal of Directors:
Directors may be removed by shareholders, the central govt., or court. a- Removal by shareholder: Sec284,of the act provides that the members of the company may remove the director before the expiry period of office expect in following cases: *An additional director appointed by a central govt. under sec.408,(in case of mismanagement and operation)cannot be removed in a private company a director appointed for life and holding office before 1april1952 cannot be removed by members resolution. *When the articles of company provide for election of directors, a director elected by

that method cannot be removed by resolution. b- Removal by central govt.: The central govt. can make a reference to the high court to remove the directors when*any person is guilty or fraud, negligence or default etc.. *The business of the company is not following sound business principle. *The company is causing damage to trade and industry of business pertaining to it. *Any person of company is to defraud creditors, members, etc.. c-Removal by court: The court can remove the directors, under the following circumstances: *Conduct prejudicial to the public interest,oppressive any members. *A material change management or control of the company *The court is of opinion that the circumstances do not justify the winding up of clause.

SHARES: The shareholders are the

proprietors of the company.therefore a share may be defined as an interest in the company entitling the owner thereof to receive proportionate part of profit and any of the part of assets after liquidation .A shareholder has certain rights &liabilities.

Share Capital: It may mean any from the

under: NOMINAL CAPITAL/AUTHORISED CAPITALThe total face value of shares which the company is authorized to issue by its MOA. ISSUED CAPITAL-Part of authorized capital which is actually offered to public for sale. SUBSCRIBED CAPITAL-Part of issued capital which is taken up or accepted by public. PAID-UP CAPITAL-Amount of money actually paid by subscribers or creditors as so paid. UNCALLED CAPITAL-Unpaid proportion of subscribed capital is called uncalled capital.

FEATURES/CHARACTERISTICS:

*A share is not a sum of money but is an interest measured in sum of money and made up by various rights. *A share is an interest having a money value &made up of diverse rights specified under AOA. *The holder of share has certain rights duties &liabilities,which are given under the company act,MOA,AOA. *A share is transferable & heritable subject to regulation of the AOA. *The share &interest of member is movable property. *The share must be numbered so as to distinguish them from another.

SHARE CERTIFICATE:

It is a certificate

issued under common sale of company specify the no. of shares held by any members.

RULES:

 A company must prepare a share certificate &have them ready for delivery with in two months of allotment of shares. The share certificate prima-facie evidence of the title of members of such shares. Duplicate: a certificate received or duplicate issued of it.. a) Is proved to have been lost or destroyed. b) Having been multilated or formed is surrendered to company. * If the company provides a duplicated certificate,punished with fine. * The govt. may prescribed rules regarding the issue, renewal etc.. of share capital. *A share certificate issue by person authorized by company binds the company regarding title &payment.

SHARE WARRANT: It is a document issued

by a company stating that its bearer is entitled to the shares therein specified. It is a substitute for the share warrant may be issued for fully paid up

shares, if the article so provide and if the approval of central govt. has been obtained. Conditions for issue of share warrants: Shares shall be fully paid-up. The articles shall authorized the issue of share warrants. Prior approval of the central govt. shall be obtained . The share warrants shall be issued under the common seal of the company.

DIFFERENCE BETWEEN SHARE CERTIFICATE & SHARE WARRANT

Share warrant states that a bearer is entitled to shares specify therein .it is the substitute of share certificate. Share warrant is issued only with fully paid up shares the share certificate may be issued even though the share partly paid . A share &share certificate are transferred by the procedure stated in the companies act &

the articles of company .a share warrant can be transferred by the delivery of the warrant. The holder of share warrant does not ordinarily posses the rights to vote &to exercise other rights of membership. The holder of share certificate exercise the rights of all the membership including the rights to vote.

Transfer of Shares: shares can be

transferred in the manner provided in the article of the company. company act contents the following provisions regarding the transfer the shares*Documents- a company must required the following documents to transfer the shares: a) a proper instrument of transfer duly stamped &executed by or on behalf of the transferer & buy or on behalf of the transferee. b) certificate relating to shares or if no certificate is in existence, the later of allotment.

* The prescribed form: every instrument/ document (written) of transfer of share shall be in the prescribed form. a)It may be presented to the appropriate authority before it is signed by or a behalf of the transferer. b)the instrument of transfer shall be delivered to the company any time before two months from the date of presentation. *Lost instruments: if the instrument of transfer is lost , the director may allow the transfer on such terms as to indemmity as they think fit. *share of deceased member: the legal representative of a deceased member can transfer shares, although he is not himself a member. *Refuger: the article may impower the company to refuge to register a transfer or transmission of shares. The power of refuger must be excesed resembly &in good faith.

CALLED-UP SHARES: The company act

1956 provides that not less than 5%of the face value of the shares must be paid up with application for the purchase of shares. The balance of the purchase price is payable in the manner let down in the article. It may be provided that the company will demand the balance by a no. of calls in different times. When the company demands payment of any part of purchased price payable in this fashion, it is called to make a call.

Requisite of a valid call are stated below: Notice- the decision to make a call must be
taken by the B.O.D. &notified to the concerned shareholders.

Time &Amount- the resolution of the B.O.D.

must state the amount to be pay and its time.

Interest- the article of the company usually

provides that in case of default interest is to be paid by shareholders.

 Uniformity- calls shall be made on a uniform

basis all shares following under the same class i.e. ,there must not be any discrimination in favour of any shareholders.

Advance calls- a company may if so

authorized by the AOA except and advance payment of any part of the money due..i.e. before any call has been made.

Call in debt- when a call has been validity

made it becomes a debt due from the shareholder and the money can be recovered by suit.

Legal Decision- the formalities laid down in

the AOA regarding the making of calls must be complied with the rules & regulation .a call may in contravention of the provision of the article is invalid.

Forfeiture of Shares: the article may

provide that the shares of a shareholder can be forfeited under the certain circumstances. EX.non payment of calls.

Rules of forfeiture of shares:

Following rules regarding forfeiture of share are generally provided in AOA of company-

Decision of forfeiture of share must be made

by B.O.D.

A notice must be issued to the holder,

demanding to pay with in a fixed period on default of which the share will be forfeited.

On forfeiture the company becomes the

owner of the share and they can be solved to others.

Upon forfeiture the original shareholder

cheases to be a member and his name must be removed from the register of the members.

The forfeiture of share can be sold at unique

prices.

A forfeiture is not valid unless the power to

forfeit the share has been strictly & literally complined with.

 The power to forfeit is in the nature of trust

&must be excercised for the benefit of the company.

The purchaser of a share forfeited for nonpayment of calls is liable to pay all unpaid call due on the share.

There is nothing in the company act 1956,

which prevents a company from forfeiting the share of any member for non-payment of any money due to the company other than money due for payment of calls.

SURRENDER OF SHARES: It means

abandonment of the share by the holder itself in favour of company. There is no provision in the act for surrender of shares,but the articles of the company may provide for the acceptance of a surrender under the following circumstances Where the AOA impower the directors to accept it,in case of partly paid share which are going through forfeiture.

 Where the surrender is in accordance with the AOA acceptance in case of fully paid share in exchanges for new shares of the same nominal value & the surrender share are capable of reissued. Surrender amounts to a deduction of capital, therefore the articles can be provide for the acceptance of surrender under certain circumstances court justify forfeiture.

STOCK:

when all the shares of a company

have been fully paid up they may be converted into stock. If so authorized by the AOA conversion in the stock is may because it is a convenient method of denoting the capital of the company &the interest of the members. It does not affect the rights of the members in any way. When share are converted into stock notice must be given to the registrar. The registrar of members must show the amount of stock held by each member instead of the amount of the shares.

The use of the term stock merely denote that the company have recognized the fact of the complete payment of the shares &that the time has come when these shares may be assigned in fragment which form obivious result could not be permitted before.

Difference between shares and stock: these are two methods of denoting
the interest of a member of a company . according to sec.2,sub. Sec.46 of the company act 1956 the term share includes a stock. The differences are : The shares of the same company are of equal nominal value but stock may be divided into unequal amount. Thus, rupees100 worth of stock can be divided into two parts rs.50 each. Shares can not be issued or transferred in fragments dividing thus,a member cannot hold half a share but stock can be transferred in fragments.

 Share may be partly paid. Share can be converted into stocks only when the full payment is made. Stocks cannot be issued when a company is initially formed. Shares are issued only when a company is formed. Shares are numbered consecutively stocks are not numbered but the name of stockholder are recorded in the books of the company. Shares can be directly issued to public whereas stock cannot be issued directly.