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MIT SCHOOL OF BUSINESS

BUSINESS LAW

ASSIGNMENT -2

SUBMITTED BY

NILAMBARI BABAR

DIVISION: D

Roll. No. 340459


A director is a person appointed to the board of a company. Every company has
a board of directors consisting of individuals as directors. Every company shall
have minimum number of directors.

Legal rights or power of directors are as follows:

To make calls on shareholders in respect of money unpaid on their shares.


To borrow monies
To invest the funds of the company
To approve amalgamation, merger or reconstruction
To make political contribution
To appoint internal auditors and secretarial auditor
To diversify the business of the company
To make political contributions
To grant loans or give guarantee or provide security in respect of loans.
Act with reasonable care skill and shall exercise independent judgement.
They should act in accordance with the articles of the company

Legal position of the directors are as follows:

Director act as an agent of the company who controls the affairs of the
company and are within the scope of their authority. They have to
disclose their interest if any in the transaction of the company.
Directors act like trustees of the company they also in charge of
companys money and its property. The directors maybe called upon to
refund to the company any money and property improperly and
negligently applied by them.
Directors act as managing partners as they manage day to day affairs and
transactions but they are not partners since they are employees of the
company.
They act as employees as they are treated as an officer under the
companies act. They may hold an office as a salaried employee of a
company.
Tata and Cyrus Mistry conflict:

As far we know that on 24th October Tata group removed Cyrus mistry as
chairman and the reasons were not given by tata group, now what exactly
happened on 24th October was not identified in a first go but the tata group
has constituted a selection committee to choose a new chairman.

According to tata group here are some reasons why Cyrus Mistry was
removed:

He had prodigiously lost confidence of the board.


Rather than merging existing business he was trying to build up new
business
Tracked disposal of non-profitable business
Negative growth
Ignoring ratan tatas advice.
Increase in debts.
Used confidential data and sensitive information which has caused
loss to the clients and the company.

Now the legal options available with Cyrus Mistry are as follows:

He has a right to make demonstration against removal and then the matter
to be put to a vote.
The meeting cannot eliminate him unless it is due to bad faith or abuse of
authority.
He was not given a free hand as a chairmen
He was removed without any notice or explanation.

Legal position available with tata sons are as follows:

As majority of the shareholders casted vote against Cyrus Mistry in the


meeting they can remove him.
The board is under no constitutional obligation to provide any reason at
the time of removal of the chairman.
Under the company law the chairman does not have any legal right to
represent his case before the board or to make any sort of defence.
As the company is unlisted hey have a right to work accordingly.