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Assignment On `
1. All Board of Directors

2. Winding up of Companies

Subject
Law of Business Organizations

Submitted To
Dr. Samza Fatima

Submitted By
Ahmad Zeeshan

Roll no. 27

Section-C (6th Semester)

2017-22

LLB.5 Year

Contents
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Introduction of Board of Directors……………………………………………………...3

Definition of Board of Directors…………………………………………………………..3

Structure of Board of Director……………………………………………………………..4

Kinds of Board of Directors……………………………………………………………….5-6

Size of Board………………………………………………………………………………………..6

Diversity of Board…………………………………………………………………………………6

How does Board of Director

Work………………………………………………………..7

Need of Board of Director…………………………………………………………………….8

Responsibilities of Board of Directors…………………………………………………..9

Role of Board of Directors…………………………………………………………………...9

Duration of Director……………………………………………………………………………10

Appointment of Board of Director…………………………………………………10-11

Removal of Director………………………………………………………………………11-12

Conclusion………………………………………………………………………………………….12

Introduction of Board of Directors

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A Board of Directors (usually abbreviated as BoDs) is a group (Board) of either elected

or appointed people (BoDs Members) who together they jointly oversee the activities of
an organization. Think of an organization as any group of people who work together in
an organized way for a commonly shared purpose.

An organization can be a for-profit company but it can also be a football club like the
Ghanaian Black Stars.

Both Profit and Not-for-Profit (e.g. Charities, NGOs, etc.) organizations can have BoDs.

Actually BoDs in nonprofits are usually actively involved even –sometimes- in the daily
running of their organizations; nonprofit BoD tend to be the founders plus a hired
executive director and staff to manage the daily operations.

In a For-Profit organization, the BoD works on behalf of the shareholders, thus the
Board is elected by the shareholders. Since nonprofits do not have shareholders, its BoD
appoints/ elects new Board members.

Depending on your geography and your company’s legal setup, in some countries,
having / electing a board of directors is a legal process stipulated by very moment that
you incorporate. Some of these laws even define when your BoD members need to be
named and how many directors are required for your company. (1)

Definition of BoDs
A group of people who manage or direct a company or organization. (2)
“Board”, In a relation to a company, means board of directors of the company. (3)1
A board of directors is a team of people elected by a corporation's shareholders to
represent the shareholders' interests and ensure that the company's management acts
on their behalf. The head of the board of directors is the chairman or chairperson of the
board.(4)

Structure of Board of Director

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31. Company Act 2017
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A Director is a person appointed to serve on the Board of any type of an organization,

such as an institution, an association, a business, etc.

 S/he could be an Inside Director – i.e. someone who has an operational role in
that organization like a CEO or CFO or a meaningful relationship an an
advisor/consultant like a Lawyer or an Accountant.
 S/he could be an Outside/ External Director – i.e. someone who besides than
serving on the Board, s/he has no other connections to the organization.
 Executive Director 

Is an Inside Director who is also an executive within that organization.

  Non-Executive Director

 Is not in any way in the payroll of that organization: neither as an employee nor as a
consultant

 Nominee Director 

Is “an individual who is appointed by a shareholder, company or interest group and who
has a continuing loyalty to the appointor/s or other interest in the appointing
company”. All Offshore corporate structures in Tax Heaven countries are ‘run’ by
Nominee Directors so the real owner can be hidden from his/her local tax authorities. 2

 Chairman: Chairman is the top of all board of director, He can be executive as well as

non-executive person. He is responsible for the overall business of the business.
 Managing Director: Managing director is appointed by the board of director basically
by the executive directors for looking at the performance of the executive directors,
Look for the business hygiene and provide insights, guidance to them. 3

Kinds of Board of Director

The many different types of Board of Director

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 Governing Board

A Governing board is one where the owner of the organisation does not sit as a
member. Instead, the board is staffed by people able to provide direction to the owner
in regards to the organisation’s best interests and future goals.

 Working Board

A Working board will simultaneously work as the board of directors and the staff of the
organization. This typically only happens in small or new organizations where the
owners can’t afford employees.

 Advisory Board

Advisory boards work in a purely advisory role. They are similar to Governance boards in
that they provide advice and direction to someone who is running the organization.

 Managing or Executive Board

This is the board who runs everything — they make decisions on the organizations day-
to-day operations together without having a CEO.

 Cooperative Board

Another style of CEO-less board, the Cooperative board is one where all members work
and vote equally on all points of business. Most often found in small-to-medium sized
nonprofit organisations where all board members are working towards a singular goal.

 Policy or Carver Board

Similar to the Advisory board, the Policy board will work more in the
background, while a CEO, owner, or other high-level staff member puts the
board’s work into practice.

 Cortex Board

Boards working in the Cortex model will put particular emphasis on the value
of the organization to the community. In most of their decision making they will include
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ways to give back to the community, and include this as a metric for evaluating how well
they’re doing as an organization.3

Size of Board

 Historically, nonprofit boards have often had large boards with up to twenty-four
members.
 But a modern trend is to have smaller boards as small as six or seven people.
Studies suggest that after seven people, each additional person reduces the
effectiveness of group decision-making

Diversity of Board

 Good governance doesn’t call for dissension in the boardroom, but it does call
for diversity.
 When governance is good, it’s a benefit to the CEO and the organization and all
its benefactors. The benefits of diversity on boards become more apparent as
boards become more accustomed to it.
 There are a lot of good ideas circulating about the best ways to bring diversity
into the boardroom. Best practices for diversity of board composition are still
evolving.
 Big changes in board recruitment call for modern governance practices and
digital board management solutions.

How Does the Board of Directors Work?

 Directors attend board meetings, evaluate management performance, tend to
major decisions (such as making acquisitions or selling the company), declare
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dividends, create stock-option policies (including approving grants to key

managers) and establish executive compensation packages.

  Boards of directors often have several committees dedicated to specific decision-

making processes. For example, the compensation committee constructs the
executive compensation packages and brings them before the full board for a
vote; the audit committee evaluates and hires the company's auditors after
bringing its research and judgment before the full board; and the finance
committee evaluates merger bids or potential sources of capital.

 Directors are elected by the shareholders usually once a year and usually at the
annual shareholders' meeting. In most cases, directors have staggered terms,
meaning that they will not all be up for re-election in the same year.

 Quite often, the CEO of the company is on the board, and the CFO or even the
COO might hold board seats. Most shareholders agree that management's
presence on the board brings detailed expertise to the board's decision-making
processes, but this can also create conflicts between acting in management's best
interests and the shareholders' best interests.

 Independent directors (also called nonexecutive directors) are directors who don't
work for the company. Nonexecutive directors are compensated with cash for
their directorships; quite often they also receive stock options or stock grants.14

Why the need for a BoD?

1. Expertise from Seasoned Professionals

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The BoD will help the senior/ executive management team to step back from the daily
routine and focus on the business strategy.

BoD members bring valuable expertise in Operations, IT, Finance, Mergers &
Acquisitions, Marketing, Sales, Law, etc. Other BoD members bring along and put into
effective use business contacts and their professional networks.

2. Corporate Governance
Simply put, for the moment think of Governance as a set of rules, principles, best
practices, processes and procedures, by which your organization is directed and
controlled. These are the guidelines as to how your company can fulfill its mission,
realize its vision and to add value to all shareholders and stakeholders.

3. Independence & Accountability

Boards Directors should ideally be independent of the organization so they could act
purely only in the interest of the organization and all possible shareholders (and
possible stakeholders too) and they should be free from any conflicting interests that
can compromise their judgment in decision- making.

4. Accountability
Since the Enron scandal (and many more that have followed since then) , BoD members
are expected to hold fiduciary / legal responsibilities. Board Directors now are more and
more becoming collectively or even individually accountable for an organization’s
performance, compliance, financial mismanagement and risk mitigation strategies.

5. Credibility & Legitimacy

The presence of a BoD presumes a sense of integrity and credibility for an organization. 5

Responsibilities of the Board of Director

1. Responsibilities of the Board of Director

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 Set out the rules, Governance, Policies, the strategy of the company
 To make the annual budgets including cash, Sales target, Expense approval for
the forthcoming year.
 Responsible for the organization performance
 Responsible for the compensation arrangement of the top officials
 To elect the CEO of the company by casting their votes
 Selecting, developing, and compensating other corporate officers and reviewing
and approving senior management succession planning;
 Nominating, compensating and evaluating the Board Directors;
 Ensuring that the Company’s business is conducted with the highest standards of
ethical conduct and in conformity with all applicable laws and regulations;

2 – Roles of Board of director

 They have to establish the vision of the company.
 Ensure that companies are implementing the strategies as desired by them.
 Doing the SWOT analysis of the organization in a timely manner.
 To check that internal control are effective at the organization level.
 Communicate with the higher management of the companies.
 To maintain official relations with the relevant stakeholders.
 To work with the best interest of the shareholders. 6

Duration of Director Terms

 Traditionally, directors are elected annually to one-year terms.

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 In some companies, directors are elected to two- or three-year terms, with a

subset of directors standing for reelection each year. Companies that follow this
protocol are referred to as having staggered (or classified) boards.
 Under a typical staggered board, directors are elected to three-year terms, with
one-third of the board standing for reelection every three years.
 As a result, it is not possible for the board to be ousted in a single year; two
election cycles are needed for a majority of the board to turn over. Staggered
boards can be an effective antitakeover protection.1

Appointment of Directors
 In public or a private company, a total of two-thirds of directors are appointed by
the shareholders. The rest of the one-third remaining members are appointed
with regard to guidelines prescribed in the Article of Association.
 In the case of a private company, their Article of Association can prescribe the
method to appoint any and all directors. In case the Articles are silent, the
directors must be appointed by the shareholders.
 The Companies Act also has a clause that permits a company to appoint two-
thirds of the company directors to be appointed according to the principle of
proportional representation. This happens if the company has adopted this
policy.
 Nominee directors will be appointed by third party authorities or the
Government to tackle mismanagement and misconduct. The duties of directors
are to act honestly, exercise reasonable care and skill while performing their
duties on behalf of the organization.

Conditions for Appointing Directors

The following conditions are applicable when appointing a director:

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 He or she should not have been sentenced to imprisonment for any period, or a
fine imposed under a number of statutes.
 Conservation of Foreign Exchange and Prevention of Smuggling Activities Act,
1974.
 He or she should have completed twenty-five (25) years of age, but be less than
the age of seventy (70) years. However, this age limit is not applicable if the
appointment is approved by a special resolution passed by the company in
general meeting or the approval of the Central Government is obtained.
 They should be a managerial person in one or more companies and draws
remuneration from one or more companies subject to the ceiling specified in
Section III of Part II of Schedule XIII.27

Removal of Directors
The following authorities are responsible for the process of removal of directors from
the board of directors.

The company in general meeting

 A company can remove a director from the board before his term of office
expires. They can pass a resolution in a general meeting upon special notice.
However, there are certain exceptions :
 This does not apply to a director appointed by the Central Government.
 This does not apply to companies who have adopted two-thirds of its directors by
the principle of proportional representation.
 Directors appointed by financial institutions under an agreement like IDBI, IFCI
under their respective acts.

Removal by the Government 

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A director can be removed from office under advice from Central Government. The
Central Government chooses to use this power on the recommendation of the Company
Law Board/National Company Law Tribunal.

Removal by Company Law Board/National Company Law Tribunal 

The Company Law Board or the National Company Law Tribunal may remove a director
from the board. If found guilty of any inappropriate conduct like fraud, harassment,
oppression or any other justifiable cause, he will be removed. The terminated director
cannot assume the position of director in any other company for the next five year. 1

Conclusion:
The directors are the core of the company and they are the main secret behind a
successful company. The company management should in the hand of responsible
people who can use their power in the proper direction as the greater power comes
with greatest responsibility.

The directors are the first person to held liable in this regard. In the case of
mismanagement director mainly are liable to the company to indemnify. But there are
situation when public at large suffers problem because of their mismanagement in the
company. So there should be provisions and measurement to prevent this thing from
happening.8

Assignment # 02

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Winding Up of Companies

Introduction………………………………………………………………………………………………………14
Winding Up & Dissolution………………………………………………………………………………….14
Reasons for Winding Up A Company………………………………………………………………….15
Modes of Winding Up A Company……………………………………………………………………..15
Grounds for Compulsory Winding Up………………………………………………………………...15
Petition of Winding up of Company…………………………………………………………………...16
Power of Court dispose Of Winding up of company……………………………………………17
Effect of Winding up of order……………………………………………………………………………..17
Power of the Court after Winding Up Order……………………………………………………….17
Powers & Duties of the Official Liquidators………………………………………………………..18
Contribution & Proceeding of Committee…………………………………………………………..19
Duties of Secretory in case of compulsory Winding…………………………………………….19
Voluntary winding up………………………………………………………………………………………...19
Procedure Member winding up………………………………………………………………………….20
Secretory Duties-Member Voluntary Winding up……………………………………………....20
Declaration of Solvency………………………………………………………………………………….…..21
Members’ Voluntary Winding Up……………………………………………………………………....21
Creditors’ Voluntary Winding Up………………………………………………………………………..21
Winding Up under Supervision of the Court……………………………………………………….22
Conclusion…………………………………………………………………………………………………..….….22
Reference……………………………………………………………………………………………………..……22

Introduction
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The winding up of a company is a process which involves ending the life of the
company and administering its property for the benefit of its creditors and
members.

In this process, the assets of the company are collected & realised to the payment
of its debt.

If after realising the creditors, company finds surplus which is distributed among
the members on the other hand if there is any deficit, every member of the
company must contribute to the assets of the company.

After completion of these formalities prescribed by the Companies Act, the

company is dissolved and its name is removed from the Registrar of Companies.

Winding Up & Dissolution

Generally, the terms ‘winding up’ and ‘dissolution’ used to

mean the same thing, but according to Companies Act, these two terms
are quite different by their legal procedures. The differences between
them are as below:

Points Winding up Dissolution

Main The first stage and involves The second stage in

Feature realising of assets, paying off which a company is
liabilities & distribution of finally dissolved
surplus if any.

Proceeding Carried out by the liquidator Order can be issued only

s appointed by the by the court
company/court.

Liquidator’s Liquidators represents the Liquidator can not

Duties company represent company
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Debt Creditors can prove their Creditors can’t prove

debts. their debts.

Reasons for Winding Up A Company

The winding up of the company may arise by any one or more of the following
reasons:

 If the object of the company for which it was established have

been accomplished.
 If company unable to carry out its main object.
 If company has to dispose of its business or the undertaking to another
company or an individual.
 If company is unable to pay its creditors in full.

Modes of Winding Up A Company

 By The Court Compulsory Winding Up (Sec. 433 – 483)

 Voluntary Winding up [Sec. 484 – 531]
 Winding Up Under the Supervision of the Court [Sec. 522 - 527]
 Members’ Voluntary Winding Up
 Creditors’ Voluntary Winding Up

Grounds for Compulsory Winding Up

The grounds on which a company can be compulsorily wound up by the court are
as follows.

 If the company itself has passed a special resolution for the winding up by
the court.
 If the statutory report is not filed with the Registrar or company fails to
hold the statutory meeting within prescribed time.
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 If the number of members of the company falls below 2 in case of private

company and below 7 in case of public company.
 If company is unable to pay the debts in full.

A company will be deemed to be unable to pay its debt under the following
conditions

 If it is proved to the court’s satisfaction that the company is unable to pay

its debts.
 If the process issued on a decree order of a court in favour of a creditors
has not been satisfied.
 If the court is of the opinion that it is just and equitable that the company

should wound up. It should be wound up under following circumstances :

 When the main object of the company for which it was established was
failed.
 When the business of the company becomes illegal.

Petition for Winding Up (Section 439)

A petition for the winding up of a company may be presented to the court by

any of the following parties:

 By a shareholders or contributory can present a petition on the following

grounds:
 When No. of members of the company falls below prescribed limit.
 When the contributory has paid the calls in arrears.
 By the company itself by passing a special; resolution.
 By the Registrar of the Companies.
 By any creditor or creditors, including any contingent or prospective
creditor or creditors.
 By the person authorised by the Central Government.
 By the voluntary liquidator.
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Power of the Court to dispose of Petition of Winding Up

On hearing a petition for the winding up of the company, the court may take the
following steps;
 It may dismiss the application with or without costs.
 It may adjourn the hearing conditionally/ unconditionally.
 It may dispose of the application in any way it thinks fit.
 It may make an interim order.
 It may order the winding up of the company with or without coats or make
any other orders as it thinks fit.

Effects of The Winding Up Order

After the order has been made by the court for winding up of the company, its
effects will be as follows;

 No suits or legal proceedings can commence against the company without

the permission of the court.
 If a suit or legal proceedings against the company were pending it cannot
be proceed with or without the permission of the court.
 Suits or legal proceedings by or against the company to be stayed on
passing of the order or compulsory winding up.
 The court will appoint the official liquidator for the winding up of the
company.
 Powers of the board of directors are terminated and they shall vest in the
official liquidator.
 Any debt payable at a future date becomes immediately payable.

Power of the Court after Winding Up Order

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To give stay order on receipt of the application for stay order either from auditor
or contributor or from the official liquidator

 Directs the contributors who hold partly paid shares to pay the balance on
such shares in case of inadequate funds to meet the liabilities & expenses
 Can order dissolution of company when it finds that:
 it is difficult for the liquidator to proceed with winding up for wants of
funds.
 the affairs of the company are completely wound up.
 The court has the power to exclude those creditors who fails to prove
claims within the stipulated period for the benefit of any distribution to be
made on behalf of the company.

Powers of the Official Liquidators

With Sanction of The Court

 To defend any suit, prosecution or other legal proceedings, civil or criminal

in the same on behalf of the company
 To carry on the business of the company for beneficial winding up
 To raise money on the security of the assets of the company.

Without Sanction of The Court

 To inspect the records and returns of company on the files of the Registrar
 To draw, accept, make and endorse Bill of exchange, hundies, promissory
notes in the name of & on behalf of company
 To take out in his official name, letters of administration to any deceased
contributory.

Duties of the Official Liquidators

 He should take into custody and protect the assets of company.

 He should submit a preliminary report to the court on company affairs.
 He should keep proper books of accounts relating to the company.
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 He should keep all the funds of the company in the “Public accounts of
India” in the RBI.
 He should obey the court’s order for the disposing of the company’s books.

Contribution & Proceedings of the Committee of Inspection

(Sec.465)

 The committee shall not consist of more than 12 members representing the
creditors & contributors.
 The committee shall have power to inspect the accounts of the
liquidator at any reasonable time.
 The committee shall meet at such time as it may itself decide.
 The quorum of the committee meetings shall be one third or two
whichever is higher.
 Any member of the committee may resign by giving written notice to the
liquidator.

Secretary in case of Compulsory Winding Up

 He should assist the directors in preparing the petition for the winding up
of the company.
 After the order of winding up passed by the court, the secretary should file
with the Registrar within 30 days a certified copy of that order.
 He must submit a statement of affairs of the company to the liquidator
within 21 days of the date of winding up order.
 He should furnish information regarding the company which the liquidators
may require from time to time.

Voluntary Winding Up

When the company wounds up itself by surrendering and realising its assets for
the payment of debts, it can be called as voluntary winding up.
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 Under Section 484 of the Companies Act, a company may wound up

voluntarily:
 When the period fixed for the duration of the company had expired by the
articles.
 If the company passes a special resolution to wind up the company
voluntarily.

Declaration of Solvency

Section 488 of the Companies Act provides that when company proposed to wind
up voluntarily, the majority of the directors make a declaration of solvency must
be made:

 Within five weeks preceding the date of passing the resolution for winding

up and delivered to Registrar for registration before the date, along with :
 The balance sheet made out on the last mentioned date
 A statement of the assets & liabilities as on that date.

Procedure-Members’ Voluntary Winding up

 Declaration of solvency must be made as per the provision of Section 488

of Companies Act.
 The next step is to hold a general meeting of the members for passing the
special resolution for the winding up.
 The notice of the same must be given within 14 days by an advertisement
in the official gazette and local newspaper.
 The company can appoint a liquidator and fix his remuneration.
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 On appointment of liquidator, all powers of the Board of directors,

managing directors ceases.
 The liquidator shall exercise all powers of the board & do all such acts
necessary for winding up of the company.

Secretary’s Duties-Members’ Voluntary Winding Up

 To arrange to hold board meetings for the voluntary winding up of the

company.
 To arrange to hold an extraordinary general meeting of the shareholders to
pass a special resolution for winding up.
 To file with registrar, a declaration of solvency as per the provisions of
Section 488.

Members’ Vs. Creditors’ Voluntary Winding Up

Members’ Voluntary Winding Up Creditors’ Voluntary Winding Up

1. It is possible when directors makes
declaration of solvency before
the registrar.
2. Here members appoint the
liquidator.
3. Liquidator’s remuneration is fixed at
general meeting.
4. There will be no committee of
inspection.
. It is possible by insolvent companies
so there is no need of declaration of
solvency.
In this creditors and members may
nominate the liquidator
. It is fixed by the committee of
inspection
Here committee of inspection exists.

Winding Up under Supervision of the Court

The court may take following steps after the order is made for winding up for
supervision of the court.

 It appoints an additional liquidator or liquidators.

 An appointed liquidator may removed for any complaint against him.
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 It may also appoint the official liquidator to fill up the vacancy of the
liquidator caused by removal, death or registration.
 The court may make a call.

Conclusion

 Therefore, to Conclude, winding up of company is a stage, where by the

company takes its last breath.
 It is a process by which business of the company is wound up, and the
company ceases to exist anymore.
 All the assets of the company are sold, and the proceedings collected are
used to discharge the liabilities on a priority basis.

Reference

www.wellstreetmojo.com

www.modernghana.com

www.lawsite.com

Company act 2017