11 MANAGEMENT

Q• 1• "o·1rectors ue not I
only agents but also in some sense ~ of
company." Explain.
~
Or, Def~ne the term Director. Discuss the legal position of Directors.
~ ~ns. D_irector. Con~pany is an artificial legal perso n hav~ ind~
existe n~e m the eyes of law. It, being an artificial person , has no nund,
and ~
act on its own. It can ac! only throu gh some hwna n agents . ~e
company is
owne d and mana ged by its memb ers. The memb ers being large
m number ~
scatte red all over the count ry, canno t conve nientl y mana ge the
business of ~
comp any• Thus, to carry on the business, they elect some persons
to look aft.er tile
gener al admin istrati on of the compa ny. These perso ns are know
n as 'Directoit
and collec tively as 'Board of Directors'.
'
Sectio n 2(34) of the Comp anies Act, 2013 defines a direct or
as a director
appoi nted to the Board of a compa ny.
This defini tion does not throw any light on the mean ing of
a director. A
direct or may be define d as one of those person s who direct and
supervise the
affair s of a comp any. Section 149(1) provides that every comp any
shall have a
Board of Direc tors consis ting of individuals as directors.
Legal positi on of Directors. It is difficult to define the exact legal,
position of
the direct ors of a comp any. In variou s judgements, Directors oi a
comp any have
been descri bed as agen~ ;:ihlst ees or managing partners.
As Agents: A Comp any, being an artificial person, has to act throug
h some
huma n agenc y and Directors act as that necessary agency. So the
relationship
betwe en the Comp any and its Directors is that of the princi pal artd
agent In the
case, "Ferguson vs. Wilson", this position of Directors was descri 1

bed as: uTht

company is no person. It can act only t~r~ugh its Dire~tors. It is an ordina
ry case of
principal and agent. Wher~er_ ~n ~gent zs liable, the~ Directors are liable and
wherecc
the principal is liable, the liabzlzty zs of the ~ompan~.
As agents , Directors must conduct_b~mess with _reasonable care abidin
g by the
Comp any's Memo randu m- of Association and Articl:s of Association
. Whatever
they do, ultima tely binds the company. They enter mto contracts and
wherever
they put their signatures, they dos~ only on behalf of the compa ny.
However,
the direct ors are not completely like agents. Agents are appoi
nted by the
. . but the directors are elected by the shareholders. Again , agents get
prmci pa1-
comm ission for the work done but the_ d.rrec tors are expecte~ lo work
witho ut
d F ther an agent may not disclose the name of his principal but a
rewar • ur ' d' e not the agents m
· the true sense
direct or has to d o so. Th us' the rrector.s ar.
As Trustees: In some respect, the_ Drr~ o~ are the trustee s of the ·
compa ny.
the ardian s or custodians o e ~oney and properties of the
They are Whilr dealin g with these, they ~ust_ act ~n the interest of the
companv
comd pant~. their own interest. They stand m a fiduciary capacity in relatio
an no m n to ~
7 s
 CHAPTER 11 : MANAGEMENT • 77
th t all the pow ers of Di rectors are .:ls
11\tt'rcsts_of e c?n ,pon y · Moreov er, almoA
st 1 shares, issue furth er ca pita l, the
f> wers tru - he pow er to make ca ll, forf eit
111
pow er to acce pt or refu se a transfer of
aeneral pow ers of mar~age ment and the b • • · h for th e
d fa1t
J. ....:H, are wh 'ch I
all, pow ers tn trus t 1 1ave to e exercised m goo
11111•~:. ' .
t,endt t ot tht: com pan y as a who le.
s are trustees of the com pan y and
Howt>ve_r, i~ ~ay be note d that the Director trustees
fl()t l'f the md~vidual shar eho
lder s of the company. Directors also are not
company. They are also not
for third parties wh~ have mad e contracts with the s are not trustees in the
th Director
tru~tees for e cred itor s of the company. The
held in trus t does not vest in them
true sense because ~he own ersh ip of property contracts
a.s in case of an ord inar y trus t. Further, unlike a trustee, they enter into
In the name of the company.
manage the company, do so for
As Managing Partners: The Directors, who
of others. They are also elected
themselves. as well as ~or the benefit
ilar to that of a managing part ner
presentatives. Thus,. therr position is sim
an arrangement between them and
cause they are app oint ed to their posts by
all the shareholders.
ners with shareholders. But, their
Being imp orta nt shareholders, they are part
on their shares. A Director cannot bind
)iability is restricted to the amo unt unp aid
ss he has been expressly authorised
another Director like part ners in a firm, unle
Directors as in the case of partners.
to do so. There is no mut ual agency amongst
s are neither agents ·nor trustees or
To sum up, we can say that the director
term. They combine in themselves all
managing part ners in the strict sense of the
position towards the company in
these positions. They stan d in a fidu ci~
their control.
respect of their pow ers and capital und er
Ad-hoc Dire~tor (ii) Alternate
Q. 2. Write not es on (i) Casual Director or
Director (iv) Woman Director (v)
Director (iii) Sma ll shareholders'
ctor.
Independent Director (vi) Additional Dire
[Section 161(4)). In the case of a
Ans. (i) Casual Director or Ad-hoc Director
ctor appointed by the company in
public company, if the office of any dire
of office expires in the normal course,
i eneral meeting is vacated before his term
ult of and subject to any regulations in
the resulting casual vacancy may, in defa
Board of Directors at the meeting of
the Articles of the company, be filled by the
the Board. ·
al vacancy may be filled by the
Where the Articles are silent, the casu
Director is appointed when a casual
shareholders in a general meeting. Casual
disqualificatio~, removal, insanity or
vacancy is caused by death, resignation, .
.
insolvency of a director. a pnv ate com pany . It 1s not
ly to
Provisions of Section 161(4) shall not app de to keep
and the Board may deci
mandatory in that case to fill casual vacancy
.
the vacancy unfilled. expr ry of the
Jhe AGM but upto the
A casual director holds the office not upto .
been appoint:d.
term of the director in whose place he has omt ~d
(ii) Alternate Director [Section 161(2)).
An alternate ~rrector c~ be a~p
Board Meeting or by crrculation or m
by the Board by passing a resolution in the
a General Meeting.
 . OM (HONS.) . d .
A o.V.; B.C
V · . ·h uld be authorise by the A ,
78 • sf'{{ · , ::f irector s O • 1'1 k,
.,. alternotr t . gene ral meetmg. k
. . nl' of tik pany rn f ,
Tl,e a1,po1nt111~ ~ :1 d by the corn h ;8 appo inted to act or the O.
I t' on pass~ . t r w o • l'J~
r bv a reso u ! . . tor js a d1rec O . d f not Jess than three months fro ti.
o . ,ate Ju ec f peno o d ll\ H
An alten . I . , absence or a d e usually hel .
- ' iunng 11 ~ f the Boar ar ha
djre(~r ,~,i~h the n,eetings o ff ce for a period long~r than t t pennissib(e
state in "' tor shall not hold o 1 h has been appointed. - . ~
Such di.re<: . h e place e · d•
. . director 1n w ~s d . bilities of an alternate rrector are Bar&
the or1gina1 d . obligations an 1ta ·•111: ,
The rights, ut1es,
of other directors. d. tor shall not exceed the term permissible to
. inal director ceases to e a 1rector by reason~
those It rnate irec b d'
The term of the a e . h
. Thus, if t e ong . . I h ~
original directer.. .. . solvency, conv1ct1on, remova etc., t e alterna~
disqualification, inca_pac:ty, mate his office. Such an alterate director shall vacai,.
. hall 1·mmed1ate.ly vac . . . "
director s · f the original director to India or the expiry of t~
the office on the return o . .
. . d' tor's term whichever 1s earher.
ongma1 rrec .
. 11 his alternate both are present at a meeting of the Board of Directors
N0 te·• If a an
director as we as . . . h . . h
the alternate director can not participate m t e meeting smce t e term of~
of the co~p y, to an end when the original director has returned to the state in whij
alternate director comes
Board meetings are ordinarily held. . -
(iii) Small Shareholders' Director. Section 151 provides _that a listed company
may have one director elected by such small shai:eholders m such a manner and
with such terms and conditions as may be prescribed.
Small shareholder means a shareholder who holds shares (beth equity and
preference) of nominal value of r 20,000 or less in a public company.
Provisions relating to small shareholders' Director as per Rule 7 of the
Companies (Appointment and Qualification·of Directors) Rules, 2014.
1. A listed company may upon a notice given by at least one thousand small
shareholders or one tenth of the total number of such shareholders, whichever is
lower, appoint a small shareholders' director elected by the small shareholders.
Small Shareholders Director may be elected by the company suo moto or on the
requisition of the small shareholders.
2. The small shareholders intending to propose the candidature of a person for
the post of small shareholders' director should give at least 14 days notice before
the shareholders' meeting. The notice should be signed by these small
shareholders and specify the name, ad.dress, shares held and folio number of the
~rson whose name is being proposed for the post o_f Small Shareholders'
Director and of the small shareholders making such proposal.
3. Such director shall be considered as an independent director.
4. Such director shall not retire by rotation. ·
5. Small Sha~eholders' Director shall be appointed for a maximum period of
three consecutive years.
6- On the expiry of the term, such director shall not be eligible for
reappointment.
7. Small Shareholders' Director cannot be appointed in more than two
companies.
· 8- Small Shareholders' Director shall be elected by the poS tal ballot method.
 CHAl.rt'BR 1t : MAN I\ ( ·:r~thN I • 79
tl Wholl·-tlnw Dlnx tor
9. ~nMII Sh.trt'lh)ld l'r~· Di r\ , 'hH' canno t h(, nppo inh:J as
., ~ t.rn,l~ir\~ Dirt'l' to r.
l(l. l "tll~· ,\ Sm.ti! Shm,, h1..)lder 1..'n n be appointed c1s J Sm,111 Shon •hokh•rs'
tY\ 'h' I'.
s to be a ~:m,all
11. ~rn,,l~ SlMn '~l~)l~it't'$ ' D_ir~~ctor shn.11 vaca te_l~is °lffke if he ceas~
ca ble to any
u~'h,~l,it r. O thti t ground~ tor vaca tion of office a\re sa me as appli
h t' f 1..itrf,·tor.

(id Woman _Director. Section 149(1) provides that such

class of companies, as
.,~· l't' pn'SL rt~">ed , shall have at least one woman d~rec tor.
the date of
A~ ~~r Sttbo n _14~(2), every company existing <;>n or before
encement,
mmt'tK't?ment ot this Act shall, within 1 11ear from such comm
r ixiin! at le~st one wom an director. ·
one woma n
The tollowmg class of companies .is required to a.l\>point at least
i~to r:
(11 ) Every comp any ~isted on a recognized sto~k e*dhange.
(b) Every other r.ubl1c company whose (i) paid-up .~hare capita
l is r 100 crore
or more or (11) turnover is r 300 crore or more l
to appoint at
Every comp any in~orporated unde r the Companies ~ct, 2013 has
the date of its
ast one wom an drrector within a period of 6 months from
,!istra tion.
0
1

to a company
(v) Inde~endent Director. An Independent Directo1 in relation
e Director or a
1eans a drrector·ot her than a Managing Director or a Whole-tim
·ominee Director (Section 149(6)):
(a) who, in the opini on of the Board, is a person of integrity
and possesses
releva nt expertise and experience;
its holding,
(b) (i) who is or was not a promoter of the company or
subsi diary or associate company;
its
(ii) who is not related to promQters or directors in the company,
holding, subsi diary or associate company;
its holding,
(c) who has or had-no pecuniary relationship ·with the company,
during
subsidiary or associate company, or their promoters, or directors,
current
the 2 immediately preceding financial years 1or during the
financial year;
transaction
(d) none of whos e relatives has or had pecuniary relationship or
or their
with the company, its holding, subsidiary or associate company,
ver or
promoters, or directors, amounting to 2% or more of its gross turno
ribed,
total income or r 50 lakh, or such higher amount as may be presc
ial years
whichever is lower, durin g the 2 immediately preceding financ
or durin g the curre nt financial year;
(e) who, neither himself nor any of his relat ives-
?r is or
(i) holds or has held the position of a Key M~ageria~ Personn~l
or
has been employee of the company or its holdmg, subs1d1ary
y
associate company in any of the three financial years immediatel
nted;
preceding the financial year in whic~ he is proposed to_ be appoi
the 3
(iz) is or has been an employee or prop~1etor or .a pa~e r, m ~yo~
he
financial years immediately precedmg ,the fmanc1al year m which
is propo sed to be appointed, of-
 80 .. SHIVA O.U a.CO M. (HONS.)
•I

(a) a firm of auditors

or co mpa ny secretaries
auditors of th e co mpany in practtc
or its holding, subsid iar
co m pa ny; or y or e 0r ~,
(f,) any legal or a cons as~ - ,
-vc13~
ulting firm th at ha s or
with the co mpa ny, its ho had any tra
lding, subs idiary or associa
a1nounting to 10% or mor te / sattirl
e of th e gross turnover of 0
(iii) hold s together w ith
his relatives 2%, or m or su ch (Parr,
power of the co m pa ny ; or e of th e totat ~:: ,
(i<') is a Chief Executiv tir~
e or director, by w ha te
non-profit or ga ni sa tio n ve r na m e called, of
th at receives 25% or m or
the co m pa ny , an y of e of its receipts fran-,
its promoters, director
subsidiary or associate co s or its ho1cttlt1
m pa ny or th at ho ld s 2%
voting po w er of th e com
pany; or
or more of the toi
(v) w ho possesses su ch
ot he r qualifications as m
Various m ai n pr ov is io ns ay be prescribed .
of th e A ct relating to 'In
follows: de pe nd en t Directors' are
Rs
(1) Minimum number of
Independent Directors
companies. Every public in case of listed public
company which is listed
shall ha ve at le as t 1/ 3 rd on th e stock exchange
of the total nu m be r of di
Directors. rectors as Ir.dependent
(ii) Minimum number
of Independent Direct
companies. Th e m in im ors in case of other
um nu m be r of In de pe nd
ot he r public co m pa ni es en t Directors in case of
may be prescribed by th
(iii) Retirement by ro e C en tra l Government
tation. The provisions of
ro ta tio n shall no t be appl re tir em en t of directors by
icable to appointment of
(iv) Remuneration. A n In de pe nd en t Directors.
Independent Director sh
re m un er at io n othe,r th all -n ot be en tit le d to an
an sitting fee, reimburs y
participating in va rio us ement of expenses for
meetings an d profit rela
ha ve be en ap pr ov ed by ted commission which
the members.
(v) Declaration. Every In
de ~n de nt Direct~r shall,
Board in w hi ch he parti at th e first m ee tin g of the
cipates as a drrector an
meeting of th e Board in d thereafter at the first
every f~ ci al ye~r or
change in the circumst~ w he ne ve r there is any
nces which affect ·~s ~t
Director, give a declarat at us as an Independent
ion that he meets cn te na
the provisions of the Ac of in de pe nd en ce as per
t.
vi
( ,,' Tenure. The tenure of the Inde
pendent Director shall no
aggregate, a period o f f. t
ive .consecu t·ive years on excee d m .. the
company. The Independ the Board of the
ent D~rector shall be elig
on pa ssing of a specfal re ible for re-appointment
has to be disclosed m s" lu tio ~ by th e company an d such a
the Board s repo~t. ointment
No In de pe nd en t Director PP
shall hold
terms bu t such Ind ep end t Directoofr fic e for more thar. tw
sh 11 .
after the expiration of en a be elig • o consecutiv et
3 yea, s of ceasing to ib le for .
Director provided th at an becom appo1ntmen
. d of 3 years be appoin ~ndep~ndent Director shal
ted m or be associated l n~ t an Ii:idepende~t
~ ;; :t he r capacity, ei th . , du rm g th e said
er directly or indirectl
y. With the co m pa ny in
 CHAPTEM 11 1MANAGSMBNT ■ 81
al Oirettor. The Board, If authorised by th A u I h ers
(i,i) Addition
· :t i·t· I Ji . , · e rue ea, as pow
111 nl1int all 1d'
Cr r
10na o rectors. 1 he powers of tile additi ona I di rector are same as
e ••

(,~e l,f other ,recto~·s. Suc.h a dil'cctor can be appointe d either in the Board
t'ctin~ or th rough circulatio n and holds office ti11 the next Annual Genera l
t'\.'tin~-
Q . 3· State the qualifications and d.tsqua1·£·
1 1cations for appointment as a
4if\'ctor. .. .
Ans. Qu~ifica tions for app~intment as a director. As per the Compan ies Act,
Jll'l ,,cadem~c or even sharehol ding qualifications are prescribed for a Director. To
appointed, a person has to be:
~ll

• an individu al, and

• compete~t to con~act as per requirements of the Indian Contract Act.
Unless the Articles proVIde otherwise, a director need not be a sharehol der of
the company.
Disqualifications for appointment as a director:
Section 164 of th: Compan ies Act states that a person shall not be eligible for
appointment as a director of a company if,
1. he is a person found by a competent court to be of unsound mind and
such finding remainin g in force; ·
2. he is an undischa rged insolvent;
3. he has applied to be adjudged an insolvent;
4. he has been convicted by a Court of an offence involving moral turpitud e
and sentence d in respect thereof to imprisonment for not less than 6
months, and a period of 5 years has not elapsed from the date of the
expiry of the sentence;
5. he has been convicted .o f an offence and sentenced in respect thereof to
imprison ment for a period of 7 years or more;
6. he is a person who has not paid any call in respect of shares of the
company held by him and 6 months have elapsed from the last date fixed
for the payment of the call; and,
7. he is a person who has been disqualified by the Court or Tribunal for
fraudule nt activities in company 's promotion or management.
. 8. he has not complied with provisions relating to Director Identification
Number (DIN).
9. he is a person who is already a director of a public company which,
(i) has not filed the financial statement or annual returns for any of the
continuo us 3 financial years.
(ii) has failed to repay its deposits or interest. ~erein on due da~e or
redeem its debentur es on due date or pay dividend and such failure
continu~s for 1 year or more. Such person shall not be eligible to be
appointe d as a director of any other public company for a period of 5
years from the date of default committed by the public comp~y.
Section 164 . authorise s a private company to add any other additional
disqualifications in its Articles for appointm~nt _as a d~ector. A pub~c company
cannot prescribe addition al disqualifications m its Articles, for appointm ent as a
director.
 IQ e rtU \ ' l ' U ' ft' HM (I h ,N._.)
, )
, • \\'t 1h n,, tt , '"' ,,t Numl••'• nl t,t n•d •tt ~, (11) Numt,.,, of fllr 4'tt c,, L
1
. .
\J " hlt ntl fh .-tt.H, N,uutwt (I,UN ~nlP"
(d llu ~h llh ,tt
) . .
, .. , •ttl Nm,,h t t '" I
1
m lll. ,\ , 1 ntt l lttH 4
In !1e-dlun 14 1(1), t•v ny
·
't Int ••, PV •·• V IV1 \h 1 r om p.m
"
, um
I''
'
n,, , t h,, , ,, nn,, 1n
1 th1 t ••1 cllH ~1t1I~
1 • ' 1''1 '
\,,, 1 J
' ,, 1' 11"' t-,, M''' ,,n , 1 ' 1
• , , ,.n n, n,,, 1,,rn v 11 1in l111111n otu • dl1t 1( tor
y rnl t 1 " I nh
' ltt·t 1, f dlt• ', t,H tt h,v• ,,. .•," fl '< t'{ I (If ,,,,
t h, n' '""'""""""' ilt h•••u A '" "'J.''"
,,, .,~,,nt '"' '"' I1' ·"' 1, fl , ~•n d,11 , t Pt ,, ,,fh-t p,,.,,,lng •' ,,,w t I., I n• 11olu tlo n 'Y rn.11
t~) Nu m~ • c.,f Dh ,,d orl
l htp ~.
1
'1,, ,~•~P ,, .
, fl,• , th, · , nnH\Wn\ 1'll1t1t1I of tl~I ~ Act,
~h.1II hold off tr,, , ,
dm" hH . ,n, ludmg .rn v ,,lh·1 n,,h•
d lr•'t'torAh1p , In rt1nt'(' th.1r1 20 r nm 1
p,in ~
1 ,1 th,· "'· "'"' t1n w
11w "'·" 'nr nm ,,umll('t of publ ic
('\H l\p ,m h.-~ In wh kh ,,, pt
.,p 't,mh·d 1, .,. ,, di11•r tnr "h.,11 no
1
~on c.10 b.
1 t t''<C'•'t•d h'n . For r,•r konln
pu bl, l l ,nnp.urn''- in wl ud , ~ the li mit of
., 1wr~0n c..-u, lll' nppoint'.l. J Ml
Jm , tnr "hq , in I'' ,v.,h• ,·omp.r
1
dir ector
nlt'~ thM lll'l ' dtl wr hCllding or
co,,.,p,un c,( ,, pu blk rt,mp,m y ~h sub sididr,
oll lw included .
:_> ~ubjt'<. t to tl'w
prn vn,ion~ of Secti()n 165(1)
m.w , bv ~pt•ci ,,I rl', olu tio n, spt ' , thl' tnl mb crs of a comp,,nv
1

C ify ,tny lesser number of co mp

whil h ,1 d1rl'r hu· of tlw romp,1 anies tn
11y mny net ns director.
~ A ny p,•r~on ho ldi ng off
kt' ,,s dirO('tl}l' In n1orc than
of romponi~ ~ .,~ sp l'Cifi\.·d in the specified num ber
Se cti on 165 (1) immcdintely
r on rnw nCl'n wn t of tlw Comp before the
anies Act, 2013 shall, wi thi n a
1 .'lt•ar (ro,n ~uch comml'nccm period of
cnt, choose not more than the
limit of rompnnil·s ""'d rc•s ign his specified
office as director in other compan
.md intimnlt• his ch ok l to each of ies
1
the companies in wh kh he wa s
thl' offirr of director before suc holding
h co mmencement and the con
Regis trJr of Companies. cerned
4. If a pt•rson accepts an ..1ppo
intment as a director in contra
Stt tio n 165(1) , he shall be pu vention of
nishable with a fine wh ich shall
than r .5,000 bu t which may exten not be less
d to t 25,000 for eclch da y after
during which the co ntravention the first
(c) DirKtor Identification Nu
co nti nu es.
mb er (DIN). Director Identi
(DIN) i!, the number allotted fication Number
by the Ce ntral ~ o~ ernn~ent
mt.e nd ang to be appointed as dir to ~ny individu aL
ector or to any cx iSltn~ du·tx-tor
th,- purpot,c of his identification ot ,1 com pa ny for
as a director of " co mpnr~, ·
f>ro vi1 lons in rts pe ct of DI
N are ,1s follows:
(,) App Ii cat ion f t
or a II o me n t of Director be Ide nti fic ati on Nu mb er (Sectio
153) F , ·
. .vt ry an di v idual intendin g to , "P<,intl--d
• f
,s :i , , .
· 1. tn.x :to r pf a
.n
co mp any Nhall ma ke nn op pUrotion fnr .,ll otn wn t of Dirt.'C
c:

t ·nl G ovt .•rn nw nt in s u

tor
1d en ti•, icat10 ,
n
N '-·•
UITIV\. r t O the Ct• n 1 'h t· .J
I I ch fl•,• ., ,,rn), tw nn•~rril)t,f. - l orrn anu
manner and alo ng w t i HU i(k !-( ns ,
(ir) Al lot me nt of Director
~tlon Numberr ISection 154). Tht: a
Jdent > Ce ntral d
c rm}t'l · fnHn tht• n•ceipt of th~
h
Go vernm ent sha ll, w l t hi 11 un )l tor Jd,. · '" ","" 'Jpf ' t· '
tea 10n
un de r Se cti on 153, oll ot a I mtiflc,,tl on Nu mb t.•r to nn R ()
n·: cribt.•d . I' t
in s uch ma nn er os rn«1y be prt PP ,ca n C
'• h
L rl
 CHAP'I:BR 11 : MANAGRMFN1'

Pro hib ition to obtain mo re than one Director Identification Number

..) d 'd ady been allotted a Director
(tll
ISection 1~5J· No in iva ual, who hos alre, sha ll apply for, obtain or
154
1drntifica hon Nu ~ bcr und er Section
11
tion Nu mber.
pos~e~s anothe r Director Jde ntifica n 156).
(i;') Director. t~ . int~~ate Direct
o~ l~entification Number [Sectio
one month of the receipt of Director
Eve r~ ~x•s_tmg du ector shall, w1thm
t1f1 cata on Nu mb er fro m the Central Government intimate his
Jden
the company or all ~he companies
Director Identification Nu mb er to
'"'herein he is a Director. Registrar
(i') Company to inform Dir
ector Identification Number to
of
ll, wit hin 15 days of the receipt
[Section 157). Every company sha
furnish the Director Identification
intimations und er Section 156,
ers of all its dir ect ors to the Registrar or any other officer or
Numb
hor ity as ma y be spe cifi ed by the Central Government with such fees
aut
itional fees as may be prescribed
as may be prescribed with such add
tion 403 and every such intimation
within the time specified und er Sec
manner as may be prescribed.
shall be furnished in such form and n 158].
or Identification Number [Sectio
(vi) Obligation to indicate Direct
ry per son or com pan y, wh ile fur nishing any return, information or
Eve n
nished under this Act, shall mentio
particulars as are required to be fur
er in such return, information or
the Director Identification Numb
rmation or particulars relate to the
particulars in case such return, info
any director.
director or contain ·any reference of ctor
Pu nis hm ent for con tra ven tion [Section 159]. If any individual or dire
(vii)
the provisions of Section 152, Section
of a company, contravenes any of
or director of the company shall be
155 and Section 156, such individual s
ish abl e wit h imp riso nm ent for a term which may extend to 6 month
pun
to r 50 thousand and where the
or with fine which may extend
h a further fine which may extend to
contravention is a continuing one, wit
ich the contravention continues.
r 500 for each day after the first during whoin
des of app tment of a director.
Q. 5. State and explain various mo er
. On ly an ind ivid ual com pet ent to contract and not disqualified und
Ans be
Director Identification Number can
Section 164 wh o has been ~Ilotted can be
No firm or association or company
appointed as director of a company.
appointed as director.
ctors: ·
Various modes of appointmen.t of dire y are
r. The first directors of the compan
1. Appointment of the first directo m, the
case the Articles do not name the
usually named in the Articles. In
to the Me mo ran dum ma y app oint them according to the procedure
subscri bers icles nor
e they are neither named in the Art
laid down in the Articles. But in cas shall be
subscribers to the Memorandum
appointed by the subscribers, the ce
to be the firs t dir ect ors of the com pany. Such directors shall hold offi
deemed e Person
eting of the company. In case of On
only tiil the first annual general me , the
not ~n ~pp o~t ed by t~e Ar~des
Company, if the first director has or or
ual me mb er sha ll be dee me d to be its frrst drrector until a drrect
Individ
mber.
directors are duly appointed by the me
 . . A o.U., 8.COM, (HONS.)
f!' • sHIV . t d as a dire ctor by the com pan y in
rson prop osed to be apf ohtnh~s Dire ctor Iden
Every pe tific atio n Nu mb erg ~
. g or otherw1s. t?, ·shal.l furnt·f· ts d' d hi ~
mee nn .15 not disq ua 1 1e d to bec ome •a irec tor un er t s Act i
lara tion that he b the Mem ber s 1n the Gen era l Meeting .lJ •
d ec A pointment Y
2· Subsequent ·de P . . . · ru"
othe rwis e, all sub seq uen t app oin tme nts of directors ""
the Articles prov , I eeti ng of the com pan y. sh....
take place 111 . the gen era m ·~
. t f Directors In the case o f a p u bl'
· 1 Retiremen o 1c Com pany
Rotationa . h .s sub sidi ary of· a Pubhe .
Com pan y, only one-third oft~ Ot
. Companfy ~ 1uct rs can be perm ane nt. At
1
Private
mber O 0 tree o leas t two -thi rds of the
tota 1 nu . t .
shall be rota tion al dire ctor s. How eve r, the · ~
number of 0 irec ors . Articles
. . f th Com pan y can pro vid 11 th D' h 11 .
Association o e e that a e irec tors s a retire at ev OI
annua.1 general meetl·ng· But in case of a Priv ate comp any , a ll the Dire
· · ctor ery
s r::11 ..
,
be permanent.
~,
, .
At every subsequen.t ann ual ,~t\ era1 mee ting , , . .
out_ of the two~thrrds rotationa .
directors, one-third or the.~1irl1.be~ nea rest to one l
-thi rd mu st retrre.
3. Appointment of Oi(_ectots by the Boa
rd. The Boa rd of Directors may
appoint directors in the followmg ,c:tr~umstanc
es:
(i) Add itio nal Directors [Section 161(1)1. If the
Arti cles of Association of a
company permit, Boa rd of Dir ecto rs may app
oin t any pers on, other than
a person, who fails to get app oin ted as a dire ctor
in a gen eral meeting, as
an add ition al dire ctor at any tim e who sha ll hol
d office up to the date of
the next ann ual gen eral mee ting or the last
date on whi ch the annual
ge:1eral mee ting sho uld hav e bee n held , whi che
ver is earlier.
(ii) Alte rna te Director l Sec tion 161(2)1. An
Alte rnat e Dire ctor may be
app oint ed by the Boa rd pro vid ed it is auth oris
ed by:
• Articles of Association; or
• a Resolution pas sed by the com pan y in Gen
eral Meeting.
Such a Director shal l act for a Dire ctor call
ed 'the orig inal Director'
dur ing his abse nce for a per iod of at leas t J
mon ths from the State in
whi ch Boa rd Mee ting s are nor mal ly held.
Only that pers on can be app oin ted as an alte rnat
e dire ctor who does not
hold any alte rnat e dire ctor ship for any othe r
dire ctor in the company.
No pers on shal l be app oin ted as an altem~te dire
ctor for an independent
dire ctor unle ss he is qua lifie d to be app oint ed
as an inde pen den t director
und er the pro visi ons of this Act.
Suc h an alte rnat e dire ctor shall vacate the offic .
e on the retu rn of the
orig inal dire ctor to Ind ia or the expiry of th
e original dire ctor 's tenn
whi che ver is earlier. . t O th A ti I
(iii) Nom inee dire ctor -CSection 161(3)]. Subject 0
f
. e r c es .
.
the Boar<i may app omt any Perso. n• ns as a director nom inataedcom b
pany,
y
. . . .
inst itut ion m pur sua nce O f the prov 1510 of any law for th tim
e ~ ~
e bein g IJ'\
t or by th Central Gov ernm ent
force or o f any agre eme n e
. f · ts shar eholding in a Gov ernm ent or the State
Gov ernm ent by virt ue _0 1 )J. 'Casual com pan y
i
(iv) Cas ual Vac anc y [Section 161 4 esig nati vacancy' mea ns an v
on etc. of a dire ctor y acancy
·

L
whi ch take s place due to dea ' r
·
 CHAPI'ER 11 : MANAGEMENT ■ 85

In the cas_e of a public ~ompany or a private company which is subsidiary

of a pubhc company, tf the office of such a Director is vacated before his
term of ~ffice expires in the normal course, the resulting casual vacancy
may be filled by the _Board of Directors at a Meeting of the Board.
Any pers?n so appointe d shall hold office upto the date upto which the
Director, m whose place he is appointed, would have held the office.
member of a company
4_Appointment of Directors by the Tribunal. Where a
111 akes an applica~
on to the Tribunal under Section 241 for relief in cases of
oppression and_ m1s_mana?ement of a company's affairs, the Tribunal may make
such order as it thinks fit for the appointm ent of such number of persons as
directors, who may be required to report to the Tribunal on such matters as the
Tribunal may direct.
Right to apply u11der Section 241. The following members of a company shall
have the right to apply under Section 241, namely -
(a) in the case of a company having a share capital, not less than 100
members of the company or not less than one-tenth of the total number
of its members, whichever is less, or any member or members holding
not less than one-tenth of the issued share capital of the company.
(b) in the case of a company not having a share capital, not less than one-
fifth of the tohll number of its members. .
5. Appointment of Directors by the Central Government [Section 167(3)).
Where all the directors of a company vacate their offices under any of the
specified disqualifi~ations, the promoter or, in his absence, the Central
Government shall appoint the required number of directors who shall hold office
till the new directors are appointed by the company in the general meeting.
6. Appointment of Directors by Third Parties. If the Articles so authorise, one-
third of the total number of directors of a public company and all the directors of
a private company may be appointed by third parties on a non-rotational basis.
Such right may be given by the Articles to the debentureholders or other
specified creditors.
Q. 6. Explain the circumstances in which a director is deemed to have
vacated his office.
Ans. Vacation of office of Director (Section 167). The office of a director shall
fall automatically vacant where the director -
(i) incurs any of the disqualifications specified in Section 164;
(ii) absents himself from all the meetings of the Board of Directors held
during a period of 12 months with or without seeking leave of absence of
the Board;
(iii) acts in contra;vention of the provisions of Section 184 relating to entering
into contracts or arrangements in which he is directly or indirectly
interested;
(iv) fails to disclose his interest in any ~ontract or ~angem ent in w~~h he is
directly or indirectly interested, m contravention of the prov1S10ns of
Section 184;
(v) becomes disqualified by an order of a court or_the T~bunal; .
(vi) is convicted by a court of any offence, whether mvolvmg moral turpitud e
 • sHJVA O.U., 0-·CO
·
M (H ONS.)
'
At>
t ., im pr iso nm en t fo r at
('I' otht?n, ,·1~ t;ind ~ ntdenbCC-l!1 < 'f h h
k:a~t 6 month .
th e di re ct or ev en 1 e 3', f'I ~- 1_
ntt ict' shall be va ca te
y 1 cd ,m a 1
. ~ tl _, or der of ,;uch , ou rt;
,,g,1in~t 1~ .
(1 11 ) i~ ~ tn<'l \'f'd in pu
1

(,,, ,, ) 1, c1
vit'H"
~
lx--en ap
other em p Iov m en t in th e ho ld in g, subs id ia
"'--eases to l,o Id su office or ot he r em pl oy men t 1n
It •' pe func
. hrso n,
d1recto r e ld b\ , hi m ha.s be co m e va ca nt on ac co un t of an f h d'
specified abov~, he shall
exten d to year or wi th fin
1 e w hi ch sh al l no t be less
extend to f S lakh , or wi
\\ne re all the di re cto rs of
di sq ualifications specified
Go,-e rn m en t sh all ap po in
till th e directors ar e ap po
A pr iv ate co m pa ny m
ya ca tio n of office of a di re
Q.7. State th e provision
of directors.
An s. Re m ov al of Directo
1. Re m ov al by sh ar eh ol
an or di na ry re so lu tio n,
af ter gi vi ng hi m a re as on
wa nt to m ov e th e re so lu
special notice to th e co m
specify th e in te nt io n to m ov
th e di re cto r co nc er ne d an
W he re th e notice is re ce iv
of th e re so lu tio n by in
Ot he rw ise, th e co m pa ny
ad ve rti se m en ts, on e in
7 da ys before th e m ee tin
W he re th e di re cto r m ak
re qu es tsJ or cir cu lat io n of
to do so , ~l es s it is re ce
se nt to th
e m embers, the a·rr ec tor
re ad ou t at th e m ee tin
• no
re pr es en tat io ns to th e m em
ee f if
m mg, on an ap pl ica
th e Tr ib un al is sa tis fie d tio n, e1 er
needless publicity for de fa
The vacancy ca us ed by
pr ov id ed special notice of
vacancy is no t filled at th th e pr Po ~ ap ';°be fill ed by the Bo ard as a ca
vacancy. Th e di re cto r wh
cla im co mp en sa tio n, if
any, m res pe c
~
po1n el
ce of the provis io ns of th is
~ utan:t a direct~r by virtu e
_
of
,
hi
Act;
s hn ld in g any of f
P?ea1
I
ry or a~socia te co mpice Ot
, ch
. h
tio
t at company any ,,
ns as a di re ct or ev en w he n he no k ·
w s th at the off ice
,h - y o t e 1squalificatio ~
~ pu ni ~h ab le w it .
1m pn so nm en t for a te rm ~
wh~ch ma,f
th an r 1 lakh bu t which
th bo th. rna ~
. . ·
a co m pa ny va ca te th ei
r of fic es un der an y of the
ab ov e, th e pr om ot er or
, in hi s ab se nc e, the Ce
t th e re qu ire d nu m be r of ntral
directors wh o shall hold off
in te d by th e co m pa ny in ice
th e ge ne ra l me eti ng .
ay pr ov id e ad di tio na l
gr ou nd s in its Articles
cto r. for the
s of th e Companies Act,
2013 w ith regard to rem
oval
rs can be stu di ed un de r th
e fo llo wi ng tw o heads:
de rs un de r Se ct io n 169.
A co m pa ny m ay , by pas
re m ov e a di re ct or be fo re sing
th e ex pi ry of hi s pe rio d of
ab le op po rtu ni ty of be in office
g he ar d, If so m e of the me
tio n for th e re m ov al of mbers
a di re cto r, th ey ha ve to
pa ny at lea st 14 da ys be give a
fo re m ee tin g. Th e notice
e th e resolut~on so th at pr should
op er notice m ay be sent to
d ot he r m em be rs .
ed we ll in ad va nc e, fr~e co
m pa ny ca n se nd the notice
c_lud in g th e sa m e in th
e no tic e of ge ne ra l meeti
ha s to no tif y th e sa m e ng.
by wa y of tw o newspape
En gl ish an d an ot he r in r
ve rn ac ul ar lan gu ag e, at 5t
g. lea
es re pr es en ta tio ns in wr
iti ng to the ~o m pa ny
th e sa m e to th e members, and
the co m pa ny 1s du ty boun
iv ed by it to o late. If a co d
py of th e re pr es
en !a tio ns is not
m ay re· qu ire that th e re pr es en tat io ns shall be
g. Th e co m pa ny n~ d d , h
t dse n t bea cod py
h re se nt ab on s ne e no o.. the
be rs or t e re p rea ou t at t e
· · ·th by the co m pan y or by th e ag gr iev d arty
f rre d ar e being ab us ed e P
th at th e rights 50 co n e to secure,
m at or y m at te ~ ay be
filled at the sa m e meeti
su ch re mo ~ 01 in tm en t ng;
ha s als o be en giv en . If the
0
e me eti ng , it xnaed ca nn sual
~ n re mo ot be re ap po in ted bu t he
o h_as vc: v f h· ma v
~ . t of teO)'linatio
n ° 15 ·
ap po in tm en t. ·
 CHA PTER 11: MANAGBMENi ■ 87

The director so rt ppoin tcd shnll hold offi' cn'- t,·11 ti,· c remov ed d ,recw ' , r cou Id have
t,eld office, had he not bl't'n removed.
The .mcmbC'rs, lunl'evel', ca1111o t remov e tl,e ,'-allow · tors:
· t tJpes o., d tree
. . , tng 1
(,) A director nppom ted accord ing to tJ1e prmc1 ·· · I of proport rona· J
. pe
t't:'prt?se ntatto n under Section 163.
(ii) A director appoi nted by the Tribunal under Section 242.
2 Removal by the Tribunal [Sectio n 242) • Where a member of a company
· . . .
of
n,akt's an apph~ ahon to the Tribunal under Section 241 for relief in case
fit
oppression or misma nagem ent, the Tribunal may make such order as it thinks
for the ~emoval of any of the directors of the company.
The dtrector so re?'ov ed canno t hold a managerial office in the company for a
period of 5 years witho ut the sanction of the Tribunal. Further, he cannot claim
compensation for such termination.
Q. 8. Discu ss the powers of Directors of a company.
Ans. Powers of Directors. As per Section 179(1), the Board of Directors can
is
exercise all such power s and do all such acts and things, as the company
to
authorised to exercise and do. The directors can exercise their powers subject
the provisions contai ned in the Act, Memorandum, Articles and regulations
made by the compa ny in general meetings.
The Board canno t exercise any power or do any act or thing which the Act, or
the Memo randu m or the Articles of the company require to be exercised or done
by the compa ny in general meetings. .. .
Once the Articles set out the powers of the Board, they can be exercised only by
ns
the Board. The shareh olders of the company cannot interfere with the decisio
of the Board, provid ed the Board acts within the scope of the authority conferred
upon it and the power s are exercised bonafid~ i~ the inter~st of the ~ompany.
Exceptions. In the following cases, the ma1on~ of _sharehol~ers m a g~nera
l
meeting may interv ene and exercise a power which 1s otherwise vested m the
· Iafid d
Board. Malafide actions. Where the actions of th e d rrector s are_ma e an
. (a)
a ainst the interests of the company. In sue~ cases, the drrectors act for
; ir own ersonal interests and ignore the mterests of the company.
t e p in incompetent to act. Where the Bo~d beco~es
(b) ~oard becomto ac g t ror example all the directors showing mterest m a
incom petent • r, '

partic ular dealing. . t 'lling to act or they are unable to

(c) Deadlock. When the directors are no w1 .
act due to equal division of v~tes.
,I th BO ard o' Directors. . h
Statut ory powers o, . e d by means '1 f oluti' ons passed at meetings ofdt ef
o res hall be exercised by the Boar 0
1. Powers to be exercise .
Board [Section 179(3)]. The f~llowmg p~:;: ;eting s of the Board.
Directors by means of resolutions pas~e t f money unpaid on their shares;
h holders m respec o Section 68; .
(a) to make calls on s are 'ties under
(b) to author ise b_u_y-b~ck of ~ec~~bentures, whether in or outside India;
(c) to issue securit~es, mcludmg
(d) to borrow morue· els s; .
of the compa ny'
(e) to invest the fun