Company Law - Unit III

MANAGEMENT AND CONTROL OF COMPANIES
â• Board of Directors: Powers and Functions

â• Distributlon of powers between Board of Directors and general
meeting â• Directors
• Appointment
• Qualification
• Position of directors
• T pes of dlrectors
• Powers and duties of directors
• Remuneration
• Removal
â• Meetings: Meetings of Board and Committees
• Kinds of Meetlngs
• Procedufe relatlng to convening and proceedings at General and Other meetings
• Resolutions
â• Prevention of oppression and
Mismanagement. â• Corporate Social
Responsibility (CSR)
”Effective leadership is putting first things first. EffeCtive management is diSCipline, carrying it out. — Stephen
Covey
BOARD OF DIRECTORS: POWERS AND FUNCTIONS
On incorporation, a company becomes an artificial person in the eyes of law, it has a pefpetual succession.
It is empowered to hold all properties in its own name and in its own right. It can sue others and can be sued
by others in its own name ln order to enable a company to achieve its objectives as enshrined in the objects
clause of its MOA, it has to depend upon some agency, known as the Board of directors. The directors are
the brain of a company. They occupy a pivotal posltion in the structure of the company They are in fact the
mainspfing of the compan .
The Board of directors of a company is a nucleus. selected according to the procedure prescribed in the Act
and the AOA. Members of the Board of directors are known as directors, who unless especially authorized
by the Board of directors of the Company, do not possess any power of management of the affairs of the
company Acting collectively as a Board of directors, they can exercise all the powers of the company except
those which are prescribed by the Act to be specifically exercised by the company in general meetings.
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The directors formulate policies and establish organizational set up for implementing those policies and to
achieve the objectives as contained in the Memorandum, muster resources for achievlng the company
objectives and control, guide, direct and manage the affairs of the company. The Companies Act 2013 does
not contain an exhaustive definition of the term director ” Section 2(34) of the Act prescribed that ‘director
means a director appointed to the Board of a company.
Section 2(10) of the Companies Act, 2013 defined that ’Board of Directors" or “Board", in relation to a
compan , means the collective body of the directors of the company Thus a director may be defined as a
person having control over the direction, conduct, management or superintendence of the affairs of the
company
Only indiviñunls can be Directors: As per Section 149 of the Companies Act, 2013 no body corporate,
association or firm can be appointed director of a company Only an individual can be so appointed
Section 166 of Companies Act, 2013, prohibits assignment of office of director to an other person Any
assignment of the office made by a director shall be void
The Board of Directors oversees how the management serves and protects the long-tefm interests Of all
the stakeholders of the company. The institution of Board of Directors 1s based on the premise that a
group of trustworthy people look after the interests of the large number of shareholders who are not directly
involved in the management of the company The position of board of directors is that of trust as the board is
entrusted with the responsibility to act in the best interests of the company
The board of directors is the highest authority ln any company. According to Section 179, Companies Act
2013, the powef of directors of a company entitled to make an and all decisions, and thus exefcise all
the power, which the company has authority to enact.
Minimum/Maximum humber of Directors in a Company [Section 149(1)]
Section 149(l) of the Companies Act, 2013 requires that every company shall have a minimum number of
3 directors in the case of a public company, two directors in the case of a private company, and one director
in the case of a One Person Company. A company can appoint maximum 15 fifieen directors. A company
may appoint more than fifteen directors after passing a special resolution in general meeting and approval
of Central Government ls not required The restriction of the maximum number of directors shall not apply
to section 8 companies.
Minimum number of Directors

H Public Company 3
Directors H Private Company
2 Directors
H One Person Company (OPC) 1 Director
Company Law - Unit Ill 3 Al - Ameen College of Law, Bangalore
Number of Directorships [Section 16^
Maximum limit on total number of directorships has been fixed at 20 companies and the maximum number
of public companies in which a person can be appointed as a director shall not exceed ten.
The members of a company may, by special resolution, specify any lesser number of companies in which a
director of the company may act as director
Section 8 company will not be counted for the purpose of m£tXlmum number of Directorship.
Sec 165 (6): If a person accepts an appointment as a director in contravention of above-mentioned

provisions, he shall be punishable with fine which shall not be less than five thousand rupees but which
may extend to twenty-five thousand rupees for every day after the first day during which the contravention
continues
POWER AND FL NCTIO S OF BOARD OF DIRECTORS
To acquire property: To purchase, take on lease or otherwise acquire property for the Company at such
price and generally on such terms and conditions as they think fit
2 Works of capital nature: To authorize the undenaking of works of a capital nature
3 To secure contracts by mortgage: To secure the fulfilment of any contracts or engagements entered
into by the Company by mongage or charge of all or any of the property of the Company
4. To appoint officers, etc: To appoint and at their discretion, remove or suspend such managers,
secretaries, officers, clerks, agents, and servants. for permanent, temporary or special services, as
they may, from time to time, think fit, and to determine their powers and duties and fix their salaries
5. To appoint trustees: To appoint any person or persons as trustees and to provide for the
remuneration of such trustee or trustees;
6. To bring and defend action, etc: To institute, conduct, defend, compound or abandon any legal
pfoceedlngs by or against the Company or its officers
7. Reference to arbitration: to refer any clalms or demands by or against the Company to arbitration
and observe and perform the awards
8. To give receipts: To make and give feceipts, releases and other discharges for moneys payable to
the Company, and for the claims and demands of the Company.
9. To authorize acceptance, etc: To determlne who shall be entitled to sign on the Company's behalf
bills, notes, receipts, acceptances, endorsements, cheques, releases, contracts and documents.
10 To appoint attorneys: Appoint any person to be the attorneys or agents of the Company with such
powers
11 To invest moneys: To deal with an of the moneys or the Compan upon such authOrized
investments by the MOA of the Company and in such manner as they think fit
12 To give security by way of indemnity: To execute ln the name and on behali of the Company in
favor of any director or other person who may incur or be about to incur any liability for the benefit
of the Company's property (present and future) as they think fit
13 To give percentage: To give to any person employed by the Company a commission on the profits
of any particular business transaction, or a share in the genefal profit of the Company
14 To make bye-laws: From time to time to make, vary and repeal bye-laws for the regulation of the
buslness of the Company, its officers and servants.
15 To give bonus: To give, award, or allow any bonus, pension. gratuity or compensation to any
employee of the Company or his widow, children or dependents
16 To create provident fund: Subject to the approval of the President to form a fund to provide for
such pensions, gratuities or compensations of to create an provident or benefit fund in such manner
as the directors may deem fit
17 To establish local board: Establish any local board for managing any of the affairs of the Company
In any specified locality in India, out of lndia and to appoint any persons to be members of such local
boards and to fix their remuneration
18 To make contracts etc: To enter into all such negotiations and rescind and var all such contracts,
and execute and do all such acts, deeds, and things in the name and on behalf of the Company
19 To sub-delegate powers: to sub-delegate all or any of the powers, authorities and discretions for
the time being invested in them subject, however, to the ultimate control and authority being
retained by them.
According to Companies Act 2013, the Bosrd of Directors of a Company has the following powers in
the
Company.
• Power to make calls in respect of money unpaid on shares

• Call meetings on suo moto basis
• Issue shares, debentures, or any other instruments in respect of the Company.
Company Law Unit Ill Al Ameen College of Law, Bangalore
• Borrow and invest funds for the Company

• Approve Financial Statements and Board Report
• Approve bonus to emplo ees
• Declare dividend in the Company
• Power to grant loans or give guarantee in respect of
loans
• Authorize buy back of securities
• Approve Amalgamation/Merger/ Takeover
• Diversify the business of the Company
Sec 179 {3): The Board of Directors of a company shall exercise the following powers on behalf of the company
by means of resolutions passed at meetings of the Board, namely
(n) to make calls on shareholders in respect of money unpaid on their shares;
b) to authorize buy-back of securities under section 68:
(c) to issue securities, including debentures, whether in or outside India:
(Q to borrow monies:
{e) to invest the funds of the company:
(/) to grant loans or give guarantee or provide security in respect of loans:
g) to approve financial statement and the Board's report;
h) to diversify the business of the company;
(/) to approve amalgamation, merger or reconstruction:
J) to take over a company or acquire a controlling or substantial stake in another company;
(k) any other matter which may be prescribed:
Sec. 180. Restriction on powers of Board: (/) The Board of Directors of a company shall exercise the
following powers onl with the consent of the company by a special resolutlon
• to sell, lease or dispose of the whole or substantially the whole of the undertaking of the company
• to invest otherwise in trust securities the amount ot compensation recelved by it as a result of any merger
or amalgamation;
• to borrow money, where the money to be borrowed, together with the money already borrowed by
the company will exceed aggregate of its paid-up share capital
• to remit, or give time for the repayment of, any debt due from a director
Meetings of the Board (Section

173)
Section 173 of the Act deals with Meetings of the Board and Section 174 deals with quorum
1. The Act provides that the first Board meeting should be held within 30 days of the date of incorporation.
2. In addition to the first meeting to be held within 30 days of the date of incorporation, there shall be
minimum of four Board meetings every year and not more one hundred and twenty days shall intervene
between two consecutive Board meetings
3. In case of One Person Company (OPC), small company and dormant company, at least one Board
meeting should be conducted in each half of the calendar year and the gap between two meetings should not
be less than 90 days
4. In case of Section 8 Company, afier MCA exemptions Notification Dated 05.06.2015, the provision of
Section 173(1) shall apply only to the extent that the Board of Difectors, ot such Companies shall hold at
least one meeting within every six calendar months.
Note: With regard to Section 8 companies this section shall apply only to the extent that the Board of
Directors of such Companies shall hold at least one meeting within every six calendar months
Quorum for Board meeting Requirement (Sec.174)
V Quorum for Board Meeting = 1/3'd of its total strength or two directors whichever is higher
H A Director participating through video conferencing/audio visual modes will also be counted for quorum
P Any fraction of a member will be rounded off as one
H Total strength shall not include directors whose places are vacant
H Quorum shall be present not only at the time of commencement of the Meeting but also while transacting
business
BDis ibi i orf D r c ors and G ne al Mee

n of Po s be en
Company's powers can be exefclsed by the board of directofs and at meetings of members of a company.
Except for the powers which are expressly requlred to be exercised by the company in general meeting, in all
other cases the difectors can exefcise all the compan s powers. The directors shall exercise their powers
bona fide and in interest of the company
This division of company s powers has been dealt with Greer L I, in John Shaw and Sons {Salford Ltd), v.
Shaw, in the following words: ’A company 1s an entit distinct from its shareholders and its directors.
Some of its powers may according to its articles, be exercised by directors, cenain other powers may be
reserved for the
shareholders in general meeting. lf powers of management are vested in the directors, they and they alone
can exercise these powers The only nay in which the general body of the shareholders can control the
exercise of the powers vested by the anicles, in the directors is by altering the anicles, or if the opportunit
arises under the articles b refuslng to re -elect the directors whose actions they disapprove."
The shareholders cannot usurp the powers hich by the anicles are vested in the directors an more than the
dlrectors can usurp the powers vested by the articles in general body of shareholders. The powers of
directors include to issue preference shares. borrow money by mortgaging the company's property and to do
acts necessary for the management of the company. The power to sell the assets of the company is vested
in the board and if the board thinks that it is not for the interest of the company to sell its assets, it is not
bound to do so, notwithstanding a resolution to contrary in the general meeting
The directors are the only persons who can bring an action on behalf of the company. They may also
compromise a suit in the interest of the company The directors cannot by contract deprive themselves of the
power to control a manager so as to confef powefs on him to the exclusion of himself While the dlrectors
are to follow the directions given by the general meeting, they are not bound to act or adopt a panicular
line of action at the instance of the shareholders. The exercise by the directors of discretionafv powers will
not be interfered with unless it is proved that they have acted for some improper motive or arbitrary or
capriciousl .
The relationship of the Board of directors with the shareholders is more of f”ederation than one of
subordinates and superior Some powers are specially reserved for the Board, example: appointing directors
in casual vacancies, the power to Issue debentures, etc On the other hand, some powefs are exclusively
reserved for the members in general meeting e.g. borrowing in excess of the paid-up capital and free reserves.
selling or disposing off the whole or substantially the whole of the undertaking etc.
In the following exceptional cases, the general body of shareholders is competent to act even in matters
delegated to the Board
(a) Directors Acting Mala Fide: The general body of shareholders can intervene when it is proved that
the directors have acted for improper motive or arbitrarily or capriciously. ln Saga charan Lal v. Romesh›i
ar Prasad Bajoria (1950) SCR 394, it was stated that ordinarily the directors of a company are the only
persons who can conduct litigation in the name of compan , but when they are themselves the wrong
doers, and have acted malafide and theif personal interest is in conflict with their duty ln such a way that
they cannot or will not take steps to seek fedress for the wrong done to the company, the majority of the
shareholders may take steps for redressal of the wrong.
(b) Incompetent Board: The general body of shareholders may exercise the powers vested in the Board
when the Board is lncompetent to act, for instance, where all the directors are interested in the transaction or
the Board is unwilling to act, or when there are no validly appointed directors functioning.
(c) Deadlock in the Board: If the directors are unable or unwilling to act. on account of deadlock, the
shareholders have the inherent power to act.
The board of directors of a company 1s primarily an oversight board. lt oversees the management of the
company to ensure that the interest of non-controlling shareholders is protected. lt also functlons as
advisory board. lndependent directors bring diverse knowledge and expertise in the board room and the CEO
uses the knowledge pool in addressing issues being faced by the company. The most imponant function of a
monitoring board is to provide directlon to the company.
KEY MANAGERIAL PERSONNEL
The Companies Act, 2013 has for the first time recognized the concept of Kev Managerial Personnel. As
per section 2(51) “key managerial personnel' , in relation to a company means'
(i) the Chief Executive Officer or the managing director of the manager
(ii) the company secretary
(iii) the whole-time director
(iv) the Chief Financial Officer
(v) such other officer as may be prescribed
Managing Director
Section 2(54) of the Companies Act. 2013, defines managing director' lt stipulates that a *managing
director’ means a director who, by virtue of the articles of a company or an agreement with the company or
a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers
of management of the affairs of the company
U hole Time Director
Section 2(94) of the Companies Act, 2013 defines ‘whole-time director ” as a difector in the whole-time
employment of the company
Company Law Unit Ill 9 Al Ameen College of Law, Bangalore
Manager
Section 2(53) of the Companies Act, 2013 defines “manager” as an individual who, subject to the
superintendence, control and direction of the Board of Directors, has the management of the whole, or
substantially the whole, of the affairs of a company, and includes a difector or any other person occupylng
the position of a manager, by whatever name called, whether under a contract of servlce or not.
Chief Executive Officer
Section 2(18) of the Companies Act, 2013 An officer of a company, who has been designated as such by it.
Chief Financial Officer
Section 2(19) of the Companies Act, 2013 defined ‘Chief Financial Officer" means a person appointed as
the Chief Financial officer of a company.
Company Secretary
Section 2(24) of the Companies Act, 2013 defines “company secretary” or secretary“ means a company
secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1950 who
is appointed by a company to perform the functions of a company secretary under this Act.
RECTORS
The Companies Act 2013 does not contain an exhaustive definition of the term ‘director' . Section 2(34) of
the Act prescribed that ‘director' means a director appointed to the Board of a company. A director may be
portrayed as an individual who coordinates controls or deals with the affairs of the Company A director is
someone who is appointed to carr out the responsibilities and functions of a compan in accordance with
the provisions of the Company Act, 2013 They are relatlvely referred to as the Boafd of Directors.
Appointment of Directors hotes
The appointment of directors rests in the following hands
1. Subscribers to the memorandum

2. Company ln general meeting
3. Board of directors
4. Central Government
Company Law - Unit lll 10 Al - Ameen College of Law, Bangalore
Appointment of Directors shall be made according to the Anicles of Association (AOA) or as per the
provisions of section 152 of the Companies Act 2013. In general, the subscribers to the MOA shall be
deemed to be the difectors Of the cofporate entity
Public Company: By and large, in a public company or a private company subsidiary of a public company,
two- thirds of the whole numbers of Directors are appointed by the shareholdefs and therefore the
remaining one- third's appointment is formed as per Anicles and failing which, shareholders shall appoint
the remaining one- third.
Private Company: ln case of a private company, which Isn’t a subsldiary of a public compan , the Articles
can prescribe the manner of appointment of Directors. In case the Articles are silent, the Directors must
be appointed by the shafeholders
First directors of the compan shall be named in the MOA and AOA. The first directors are
deemed to have been appointed on the incorporation of the company. The first directors will
hold office until the first Annual General Meeting (AGM) where they will retire.
Nominee Directors can be appointed by a third pafty or by the Central Government in the case of oppression
or mismanagement
Some of the categories of directors, being provided under the Companies Act 2013, are as follows
• Women directors are there must be one woman within the board of directors where the corporate entity has
paid-up capital of Rs 100 crore or more or features a turnover of Rs 300 crore or more
• lndependent Director under section 149(6)
• Small Shareholder Director, being elected by small shareholders of the entity, under section 151
• Resident director under section 149(3) is required in a very company that has lived for 182 days in lndia
within the previous year Additional director under section 161
• Alternative directors under section 161(2) may be appointed in the absence of the most difector for a
minimum of three months and above.
• Nominee Directors under section 16 1(3) are appointed by a 3rd party or by the Central Government in the
case of mismanagement or oppression
Qualifications for Directors
Under the Companies Act, any qualifications for Directors of any company aren't prescribed anywhere.
An lndian company may, therefore, in its AOA stipulated quallfications for Directors. The Memorandum
of Association makes no mention of a director's quallfications The Articles of Association specify
the
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qualifications. However, the directors must meet the requirements: Directors must acquire a specific number
of shares which can be prescribed by a public company or a private company that's a subsidlary of a public
company, to be five thousand rupees (Rs 5,000?-).
Disqualification of Directors
Under section 164 of the act, the subsequent disqualifications are provided’
• Unsound mind person

• UndlScharged Insolvent
• Convlcted by the com
• Ofder of disqualifying elapsed the com
• NOt pa lng any necessitate the shares of the corporate entity
• Convicted for an offence
• Not filled any financial statements
• Failed to repay the deposits
• Barred by law
• Compan audltor,
• A Director who has been banned,
PROCEDL RE FOR THE APPOINTMENT OF DIRECTOR
The procedure fof the appointment of director has been provided under sections 152 to 159 of the
Companies Act 2013 and the same are as follows:
â• Section 153: Apply for the allotment of the Director identification number (DIN) before the central
government together with the deposlting of the pfescribed fees
â• A Section 154: The central government allot the DIN within one month of the receivlng of the
allotment application made.
â• Section 155: The applicant to whom DIN has already been allotted, shall now use or possess another
Director Identification Number.
â• Sectlon 156: The existing directors afe required to disclose their DIN (Director ldentification Number),
which has already been obtained by them from the central government.
â• Section 157 The corporate entity is required to inform about the DIN (Director ldentification Number)
of all the Directors to Registrar of COmpanies, of the authorized person, and the same shall be reponed
within 15 days from recelving the intlmation Prescribed fees are required to be submitted along with the
repos, as
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provided under section 403. On the of the intimation within 15 days the corpOfate entity must pay
a fine for Rs 25,000 twenty-five thousand which can reach Rs 1.00.000 one lakh.
â• Sectlon 159: If any of the provisions under sectlons 152, 155, and 156 haven't been followed then a fine
of
Rs 50,000 fifty thousand should be imposed or could also be accountable for the imprisonment for the six
months. In case of continuation of contravention, a penalty of Rs 500 for each day of default, shall be
imposed till the contravention continues
DOCL'MENTS RFQL IRED FOR A PPOIATMEhT
• DIN ldentiflcation Number).

• Form DIR 12 is filled together with the letter ot the appointment so submission of the documents by
the director within 30 days.
• The consent form DIR-2 should tend in writing for willingness to be a director.
• The appointing director should provide Form DIR intimating that he is not disqualified under the
provisions of section 164(2) of the act
• After the appointment, the director has got to give Form MBP- 1 in compliance with section read
with Rule 9(l) of Companies (Meeting of Board and Its Powers) Rules 2014
• The Company has got to call the board meeting and pass the resolutlon to appoint the extra director in
keeping with the AOA. lf no clause is mentioned then in accordance with provlsions of section 161 of
the act
POSITION OF DI RECTORS
1. Directors ns ngents: A company, as an artificial person, acts through directors who are elected
representatives of the shareholders. They are, in the eyes of the law, agents of the company for which they
act (Ferguson v Wilson) The general principles of the law of principal and agent regulate in most respects
the relationship between the company and its directors
2. Directors ns servnnts: They are not servants of the company A director may, however, become a servant
in a different capacity. He is someone who controls the affairs of the compan . For example, the creator
and controller of an air farming company was also working as its pilot. He died in an accident His widow
was allowed workman's compensation Lee v Lee 's Farming Ltd.).
3 Directors us A director is an officer of the company As such they are liable to certain
penaltles if the provisions of the Companies Act are not strictly complied with
4. Director ns trustees -
(a) Directors ns trustees of the company’s money nnd proper in the sense that they must account for all
the compan s money and property over which they exercise control Directors are. however. not trustees in the
real sense of the world because they are not vested with the ownership of the company's property It is only as
regards some of their obligations to the company and certain powers that they are regarded as trustees of the
company
(b) Directorsns trustees of the power entrusted to them in the sense that they must exercise their powers
honestly and in the interest of the company and the shareholders and not in their own interest
Types of Directors
There are a variety Of Directors under the Companies Act, 2013
¥ First Director
H lndlan Resident
Dlrector Based o‹ functions
(a) Executive Director: The two types of Executive Directors
V Managing Director,
H Whole time Director
(b) Non - Executive Director: The two types of Non- Executive
Directors H Nominee Director,
¥ lndependent Director.
Based o‹ appointment
H Additional Dlfector,
¥ Alternate Director,
H Casual Vacancy Director.
Other types
V Women Director,
V Small Shareholders Director,
V Shadow Director.
TYPES OF DIRECTORS
1. First Director
Section 152 of the Act provides for the appointment of first directors, accordingly, where there is no
provlsion made in Afticles of Association of the company for appointment of first directors then the
subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company
until the directors are duly appointed.
2. Indian Resident Director
The provlsion relating to appointment of lndian resident director are contained in section 149 (3) of the
Companies Act, 2013. i.e., ever company shall have at least one director who has stayed in lndia for a
total
period of not less than 182 days in the previous calendar year. Companies incorpOfated after 30.9 2014 need
to have the resident director from the date of incorporation itself
Based on Functions
3. Executive Director
Executive directors are internal professionals, i e. they are internal to the organization and are involved in
the daily functions of the company Any person who is a full-time employee of the company (i e whole-
time director) of who is responsible for the day-to-day operations of the company (i.e. managing director)
will be called an Executive Director Thus. an Executive Director can be designated as Managlng Director
and whole- tlme Director. Generally, an executive directof iS paid more than a non-executive director
because they are believed to have rich expenise and experience ln their field He is usually responsible for the
executive functions in the management and administration of the company Certain skills are required for a
person to be an executive director. Executive directors are present internally and are involved in the
company: Sec. 149(12).
• Sec 2(94) of Companies Act, 2013 & Rule 2(l) (k) of Companies (Specification of Definitions Details)
Rules, 2014: Executive Director means a whole-time director.
They afe generally appointed through an appointment agreement and their qualifications and remuneration will
be discussed in detail before they are appointed as Executive Directors
• Tenure: Managing director or a whole-time director can be appointed for a maximum period of 5
(five) years They are eligible for re-appointment. The re-appointment can be done for the next term
but not before one year of the expiry of the current term
• Age limit: The minimum age of a director should be 21 years. And the maximum age should be 70
ears. For a person above 70 years, shareholder's approval in the General meeting is required.
A Company (public or private) cannot appoint a manager along with a managing director but can appoint a
whole-time director along with a managing director or manager.
A. Managing Director: He is an executive director. A director who is the CEO and entrusted with
substantial management powers under Sec 2(54). When conslderable power of managing the affairs of a
company is given to a director either by way of,
• Articles of Association of the Company (AOA)

• An agreement with the Company
• A resolution passed in its general meeting
• By its Board of Directors
Then he will be the Managing Director of that Company.
B. Whole Time Director: Director + Whole Time Employee of the company — Whole Time Directof. As per
Clause 2(94) of Companies Act, 2013 ‘whole-time director includes a Director in the whole-time
employment of the company He is also an executive director of the company. A director employed on a
whole- time basis, not the CEO of the company, and is undef a special contract, appointed under Sec 2(94)
Independent Director (Sec 149)
Directors who have knowledge or network in a particular area or a panicular field can be termed as
independent directors Usually, companies hire ex-officials for such roles because they have the industrial
expertise and the experience which 1s required to run a company smoothly Women directors can also be
appointed as independent dlrectors lndependent directors help maintain transparency, which is an especiall
relevant factor, especially ln the corporate regime.
They are appointed to ensure tfansparency and provide expertise Must have the following qualifiCatlons
• Industrial expertise and knowledge

• Must not have any stock options or stake in the company
• It can only be appointed for a maximum of 5 years and for two terms, with a minlmum cooldown of 3
years between the terms
According to Rule 4 of Companies (Appointment and Qualification of Directors) Rules, 2014 the following
class or classes of companies are required to have at least two directors as independent directors
(i) the Public Companies having paid up share capital of ten crore rupees or more
(ii) the Public Companies having turnover of one hundred crore rupees or more
(iii) the Public Companles which have. in aggregate, outstandlng loans, debentures and
deposits, exceeding 50 crore rupees
Code for lndependent Directors (Schedule lX of the Companies Act 2fll3)
Section 149 (8) of the Act prescribes that the company and independent directors shall abide by the
provlsions specified in Schedule lV regarding code for independent directors. lt 1s a guide to professlonal
conduct for independent directors. Adhefence to these standards by lndependent difectors and fulfilment of
their responsibilities in a professional and faithful manner u ill promote confidence of the investment
community, panicularly minority shareholders, regulators and companies in the instltution of independent
directors.
Code of Conduct includes

• Guidelines of professional conduct,
• Role, functions and duties,
• Manner of appointment and re-appointment,
• Resignation or removal,
• Separate meetings,
• Evaluation mechanlsm.
Guidelines of professional conduct:
An independent director shall’
• Uphold ethical standards of integrity and probity

• Act objectively and constructively while exercising his duties;
• Exercise his responsibilities in a bona fide manner in the interest of the company:
• Give sufflcient time and attention to his professional obligations for informed and balanced decision making:
• Not allow any extraneous considerations that will vitiate his independent judgment
• Not abuse his position for the pufpose of gaining direct or indirect advantage or advantage
• Refrain from any action that would lead to loss of his independence
• Assist the company in implementing the best corporate governance practices
Role end functions:
• lndependent judgment to bear on issues of strategy, performance,risk management,resources, key

appointments and standards of conduct
• Objective view in the evaluation of the performance of board and management
• Scrutinize the performance of management and monitor the reporting of performance
• satisfy themselves on the integrity of financial information and that financial controls and the systems of risk
management are robust and defensible
• Safeguard the interests of all stakeholders, panicularly the minority shareholders:
• Balance the conflicting interest of the stakeholders
• Determine appropriate levels of remuneratlon of executive directors, key managefial personnel
• Moderate and arbitrate in the interest of the company as a whole. in situations of conflict between
management and shareholder s interest.
Duties:
The independent directors shall

• Underrate appropriate induction and regularly update and refresh their skills, knowledge and familiarity
with the company;
• Seek appropriate clarification or follOw appfopriate professional advice and opinlon

• Attend all meetlngs of the Board of Directors and of the Board COlTliTlittees
• Participate constructively and actively in the committees of the
• Attend the general meetlngs of the company:
• Address concerns about the running of the company or a proposed action, insist that their concerns are
recorded in the minutes of the Board meeting:
• Aware about the company and the external environment in which it operates:
• Function as vigil mechanism
• Report concerns about unethical behavlor, or suspected fraud or violation of the company’s code of
conduct or ethics policy;
• Assist in protecting the legitimate interests of the company, shareholders and its employees.
• Not disclose confidential
information Re-appointment:
The re-appointment of independent director shall be on the basis of report of performance evaluation dcc
149 ( l()) The tenure of the lndependent directofs the hall up to 5 consecutive ears; however, they shall be
entitled to reappointment by passing a special resolution with the disclosure in the Board's report.
Resignation or removal
The resignation or removal of an independent director shall be ln the same manner as is provlded in sections 168
and 169 of the Act An independent director who resigns or is removed from the Board of the company shall
be replaced by a new independent director within a perlod of not more than one hundred and eighty days from
the date of such resignation or removal as the case may be.
Separate meetings
• The independent directors of the company shall hold at least one meeting in a year
• All the independent directors of the company shall strive to be present at such meeting:
• The meetiRg Shall
V Revlew the performance of non-independent directors and the Board as a
whole H Revlew the performance of the Chairperson of the company
H Assess the quality, quantity and timeliness of flow of information between the company
management and the Board that is necessary for the Board to effectively and reasonably perform
their duties.
Evaluation mechanism
The performance evaluation of independent directors shall be done by the entire Board of Directors,
excluding the difector being evaluated. On the basis of the repos ot performance evaluation, it shall be
determined whether to extend or continue the term of appointment of the independent director.
Liability of lndependent Director
Section 149 (12): an independent director; a non-executive director not being promoter or key managerial
personnel, shall be held liable, only in respect of such acts of omission or commission by a company which
had occurred with his knowledge, attributable through Board processes, and with his consent or connlvance or
where he had not acted diligently.
Nominee Director
Section 149(7) and Section 161(3) of the Companies Act, 2013 deals with a Nomlnee director. If it is
authorized by the Articles of Association (AOA) of a company then the Board may appoint any person
as a director nominated by any institution in pursuance of the provisions of any law for the time being in
fofce or any agreement or by the Centfal Government or the State Government under lts shareholding in a
Government company. lf the Articles of Association of a Company authorizes it, only then can a
nominee director be appointed by the Board. They represent the stakeholders on the board of directors. To
put it in simple terms, a nominee director is a representative of the stakeholder who protects the stakeholder
s interest Their job is to see that the company does not function in a manner detrimental to the interest of
the stakeholders the represent
Nominee dlrectors could be appointed by a specific class of shareholders, banks or lending financial
institutions. third parties through contracts, or by the Union Government in case of oppression or
mismanagement
Types of Directors Bssed on Appointment
The Companies Act 2013 allows for three types of directors based on appointment to deal with
contingencies: Additional Director, Alternate Director, and Casual Vacancy Dlrector
4. Additional Director
A company may appoint an additional director under Sec.16l(1) to deal with unexpected or additional work.
Hence, it lTluSt fulfill the follOwing requirements
• Must be provided for in the AOA

• Cannot serve beyond the next Annual Genefal Meeting
• #OMi ›. r‹g Hospital: Addltional Directors cannot be appointed in special circumstances to strengthen
the majority
A person could be appointed as an additional director and can occupy hls post until the next Annual
General Meeting. In absence of the AGM, such term would conclude on the date on which such AGM
should have been held
5. Alternate Director {Sec. 161(2)}
Alternate director refers to personnel appointed by the Board, to fill in for a director who might be absent
from the country for more than 3 months
• Can be appointed under Sec.161(2) ln the absence of the director for more than three months to act
on his behalf if provided under AOA
• Can only serve till the managing director returns. cannot serve beyond that point
• Must be a like-for-like replacement: only an independent, alternate director may fill in for an
alternate director
6. Casual Vacancy Director
Provisions of Section 161(4) of the Companies Act 2013 deal with a casual vacancy director. Casual
vacancy means a vacancy in the office due to the reasons of death, resignation, disqualification, incapaclty,
and removal. Thus, a director assuming offlce due to any of these reasons will be considered as a casual
vacancy dlrector. The vacancy arising in the office of the director shall be consldered as a casual vacancy if
such a director was appointed by a shareholder ln a general meeting. Only the shareholders will have to
make a valid appointment with such a director. The concept of a casual vacancy dlrector applies only to
public companles
• Can be appolnted under s.l6l(4) on the death, resignation, disqualification, or incapacit of a director
• Need not be provided for under AOA
• Can only serve till the term of the director who has vacated.
• This only applies to public companies.
OTHER TYPES OF DIRECTORS
7. Women Director
The Companies Act, 2013 made it mandatory for cenain companies to appoint a woman director As per
the provisions of Section 149 (l) of the Act and Rule 3 of the Companies (Appointment & Qualification of
Directors) Rules 2014, the Companies that need to appoint a women director are as follows:
â• Every listed company

â• Ever public company having pald-up share capital of Rs 100 Cfores or more
â• Every public company which has a minimum turnover of Rs. 300 crores or more.
A company which has been incorporated under the Act and is covefed under provlsions of second proviso
to sub-section (1) of section 149 shall comply wlth such provisions within a period of six months from the
date of its incorporation. However, any intefmittent vacancy of a woman dlrector shall be filled-up by the
Board at the earliest but not later than immediate next Board Meeting or three months from the date of
such vacancy whichever is later.
8. Small Shareholders Director
Any person who holds shares of the nominal value of not more than Rs. 20,000 in a Public Company is
called a small shareholder. These small shareholders are allowed to elect a director in a listed company
Thus, directors elected by these small shareholders are called Small Shareholders Director. According to
Section 15 l of the Companies Act, 2013 every listed company may have 1 (one) director elected by such
small shareholders There is no mandate to appoint a small shareholders director under s.151, let up to the
company's discretion
Thus, a small shareholder director can be appointed b a Company if
H The Company is a Public Company

H The Compan has at least 1000 Or mofe small shareholders
Only if these two criteria exist, the listed company can have one director elected by a small shareholder.
9. Shadow Director
A shadow director is nowhere mentioned in the Companies Act, 2013. A shadow director is someone who is
not appointed offlcially as a director of the company but the Board follows his directions and orders. They
are very influential just llke any other Director of a company but they manage to avoid the liabillty that
arises thereof They give orders and their orders are followed but they do not have any managerial position
in the company Such Directors are known as Shadow Directors. The following points need to be established
for a person to be called a shadow Director-
• Not ln official capacity Such a person is not a director in his official capacity.
• Direct involvement: The person is involved directly in the affairs of the company He is not merely advising
but is directl involved in the company's management.
• Continuity The Board of Directors are following the instructions of such a person continuously and not just
once or twice
Company Law Unit lll 2l Al Ameen College of Law, Bangalore
• Majority following: The majority of the members of the company are following the instructions and
directions glven by such a person.
POWERS OF DIRECTORS
The powers of the Board of directors are co-extensive with those of the company. This proposition is,
however, subject to two conditions:
• First, the Board shall not do any act which is to be done by the company in general meeting
• Second, the Board shall exercise its powers subject to the provisions contained in the Companies Act, or
in the Memorandum or the Articles of the company or in any regulations made by the company in
genefal meetlng.
Powers to be exercised nt Bonrd meetings (Section 292)
The Board of directors of a companshall exercise the following powers on behalf of the company by means
of resolutions passed at the meetings of the Board, viz, the power to-
(a) make calls on shareholders in respect of money unpaid on their shares
issue debentures
(c) borrow money otherwise than on debentures
(d) invest the funds of the company
(e) make loans
Powers to be exercised with the npprovnl of compnny in genernl meeting
(a) sale or lease of the company's underrating
(b) extension of the time for payment of a debt due by a director
(c) investment of compensation received on acquisition of the company s assets in securities other than trust
secufities
(d) borrowing of money beyond the paid-up capital of the company
(e) contributions to any charitable fund beyond Rs.50,000 in one financial year or 5% of the average et
profits during the preceding thfee financial years, whichever is greater
DLTIES OF THE DIRECTORS (Sec 166)
The duties of directors as contained in section 166 of the Companies Act, 2013 are described as follows
1. Duty to act as per the articles of the company
The director of a company shall act in accordance with the articles of the company
2. Fiduciary duties: as fiduciaries, the directors must:
(a) exercise their powers honestly and bona fide for the benefit of the company as a whole; and
(b) not place themselves in a position in which there is a conflict between their duties to the company and
their personal interests They must not make an secret profit out of their position If they do, they have to
account for it to the company
3. Duties of care, skill end diligence (Duty to exercise due care) A director of a company shall exercise
his duties with due and reasonable care, skill and diligence and shall exercise independent judgment He is not
bound to bring an special qualifications to his office.
Stnndnrd of care The standard of care, skill and diligence depends upon the nature of the compan s
business and circumstances of the case They are various standards of the care depending upon:
(a) the type and nature of work

(b) division of powefs between directors and other officers
(c) genefal usages and customs in that type of business; and
(d) whether directors wOrk gratuitously or remuneratively
4 Dub to disclose interest: (Duty to avoid conflict of interest): Where a director is personally interested
in a transaction of the company, he is required to disclose his interest to the board An interested director is
neither to vote on the matter of his interest nor his presence shall count for the purposes of quorum A
director of a company shall not involve in a situation in which he may have a dlrect or indirect interest that
confJ icts, or possibly may conflict, with the interest of the company
5. Dub to ntten bonr meetings: The Act only says that the office of a director is automatically vacated if
he fails to attend three consecutive meetings of the board or all meetings for a pefiod of 3 months,
whichever is longer. Moreover, a director's habitual absence ma become evidence of negligence
6. Duty not to delegnte: A director should not delegate his functions to another person. But delegation of
functions may be made to the extent to which it is authorized by the Act or the constitution of the
company. A director of a company shall not assign his office and any asslgnment so made shall be void.
7. Duty to act in good

faith
A director of a company shall act in good in order to promote the objects of the company for the benefit
of its members as a whole, and in the best interests of the company. its employees, the shareholdefs, the
community and for the protection of environment
8. Duty not to make any undue gain
A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to
himself or to his relatives, partners, or associates and if such director is found guilty of making any undue
gain, he shall be liable to pay an amount equal to that gain to the company.
Punishment for contravention:
If a director of the company contravenes the provisions of this section such director shall be punishable with fine
which shall not be less than one lakh rupees but which may extend to five lakh rupees
¥ station of office of director (Sec. 167)
The office of a director shall become vacant in case
• Disqualifications specified in section 164

• Absents from all the meetings of the Board of Directors
• Acts in contfavention of the provisions of section 184
• to disclose his interest in any contract
• Disquallfied by an ofder of a com or the Tribunal
• Convicted by a com of any offence
• Till holding any office (once ceases to hold such office, the post as director also ends)
REMUNERATION
Section 198 provides that the total managerial remuneration payable by a public company or a private
company which to its directors or manager in respect of any financial year must not exceed l1 per cent of
the net profit of that company for that financial year, in computing the above ceiling of 11 per cent computed
in the manner laid down in section 349 and 359 The fees payable to directors for attending Board meetings
is not included.
¥t hat is included in Remuneration?
ExplanatloR to Sec. 198 describes the term ‘remuneration’ According to it, for the purposes of Sections.
309, 310, 311, 381 and remuneration’ includes the following:
1. Any expenditure incurred by the company in providing rent-free accommodation, or any other benefit
or amenity ln respect of accommodation free of charge, to any of its directors or manager.
2. Any expenditure incurfed by the company in providing any other benefit or amenity free of charge or at
a concessional rate to any of the persons aforesaid.
3. Any expenditure incurred by the company in respect of any obligation or service, which, but for such
expenditure by the company, would have been incurred by any of the persons aforesaid: and
4 An expenditure incurred by the company to effect any insurance on the life of, Of tO provide any
pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child
A director who is neither in the whole-time employment of the company nof a managing director may be
paid remuneration (a) by way of a monthl , quarterly or annual payment u ith the approval of the Central
Government. or (b) by way of commission, if the company by special resolution authorizes such payment; or
(c) by both
Each director 1s entitled to receive a sittlng fee for each meeting of the Board or a committee provided the
same is authorized by the articles.
The provisions of Sec 309 will not apply to a private company unless it is a subsidiary of a public
company.
REMOVAL OF DIRECTORS
Section 169 of the Companies Act, 2013 clearly defines the removal of a director and the circumstances
under which it can take place. Take a look at the various cases that incurs during removal of directors
A. V'here the director submits his resignation to the Board
In such a case, follow these steps to remove his name from the register of directors:
1. The first step is to hold a Board Meeting by issuing seven days of Cleaf Notice which implies to 21
days notice excluding the day on which it was sent and recelved
2. Then the Board will deliberate and determine whether to accept the director s resignation or not.
3. After accepting the resignation, the Board will pass a resolution stating acceptance of the director's
resignation
4. The next step that the outgoing director and Board need to take is to file a Form DIR — 11. Affix a
pfoof of the resignation letter's delivery and a copy of the resignation letter along with the form
5. Subsequently, the company must flle a form DIR 12 with the Registrar of (ROC) along
Companies with the Board Resolutlon and Resignation letter.
6. Lastly, after filling all the forms, the name of the director will get excluded from the mastef data of
the company on the offlClal pOftal of the MCA
B. Removal of director Suo-moto by the Board
A Company has the power to remove a director via passing an Ordinary Resolution unless the Central
Government or the Tribunal hasn't appointed that director. A company partakes Suo-moto in the following
way
1. A Board meeting will be called by givlng seven days' notice to all the directors That notice will
inform the directors about the removal of the concefned director
2. On the day of the Board meeting, a resolution shall be passed for holding of an extraordinary
general meeting along with the special resolution for removal of directors under shareholder's
approval
3. A general meeting will be held by givlng 21 days Clear Notice. Thereby, all the members will vote in
the meeting. and if a majority of people shows their consent to the decision. a resolution shall be
passed.
4. The company will give an opportunity of being heard to the director before passing the resolution.
5. Once the compan passes the decision, then, the same procedure will be followed for removal of
director. Wherein Forms DIR — 11 and DIR — 12 shall be filed with the same attachments of the Board
Resolution, Ordinary Resolution.
6. Thus, the name of the director will be removed from the Ministry of Corporate Affairs website
C. If the director does not attend three Board Meetings Consecutively
As per Section 167 of the Companies Act, 2013, if a difector has not attended a Board Meeting for 12
months, it will be considered that he has vacated the office. Therefore, a Form DIR — 12 will be filed on his
name and his name will get eliminated from the Ministry of Corporate Affairs
MFFTINGS
The word meeting is not defined anywhere in the Companies Act Ordinarily, a company may be defined
as gathering, assembling or coming together of two or more pefsons (by prevlous notice of by mutual
arrangement) for discussion and transactlon of some lawful business. A company meeting may be defined as
a concurrence or coming together of at least a quorum of membefs in order to transact either ordinary or
special business of the company.
Some important definitions of meeting are given below:
In the case of Sharp v. Daw es (197 l), the meeting is deflned as An assembly of people for a lawful
purpose or the coming together of at least two persons for any lawful purpose
According to P K. Ghosh Any gathering, assembly or coming together of two or more persons for the transaction
of some lawful business of Common concern is Called meeting.
According to K. Kishore, A concurrence or coming together of at least a quorum of members by previous

notice or mutual agreement for transaction buslness for a common interest is meeting.
From the above definitions of meeting, it can be concluded that meeting is the congregation of several
persons in a particular place for the purpose of discussing some important matters and expressing their
opinion on the questions raised.
Characteristics of a Company Meeting:
The characteristics of a company meeting are as follows
• Two or more persons (who are the members of the Company) must be present at the meeting.
• The assembly of persons must be for discussion and transaction of some lawful business
• A previous notice would be given for convening a meeting.
• The meeting must be held at a particular place, date and time
• The meeting must be held as per provisions/rules of Companies Act.
Kinds of Company Meetings:
The meetings of a company may be classified into the following categories
1. Meetings of shareholders:
1. Statutory meeting
11. Annual general meeting (AGM)

Ill. Extra ordinary general meeting
IV. Class Meetings
2. Meetings of Directors
1. Meetings of board of directors;

11. Meetings of
directors; Ill. Meetings of
creditors.
IV. Meetings ot debenture-holders.
I. Meetings of Shareholders:
The shareholders are the real owners of the company, but due to certain limitations they cannot take part in
the management of the company They leave this to their representatives called the directors. For
controlling the board of directors and their activities shareholders’ ‘meetings’ are held from time to time.
Meetlng of shareholders can be classified as under.
I. Statutory Meeting
Every public company havlng share capital must convene a general meeting of shareholders within a period
of not less than one month and not more than six months after the date on which it is authorized to
commence its business. This is the first meeting of the shareholders of the company and lt is held once in
the whole life of the company.
The following companies need not to hold statutory meeting:
(i) Private company.

(ii) Company limited by Guarantee having no share capital
(iii) Unlimited liability company
(IV) A public company which was registered as a private company earlier
(v) A company which has been deemed as a public company under Sec. 43 A
11. Annual General Meeting (AGM): Section 96
An Annual General Meetlng (AGM) is held to have an interaction between the management and the
shareholders of the company The Companies Act, 2013 makes it compulsory to hold an annual general
meeting to discuss the yearly results, auditOf’S appointment and so on A company should follow the
procedures under the Companies Act, 2013 to conduct the AGM All companies except one pefson
company (OPC) should hold an
AGM afief the end of each financial year. A one-person company (OPC) ls exempt from holding an AGM.
A company must hold its AGM within a period of six months from the end of the financial year
It is a meeting of shareholders which is held once in a year The object of holding this meeting is to review
the progress and prospects of the company and elect its office-bearers for the coming year
The first AGM of the company is held within 9 months of its incorporation. After holding such meeting, it is
not necessary to hold any other annual general meeting in the year of its incorporation and in the next year.
Subsequent AGM must be held by the company each year within six months or the closing of the financial
year. The interval between any two AGM must not be more than fifieen months. The registrar is empowered
to extend the tlme upto a period to three months except in the case of first AGM
Place: Such meeting is called at Registered Offlce of the Company or any other such place in the city
where such Reg. Office is situated
Time Hours: Between 9 00 am 6:00 pm , and not on any public holiday as so declared by Central or
State Government
Notice
The Board of Directors has to call AGM giving 21 days notice to all the members entitled to attend the
meeting. However, such a meeting may be called with shorter notice, if it is agreed to by all the members
to vote in the meeting.
Contents of Notice
Place of meeting (Section

96) Day of meeting (Section
96) Time of meeting
(Section 96)
Agenda (Section 102) A statement of the business to be transacted at the AGM should be given in the
notice. In case the meeting is to transact a special business. an explanatory statement should be attached
about such item
Proxy clause with reasonable prominence [Section 105(2)]
Every notice calling a meeting of a company, the aoicles of which provide for voting by pfoxy at
the meeting. should carr with reasonable prominence, a statement that a member entitled to attend and
vote is entitled to appoint a proxy etc
What is the Agends of an AGM? Buslness to be transacted at AGM: Section 102(2)(a)
The matters discussed or business transacted in an AGM except the following special business’
• Consideration and adoption of the audited financial statements.

• Consideration of the Director's report and auditor's report.
• Dividend declaration to shareholders.
• Appointment of directors to replace the retiring directors.
• Appointment of auditors and deciding the auditor's remunefation
• Apart from the above ordinary business, any other business may be conducted as a special business of
the company.
Quorum for an AGM
Private company = Two members
In the case of a publiC company, the quorum lS’
• 5 members if members are less than 1000.

• 15 members if members between 1000 to 5000
• 30 members if members are more 5000.
In case the quorum for the meeting is not present within half an hour ffom the scheduled time, the meeting will
be adjourned to the same day in the following week for the same time and at the same place
Update as of 5th Ma 2020: Companies are allowed to hold Annual General Meeting via Video
Conf”erencing (VC) or Other Audio-Vlsual Means (OAVM) in the year 2020.
Chairman of Meetings (Section 104)
Unless the articles of the company otherwise provide, the members personally present at the meeting shall
elect one of themselves to be the Chairman thereof on a show of hands. If a poll is demanded on the
election of the Chairman, it shall be taken forthwith in accordance with the provisions of this Act.
I II. Extraordinary General Meeting (Section 10fl)
Extraordinafy meeting is a general meeting which is held between two Annual General Meetings
Extraordlnary Genefal Meeting is Called to discuss any panicular matter of ufgent impOftance to the
company. This meeting is called for the consideration of any specific subject, decision of which cannot be
postponed to the next Annual General Meeting.
This meeting may also be called to discuss the following:
(i) Alteration of any clause of Memorandum of

Association;
(ii) Changes in the Articles of Association;
(iii) Scheme of the reduction of share capital etc.
CALLING OF EGM
Section 100, regarding calllng and holdlng of an extraordinary general meeting:
(1) By the Board Suo motu [Section 100 (l)]
The Board may, whenever it deems fit, call an extraordinary general meeting of the company, EGM may be
held at any place within lndia
(2) By Board on requlsition of members [Section 100 (2)]
The Board shall, call an ECiM on receipt of the requisition from the following number of members: The
Extraordinary General Meeting may be called by the Directors or may be convened by the Shareholders it
the Board of Directors does not arrange for lt despite their requisition to call it Directors may call the
Extraordlnary Genefal Meeting in accordance with the procedure laid down in the Anicles of Association
of the company. Shareholders holding at least one-tenth of the paid-up share capltal Of the company can
make a requisition to the Board of Directors to convince such a meeting.
(3) By RequiSltionists [Sectlon 100(4)]
If the Board does not, within 2 l days from the date of receipt of a valid requisition in regard to any matter,
proceed to call a meeting for the consideration of that matter on a day not later than 45 da s from the date
of receipt of such requisition, the meeting ma be called and held by the requisitionists themselves within a
period of three months from the date of the requisition
(4) By Trlbunal [Section 98]
By Tribunal under section 98, «hereby it can conduct meetings on its own or on any fequest received by
the member of such company.
IV. Class Meetings (Section 48 &232)
When the meeting of a particular class of shareholders takes place such as prefefence shareholder meeting,
it is known as class meeting Such a meeting can be attended only by that class of shareholders The anicles
define
the procedure for calling such meeting. Such a meeting is called for the alteration in the rights and
privileges of the shareholders and for the purpose of conversion of one class of shares into another.
Such meeting is convened by a particular class or shareholders only and only if they think that their rights
are being altered or if they want to vary their attached rights, as mentioned u/s 48 of CA’13. and u/s 232
also, if under Mergers and Amalgamation scheme, meetlngs of panicular shareholders and creditors can be
convened if their rights/privileges are being varied to their interests in such company
2. Meetings of Board of Directors
I. meetings of Board of Directors
As per Sec 173, every company needs to convene fifst board meeting within 30 days ot its incorpofation,
and then minlmum four meetings in each calendar year, with time gap of not more than 120 days (at present
it is 180 days because of COVID- 19) between two board meetings
At Least One Meeting in Every Three Months: The directors of a company exercise most of their powers
in a joint meeting called the meeting of the Board.
In the case of every company, a meeting of the Boafd of Directors must be held
(i) At least once in ever three months, and
(ii) At least four such meetings shall be held in every year. [Sec. 285]
In other words, no three months should pass without directors' meeting being held, and no year should
expire without at least four directors meetings havlng been held in it.
Quorum: 1/3r‘ of total directors or two directors, whichever is higher
Matters that csn't be deslt here ApprOving ProspectuS/ Boards Report/ Annual Financial Statements,
scheme of Merger, Amalgamation, Demerger, etc
3. Other Meetings
Creditors Meeting (Sec 230)
The meetings of creditors are called when the company proposes to make a scheme fof arrangement with
its creditors
Debenture Holders Meeting with the Bosrd of

Directors
Meetings of the debenture holders are held according to the conditions contained in the debenture trust
deed. These meetings are called thorn time to time whefe the interests of debenture holders are involved at
the time of reconstruction, reorganization, amalgamation or winding up of the company.
• Audit Committee Meeting (Sec 177)

• Nomination and Remuneration Committee Meeting (Sec. 178)
• Any other committee meetings with the respective Board of Directors of the Company, as and here
specified under Companies Act of 2013
A resolution can be defined as a decision which is taken by limited company directors or shareholders and
ls legally binding. A resolution can be passed by the members of the meeting if a majority of votes are
received in favor of the resolution. There are three kinds of resolutions namely, ordinary resolutions, special
resolutions and written resolutions.
Ordinary resolutions: Section 114
A resolution shall be an ordinary resolution if the notice required under this Act has been duly given and it
is required to be passed by the votes cast It refers to the resolutlons that can be passed by a simple majorit .
lt can be used for all kinds of matters unless there's a need to for special resolution. The ordinary
resolutions are generally filed with a government body i.e. Companies House
Special resolutions: Section 114
The resolutlons which need to be passed by a majority of at least 75% of the total votes in favor of the
resolution at a general meeting is referred to as special resolutions. It is generally used in cases where a
resolutlon can t be passed by an ofdinarv resolution and consists of special or extraordinary matters
Written Resolutions
It 1s used when the resolution which needs to be passed is an ordinary resolution or a simple resolution
but doesn't need a general meeting for it It is done by shareholders by simply signing and casting thelr
votes for a resolution In case the resolution is an ordinary resolution then it can be passed by a slmple
majority and in case of a special resolution, 75% of votes are needed.
Resolutions requiring Special Notice (Section

115)
• Passed only if required by the provisions of Companies Act 2013 or the Aoicles of the Company
• NOtice to move the resolution shall be given to company
• Speclal notice to be sent by members to the compan not earlier than 3 months but 14 days before the
meeting
• The compan on receiving the notice shall give notice to the members at least 7 days before the meeting
Resolutions passed at Adjourned Meeting
As per Section 116 where a resolution is passed at an adjourned meeting of a company, the resolution shall
be treated as passed on the day it was actually passed and not on any earlier date.
Resolutions and Agreements to be filed with the Registrar (Section 117)
In accordance with Section 117 of the Act, cenain resolutlons are required to be filed with the Registrar for
its recording within 30 days of its passing at the meeting
• Special resolutions
• Any resolutlon of the Board of Directors of a company
• Resolutions passed by a company according consent to the exercise by its Board of Directors
• Resolutions requiring a company to be wound up voluntarily passed in pursuance of section 59 of the
Insolvency and Bankruptcy Code.
Applicability to One Person Company
Section 122 provides that the pfoVisionS of section 98 and sections 100 to 111 shall not apply to a One
Person Company Any business which is required to be transacted at AGM or other general meeting of a
company by means of ordinary or special resolution, it shall be sufficient if, in case of One Person
Company, the resolutlon is communicated by the member to the company and entered in the minute book
Such minute book shall be signed and dated by the member and such date shall be deemed to be the date of
the meeting.
• Every compan is required to keep minutes of the proceedings of general meetings and of the meetings
of Board of Directors and its Committees.
• Every listed company is required to prepare a repos on AGM.
PREVENTION OF OPPRESSION AND MISMANAGEMENT
Oppression and Mismanagement of a company pooray the affairs that are biased towards the minority
shareholders. The affairs include the prejudicial behavlor on the public or any member of the company.
Chapter XVI of The Companies Act, 2013 states that lf any misconduct happens in the company. then any
member can apply to the Tribunal appealing for the prevention of oppression and mismanagement of the
company. Such an application is for a petition of relief”
Shareholders and creditors are invested their money ln corporate bodies. However, it 1s not necessary that all
the shareholders have the controlling power in the company. The group of shareholders is divided into two
parts i.e. Majority Shareholders and Minofity Shareholders The protection of the minority shareholders
within the domain of corporate activity constitutes one of the most difficult problems facing modern company
law. The aim must be to strike a balance between the effective control of the company and the interest of the
small individual shareholders'
Rule of loss r. ffnrbunt« [(i843) 67 ER 189]: Rule of Majority
The basic rule laid down in this case was that the courts will not, in general, intervene at the instance of
shareholders ln matters of internal administration; and, will not interfere with the management of a company,
by its directors so long as they are acting within the powers conferred on them under the articles of the company
” However, the Court has also given cenain exceptions to this rule, among which one is oppression and
mismanagement' . It has been stated by Justice SINHA of the Calcutta High Coun in Kanika Mukherji i.
Rameshu ar Dayal Dubey {II 9661 1 Comp LV 65 Cal.] that the principle embodied in Sections 397 and
398 of the lndian Companies Act, 1956 which provide for prevention of oppression and mismanagement is an
exception to the rule in does r. Harbottle which lays down the sanctity of the majority rule
Fxceptions to the rule of Foss v. Hnrbottle
1. Act is Ultra vlres
2. Fraud on minority
3. Acts requiring special Majority
4. Wrongdoers in control
5. Oppression and mismanagement

Meaning of
Oppression
Oppression is the exercise of authority or power in an unjust manner against the consent of the other party.
In the Black Law Dictionary. the term oppression’ is defined as the act or an instance of unjustl
exercising power It can also be viewed as an act or instance of oppression and the feeling of being
heavily burdened, mentally or physically, by troubles, adverse conditions, and anxiety
In the case of Dale and Carrington Investment Pvt Ltd. r P. K. Prathapan, it was held that increasing the
capital
of a company with the sole purpose of gaining control over can be termed as
oppression Remedies
Sec. 241 of the Companies Act, 2013 provides that, any member of a company who complains regarding
any oppression or mismanagement being occurred in a company, may apply to the Tribunal Moreover,
even the Cenual Government, if of the opinion that the affairs of the company afe being conducted in a
manner prejudicial to the public interest, then it may itself apply to the Tribunal for an order.
Application to Tribunal for relief in cases of Oppression
The aggrieved shareholder may approach the National Company Law Tribunal set up under the Company
legislations. For the prevention of oppresslon and mismanagement, a person must apply to the Tribunal.
The application to the Tribunal must require the following:
• The company conducts the in a manner causing damages to the public or the members of the
company
• The fact which justifies the order of compulsory winding-up stating that it is equitable and just to close
the
company
• Winding-up of the compan would create unfair prejudlce on the petitioners
• The Company Board of Law takes necessary actions for the following complaints mentioned above.
Application against oppression and mismanagement
Section 241 of the Companies Act, 2013 lays down the provision to make an application against the
oppression. Chapter XVl of the Company Act clearl specifies who can a complaint and under which
circumstances a complaint may be raised of oppression and mismanagement.
The Central government may, by itself, file the oppression and mismanagement application before the tribunal
against a company if it believes that the of the company are prejudicial in nature
Right to apply under section

241
The members who have a right to apply under section 241 are
When a company has a share capital the following members can apply under section 241
• Not less than one hundfed members or not less than one-tenth of the total number of its members
«hichever is less
• Any member or members holding not less than one-tenth of the issued share capital
The applicant or applicants must have paid all call money and othef sums due on them before applying.
When a company does not have a share capital at least one-fifih of the total number of its members shall
apply under section 241. In addition, the Tribunal may waive any of the requirements under section 244 to
enable members to apply under section 241
THE NATIOhAl. COMPANY I.AW TRIBUNAL OR hCLT
The National Company Law Tribunal or NCLT is a quasi-judlcial body in lndia adjudicating issues
concerning companies in the country lt was formed on June 1, 2016, as per the provisions of the
Companies Act 2013 (Section 408) by the lndian government. NCLT was formed based on the
recommendations of the Justice Fradi Committee (1999) that was related to insolvency and winding up of
companies in lndia.
Each Bench is headed by a President, 16 judicial members, and 9 technical members
The National Company Law Appellate Tribunal (NCLAT) is a tribunal which was formed by the
government under Section 410 of the Companies Act, 2013. NCLAT is responslble for hearing appeals
from the orders of the National Company Law Tribunal. Decisions taken by the NCLT can be appealed to
the National Company Law Appellate Tribunal (NCLAT). The decisions of the NCLAT can be appealed
to the Supreme Court on a point of law.
Powers of Tribunal (Section 242)
Section 242 of the Act pfovides powers of Tribunal. The Tribunal ls empowered to pass an order as it deems
fit. The order may proVide for
• For regulating the conduct of the company's in future
• Purchase of interests and shares by the members of the company or by the compan
• Reduction in the share capital as a consequence of the purchase of shares and interests
• Restrictions on the allotment or transfer of the company's shares

• Termination or modification of any agreement between the company and the managlng director,
manager or any other director
• Removal of the managlng director. any of the directofs Of manager of the company
• Setting aside any transfer, payment, execution, delivery of goods or other act relating to property
which is laid b or against the compan withln three months before the date of the application. If
such an act is laid by or against an individual. the individual will be deemed in insolvency to be
fraudulent
• Recovering or the undue gains, this is b the managing director, manager or an director of the
company within the period of appointment
• The manner in which the appointment or the removal of the managing director or manager of the company
• Conversion of Public Company Into Private Company
• Section 13 to of Companies Act, 2013 & Rule 41 of Companies (Incorporation) rule 2014 states
when a company converts from a public company Into private company an approval of NCLT
tribunal is required for such convefsion The tribunal may impose such terms and conditions as in
section 459 of Companies Act, 2013
• Class Action Suit (Section 245): It is a type of representative suit wherein larger interests of
individuals are combined in the form of a class, and then a common, single lawsuit is filed against
such companies that act fraudulently or in the interests that is detrimental to those of
shareholders/depositors
• To issue order of de-registration of certain companies: This power is defined u/s 7(7) of
Companies Act of 2013 wherein the registration at initlal phases of incorporation was applied on
false or grounds.
• Power to convene AGM: lf u/s 97 & 98 of Companies Act of 2013. if members are unable to
convene the meeting within a specified time, then they may request NCLT to pass an order for
convening the said meeting, and NCLT can therefore do so.
• To order for Investigations Chapter XIV of Companies Act of 2013 & Sec. 213 of Companies Act
of 2013, the tribunal has such power to investigate into the affairs and ownership of the company
when there are at least 100 members asking for such investigation, and ceoain other associated
powers are freezing assets of the company & so on as mentioned under the cited provislon.
Additional Powers
Section 22 l of Companies Act, 2013 power of the tribunal to freeze the assets of the company.
Company Law Unit lll 38 Al Ameen College of Law,
Bangalore Section 2(41) of Companies Act, 2013 power to change the financial years of the company
registered.
CORPO T SOCIAI. RESPONSIBLE QTY
Corporate Social Responsibility (also known as Corporate Citizenship) means the responsibility taken by
the companies or the corporates towards the betterment of society as a whole. Companies undertake these
activities for upgradation in the lives of the people. The whole concept ot CSR is welfare of ever one’
Companies Act 2013 has introduced several new provlsions which change the race of lndian corporate
business lndia has one of the richest traditions of CSR. The concept of CSR rests on the ideolog of give
and take. Companies take resources in the form of raw materials, human resources etc. from the society.
By performing the task of CSR activities, the companies are giving something back to the society
Much has been done in recent years to make lndian entrepreneurs aware of social responsibility as an
important segment of their business activity but CSR in lndia has yet to receive widespread recognition lf
this goal has to be realized then the CSR approach of corporates has to be in line with their attitudes
towards mainstream business- companies setting clear objectives, underrating potential investments,
measuring and reporting performance publicly. One of the key changes in the Companies Act, 2013 is the
introduction of a Corporate Social Responsibility section making lndia the first country to mandate SSR
through a statutory provision While CSR is not mandatory fOr companies, the rules are in line with the
’Comply or Explain’ pfinciple with penalties applicable only if an explanation is not offered.
The provisions of the Section 135 of the Act ma be summarized as under:
1. The Section applies to the following classes of companies during any flnancial year:
(i) Companies havlng Net Worth of rupees five hundred crore or more;
(ii) Companies having turnover of rupees one thousand crore or more;
(iii) Companies having Net Profit of rupees five crore or more
2 The companies specified above shall constitute a Corporate Social Responsibility Committee (CSR
Committee) of the Board.
3. The CSR Committee shall consist of three or more Directors, out of which at least one Director shall be
an lndependent Director.
4. Afier taking into account the fecommendations of the CSR Committee, the Board shall approve the
SSR Policy for the company
5. The contents of the Policy shall be disclosed in the Board's

report
6. lt shall also be placed on the Company s website, if any, in a manner pfescribed by the Central
Government.
7 The Board shall ensure that the activities as are included in the SSR Policy the activities as specified in
Schedule Vll) are undertaken by the Company
The following additional features of the Section are relevant:
1. While spending the amount earmarked for CSR activities, the company shall glve preference to the local
area and areas around it where it operates;
2. If the Company fails to spend the amount, the Board shall specify the reasons for not spendlng the
amount in the Board's Report
3. The eligible companies are required to spend in every financial year, at least two per cent of the Average
Net Pfofits of the Company made during the three immediately preceding flnanclal years in pursuance of
its SSR Policy. For this purpose, “Average Net Profit' shall be calculated in accordance with the provisions
of Section 198 of the Companies Act, 2013
CSR Committee: Shall constitute 3 or more Directors, out of which at least one of the Directors shall be
an lndependent Director. In the case of a Private Company having only two directors, the committee shall
also be constituted havlng 2 Directors
Roles Played By the CSR Committee:
• To plan and approve CSR strategies.

• To allocate the budget for CSR activities.
• To access the performance of the CSR policy of the Company.
• Monitor the implementation of CSR projects ln a more transparent manner and a better way.
A large number of activities are undertaken by the companies under the umbrella of CSR Few of these
activities are:
• To promote education in society

• To organize programs designed to enhance the vocational skills among people.
• To promote health care and sanitation
• To organize seminars and programs in order to educate people about the environment and
sustainable development.
• Setting up of orphanages old age homes and daycare centres.
• Promote training for sports

To contribute during the times of natural calamities like eanhquakes, droughts and floods
• To promote programmes and schemes for poverty alleviation, eradication of hunger, providing safe
drinking water, health care measures. rural development programs
• To promote infrastructure development for building schools, hospitals, sports training complexes, etc
Important Questions
Essay
1. Who is a director* Explain the powers and dutles of the directors.
2. Explain different kinds of compan meetings
3. Describe the position of director in a company.
4. Discuss the powers and functions of board of
directors. Short Note
1. lndependent director
2. Women Director
3 Kinds of resolution
4. AGM
5 Corporate Social Responsibility (CSR)
6 National Company Law Tribunal & its powers
REFERENCES
• S R MYNENI, COMPANY I AW (Asia Law House 2014)
• AVATAR SINGH, COMPANY LAW (15 ed EBC 2007)
• H. D PITHAWA I ,LA, COMPANY LAW (C. Jamnadas & Co 2013)
• Material for Company Lair , KLE SOCIETY’S LAW COLLEGE, (Jan 09, 2023, 07: 30 PM),
https:// w klelawcollege org/study-materials/
• REGA SURYA RAO, LECTURES ON COMPANY LAW (Asia Law House 2006)
• RINITA DAS, COMAPANY LAW (EBC 2022)
• KAII ASH RAI, COMPANY LAW (12 ed. Allahabad Law Agency 2012)
• The Companies Act, 2013, No 18 Acts of Parliament, 2013 (lndia)
• The Companies Act, 2013 - BARE ACT (Universal LexisNexis 2022)
COMP II ,ED BY: S UBIN THOMAS

(10 January 2023)

Company Law - Unit III

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MANAGEMENT AND CONTROL OF COMPANIES

â• Board of Directors: Powers and Functions

BOARD OF DIRECTORS: POWERS AND FUNCTIONS

Minimum/Maximum humber of Directors in a Company [Section 149(1)]

Minimum number of Directors

Number of Directorships [Section 16^

Sec 165 (6): If a person accepts an appointment as a director in contravention of above-mentioned

POWER AND FL NCTIO S OF BOARD OF DIRECTORS

2 Works of capital nature: To authorize the undenaking of works of a capital nature

• Power to make calls in respect of money unpaid on shares

• Borrow and invest funds for the Company

Meetings of the Board (Section

Quorum for Board meeting Requirement (Sec.174)

BDis ibi i orf D r c ors and G ne al Mee

KEY MANAGERIAL PERSONNEL

(ii) the company secretary

(iii) the whole-time director

(iv) the Chief Financial Officer

(v) such other officer as may be prescribed

U hole Time Director

Chief Executive Officer

Chief Financial Officer

Appointment of Directors hotes

The appointment of directors rests in the following hands

1. Subscribers to the memorandum

Qualifications for Directors

• Unsound mind person

PROCEDL RE FOR THE APPOINTMENT OF DIRECTOR

DOCL'MENTS RFQL IRED FOR A PPOIATMEhT

• DIN ldentiflcation Number).

2. Indian Resident Director

• Articles of Association of the Company (AOA)

Then he will be the Managing Director of that Company.

Independent Director (Sec 149)

• Industrial expertise and knowledge

deposits, exceeding 50 crore rupees

Code for lndependent Directors (Schedule lX of the Companies Act 2fll3)

Code of Conduct includes

An independent director shall’

• Uphold ethical standards of integrity and probity

Role end functions:

• lndependent judgment to bear on issues of strategy, performance,risk management,resources, key

The independent directors shall

• Seek appropriate clarification or follOw appfopriate professional advice and opinlon

Liability of lndependent Director

Types of Directors Bssed on Appointment

• Must be provided for in the AOA

5. Alternate Director {Sec. 161(2)}

6. Casual Vacancy Director

â• Every listed company

8. Small Shareholders Director

Thus, a small shareholder director can be appointed b a Company if

H The Company is a Public Company

Powers to be exercised nt Bonrd meetings (Section 292)

(a) make calls on shareholders in respect of money unpaid on their shares

(c) borrow money otherwise than on debentures

(d) invest the funds of the company

(e) make loans

Powers to be exercised with the npprovnl of compnny in genernl meeting

(a) sale or lease of the company's underrating

(b) extension of the time for payment of a debt due by a director

(d) borrowing of money beyond the paid-up capital of the company

DLTIES OF THE DIRECTORS (Sec 166)