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Board Of Directors

Definition of Directors
Section 2(13) of the companies act states that;
Occupying the position of director
Directors include any person

By whatever name it is called.



A board of directors is a body of elected or appointed members who

jointly oversee the activities of a company or organization.

Directors are legally obligated to look after the company mere interest. Representatives of the stockholders who establish corporate

management who take decisions regarding major company issues.

Governing the organizations by establishing broad policies and


Duties of directors
Approving annual budgets Ensuring the availability of financial resources.

Accounting to the stakeholders for the organization's performance

Setting the salaries and compensation of company management.

To attend board and committee meetings.

To prepare and place the balance sheet at the AGM.

Not to delegate functions

To call for extra-ordinary meeting, when validly demanded

Interest of the employees

Directors as agent
Company being an artificial person can act only

through director.
Play the role of the negotiator

Directors as trustee
Power to make calls
Power to forfeit shares Power to issue further capital Power to approve transfer of shares

Appointment of directors
Rules regarding appointment of directors
Minimum no. of directors Public -3 Private-2 Cannot be a director of more than 15 companies

Maximum no. of directors is twelve

Director should not have any criminal record

Small shareholders can elect a director.

Modes of appointment of director

First Directors Appointment of director in the AGM.

Appointment of directors by the board of directors.

Appointment by the central Government. Appointment by the third parties.

Diversity Industry specific experience

Leadership Quality

An area of expertise


Unsound mind

Undischarged Insolvent

Not paid calls for six months Disqualified by the court of law on the ground of fraud

Powers of directors
General powers Powers exercisable with the approval of the board

Powers exercisable with the approval of


Powers exercisable with the consent of central government

Rights of Directors
Right to attend and participate in the meeting Right to remuneration and compensation. Internal communications

Unlimited access to records.

Protection against liability.

Calling out other directors.

Liability of Directors
Breach of trust- liable for breach of trust or secret

Ultra vires acts- Jointly and severally liable to the

company for illegal acts.

Criminal liability

Fraud and torts of the company

Misapplication of companys money



Liable for untrue statement in the prospectus.

Loss on account of failure to exercise kill and diligence.

Liability for acts of co-directors.

Default in distributing dividends.

Failure to supply information to the auditors.

Removal of directors.
There are three modes of removal of diretors.
By Shareholders By Tribunal By Central Government

Managing director
A managing Director is a Person with vast substantial powers, and could be appointed by an agreement or by resolution passed in general meeting.
Public and private company having paid up capital of 5

crores may have MD.

The appointment ha to be approved by the central


A person cannot be a Managing director of more than

2 companies.
Remuneration is paid either monthly or according to

the percentage of the net profit.

Any change in the remuneration needs prior approval

of central government.
An MD is disqualified if he is un discharged insolvent.