INDIAN COMPANIES ACT, 1956 With Respect to DIRECTORS
INDIAN COMPANIES ACT, 1956
Presented by :
MFM SEM – I (2008-11)
NAME OF THE STUDENT
SUNIL PANDEY AKHIL SARVAIYA ARUN SINGH SHRIJESH NAIR AMIT SHAH SANJOG DEVRUKHKAR
INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956 TYPES OF COMPANIES INTRODUCTION TO THE TERM ‘DIRECTORS’ APPOINTMENT OF DIRECTORS REMOVAL / RETIRMENT OF DIRECTORS RIGHTS AND DUTIES OF DIRECTORS ROLE OF DIRECTORS MANAGING DIRECTORS AND ADDITIONAL DIRECTORS
INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956
MANAGEMENT OF A COMPANY
A company functions through the medium of Board of Directors. However, certain powers have been reserved to be exercised by shareholders in general body meetings. Section 291 of the Companies Act, 1956 confers general power on the Board of Directors. It provides: “Subject to the provisions of the Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do.
The company carries on its business through individuals called directors.
Collectively they are called Board of Directors No body corporate, association or firm can be appointed as a director of a company, and only an individual can be appointed
Every Public Company must have at least 3 directors A Public Company having A paid up capital of Rs. 5 crore or more and One thousand or more shareholders Can elect a director by small shareholders. A private company must have at least 2 directors Subscribers of the memorandum who are individuals, are deemed to be the directors of the company, until the directors are duly appointed in accordance with the Act. Directors are appointed in general meeting, in board meeting, by central government, by proportional representation or a person can stand for directorship, if eligible.
A company can have a maximum number of 12 directors and to increase this number, the approval of Central Government is required. The board of directors can appoint Additional Directors, by passing a resolution, if such a power exists in the articles. If any vacancy arises in office of any director then subject to articles, the board of directors can fill the vacancy at a meeting of board. the the
One single resolution can appoint one director only and two or more. A company, at a general meeting may, by resolution, increase or reduce the number of its within the limits fixed in that behalf by its articles. ordinary directors
APPOINTMENT OF DIRECTOR
Any Person Can Be Eligible For Appointment To The Office Of Director At Any Annual General Meeting, If He himself or some member intending to propose that person as a director. Gives a sign notice in writing to company. Signifying that persons for the office of director Along with a deposit of Rs. 500/- which is refundable subject to appointment as a director
RETIREMENT OF DIRECTORS
The directors to retire by rotation at every AGM are those who have been longest in office since their last appointment.
REMOVAL OF DIRECTORS
Removal Of Directors Is Conferred Upon Shareholders, Central Government And Company Law Board
A company may, by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office. This provision shall not apply where the company has availed itself of the option given to it of proportional representation on the Board of Directors to appoint not less than two-thirds of the total number of directors according to the principle of proportional representation.
Special notice shall be required of any resolution to remove a director, or to appoint somebody instead of a director so removed at the meeting at which he is removed.
VACATION OF OFFICE BY DIRECTORS
The directorship of a director automatically ceases if,
He fails to obtain qualification shares He fails to pay any call in respect of shares He absents himself from 3 consecutive meetings of the board of directors, or from all meetings of the board for a continuous period of 3 months, whichever is longer, without obtaining leave of absence from the board
He is removed by the shareholders by resolution passed in a general meeting
A company can remove a director even before the expiry of his period of office
DISQUALIFICATION OF DIRECTORS
A person shall not be capable of being appointed director of a company, if,
he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force
he is an undercharged insolvent he has applied to be adjudicated as an insolvent and his application is pending
he has been convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence
They are the minimum number of shares a person must own, as provided in the articles of the company, in order to qualify to become a director of the company. Qualification shares must be acquired by a director within 2 months of his appointment. The articles cannot require a director to acquire qualification shares within a shorter period. The face value of the qualification shares cannot exceed five thousand rupees, or if the face value of one share is more than five thousand rupees, then the qualification share will be one qualification share.
A director is required to hold certain shares as qualification shares if such requirement is here in the Articles of
WHOLE TIME DIRECTOR
Every company, having a paid-up capital of Rs. 5 crore or more must have a whole-time director.
A WHOLE TIME DIRECTOR is one who entirely looks into the affairs of a company.
At a time a single whole time director can act as a director for not more than 20 Companies.
A person shall not act as director of a company unless he has, by himself or by his agent authorized in writing, signed and filed with the Registrar, consent in writing to act as such director within 30 days of his appointment. This provision shall not apply to a private company unless it is a subsidiary
The Board of directors may appoint additional directors if such power is conferred on it by the articles of the company. Such additional directors shall hold office only up to the date of the next annual general meeting of the company
The Board of directors of a company may, if so authorized by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.
REMUNERATION OF DIRECTORS
The overall maximum remuneration payable to directors and its managers in one financial year If a company has only one director If a company has more than one director The director is not a whole time director
Not more than 11% of the net profits of the company for that financial year Not more than 5% of the net profits Not more than 10% of the net profits for all of them together Not more than 1% of the net profits
DIRECTOR CANNOT TO HOLD OFFICE OR PLACE OF PROFIT:
Except with the previous consent of the company accorded by a special resolution:
No director of a company can hold any office or place of No partner or relative of such a director (i.e. a director
profit in that company
holding an office or place of profit in the company), no firm in which such a director or relative is a partner, no private company of which such a director is a director or member, and no director, or manger of such a private company can hold any office or place of profit carrying monthly remuneration in excess of the prescribed amount (Rs. 10000/-).
LOANS TO DIRECTORS
A company provides loan to its director (for a guarantee or security) or the related parties, with proper approval from Central Government. This is to ensure that the Board Of Directors of a public company does not misuse the funds of the company for the benefit of its directors.
INTERESTS OF A DIRECTOR
When any company enters into contracts relating to the business of the company with the directors, the consent of the board of directors is required by way of resolution.
Every director of a company has to disclose the nature of his concern or interest at a meeting of the board of directors.
Finally a decision will be taken by the BOARD OF DIRECTORS. Every Director shall disclose the nature of his concern or interest in a contract or arrangement at the meeting of the Board. Disclosure is not required where any of the Directors of one company or two or more of them together hold 2% or less than 2% of paid up share capital of the company
Directors can exercise certain powers only at the meetings of the board related to some significant matters which need deliberations and discussions. They are:
Make Calls on shareholders in respect of money unpaid on their shares Issue debentures Borrow moneys otherwise than on debentures Invest the funds of the company Make loans
RESTRICTIONS & LAIBILITIES ON BOARD OF DIRECTORS
Dispose of any Undertaking of the company Remit or to give time for the repayment of, any debt due by a director
Invest, otherwise than in trust securities, the amount of compensation received by the company in respect of the compulsory acquisition
Borrow moneys in excess of aggregate of the paid-up capital of the company & its free reserves
Contribute to charitable and other funds not directly relating to the business of the company or the welfare of its employees
Legal Aspects of Banking Operations By Macmilan Business Law for Management by K.R. Boolchandani Indian Companies Act, 1956 Company Law by Singh and Avatar Company Law and Practice, Taxmann, New Delhi A Guide to the Companies Act, Wadhwa and Company, Nagpur www.google.com
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