You are on page 1of 21

Meaning of a Director

Any person occupying the


position of director, by whatever
name called

-Sec. 2 (13)
Who are Directors
The persons, through whom a company acts
and does its business, are termed as
directors.
They are collectively known as board of
directors.
They are the brains of a company
A director is defined as a person having
control over the direction, conduct, of a
company.
Who may be appointed as a Director

No body corporate, association or firm

Only an individual

-Sec. 253
Board of Directors

Board of Directors or Board in


relation to a company, means the Board
of Directors of the Company.

-Sec. 2 (6)
Minimum & Maximum Number of
Directors

Public Co. Private Co.


Minimum * 3 2
Maximum *

Both Minimum and Maximum number of


Directors may be as provided in the articles .
Number of Directorship

A person cannot hold office at the


same time as a director in more
than 15 companies
Types of Directors
Inside Directors
Outside Directors
Professional Directors
Nominee Directors
Special Director or Executive Director
Government Directors
Whole Time Directors
Managing Director
Non Executive Director
Qualifications For Directors
Act prescribes no academic, professional or
share qualifications.
Articles may provide for any qualifications.
Where share qualification is fixed by articles
then (Sec. 270) Act provides:
- Qualification shares must be taken within 2 months
after appointment
- Nominal value of qualification shares not to exceed
Rs. 5000 or 1 share where it exceeds Rs. 5000.
- Share warrants will not count for this purpose.
Disqualifications of Directors
The following persons are disqualified for appointment
as directors of a company:
A. A person of unsound mind
B. An undischarged insolvent
C. A person who has applied to be adjudicated as an
insolvent and his application is pending
D. person who has been convicted by a court on any
offence involving moral turpitude
E. A person whose calls in respect of shares of the
company held for more than 6 months have been in
arrears
Contd
F. A person who is disqualified for appointment as
director by an order of the court under Sec. 203
(which deals with powers of the court to restrain
fraudulent person from managing co.)
G. A person who is a director of a public co. which
- has not filed the annual accounts & annual
returns for 3 financial year commencing on &
after 1-3-1999.
Contd
- Has failed to repay its deposit or interest thereon on
due date or redeem its debentures on due date or pay
dividend & such failure continues for one year or
more
- The disqualification mentioned in clauses (D) & (E)
may be removed by Central Govt. by notification in
official gazette
- Private co. not a subsidiary of a public co. may, by
its articles, provide for additional grounds
- A director who has been removed by the central govt.
shall not be a director for five years.
Appointment of Directors
- First Director
- Appointment of Directors by Company
- Appointment of Directors by Directors
- Appointment of Directors by third parties
- Appointment of Directors by proportional
representation
- Appointment by Central Government
- Appointment by Small Share Holders
Removal of Directors

- By shareholders (Sec. 284)

- By Central Government

- By National Company Law Tribunal


Legal Position of Directors
As Agents
As Trustee
As Managing Partners
As Employees
Contd..
Directors have sometimes been called us
Trustees or Commercial Trustees and sometimes
they have been called managing partners; it does
not matter much what you call them so long as
you understand what their real position is, which
is that they are really commercial men managing
a trading concern for the benefit of themselves
and of all the shareholders in it. They stand in a
fiduciary position towards the company in respect
of their powers and capital under their control
-M.R. Jessel
Power to be Exercised by Resolutions Passed
at Boards Meetings
- The power to make calls
- The power to issue debentures
- The power to borrow money otherwise than on debentures
- The power to invest the funds
- The power to make loans
- The power to authorize the buyback of shares.
Others
- The power to fill causal vacancy in Board
- Sanctioning of a contract in which a Director is interested
- Recommend rate of dividend in AGM
- Power to make political contributions
Restrictions on the Powers of the Board

Restrictions on making political contributions


Restrictions on the power to appoint
Exemption from liability in respect of
negligence etc.
Holding of office or profit
Restriction on the number of Directorships
Restriction regarding standing surety for an
accused person.
Power of the Directors
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.

(Sec. 291)
Powers to be exercised by the company in
the general meeting
Sale, Lease or Disposal of the undertaking.
Showing any concession regarding payment
of debts
Make investment of the amount of
compensation received
Contribution to charitable and other funds
Borrowing money
Duties of Directors
Duty of Good Faith
Duty of reasonable care
Duty to attend board meetings
Personal attendance
Duty to disclose interest
Audit committee (Sec. 291A)
Investor's Grievance Committee
Limitations
Where the Directors actions are found to be
malafide.

Where the Board becomes incompetent to


act.

Deadlock in the Board.