Company Law

Subrata Kumar Ray

11/20/2023
Nature of Company Management
Management power to be exercised Type of Powers Reference
by:

Shareholders Power not given/delegated to Board Section 180 of Companies Act,2013

of Directors. and AOA.

Board of Directors All powers of decision making about Section 179 of the companies Act,
the company unless reserved for 2013
shareholders.

Chairman Executive ,Non- executive power of Section 104 of the companies Act,
the company. Chairing the company 2013
meeting.

CMD Exercises both Chairman & MD’s

power.

Managing Director Has substantial power of Section 196 of the companies Act,
Management. 2013

Whole-time Director Full time employee and looks after

specific functions of the company
Composition of Board of Directors

 Board of directors in relation to a company means collective body of the

directors of the company
 Every company shall have a Board of Directors consisting of individuals as
directors and shall have -

i. Private Company:- Minimum 2 , Maximum 15.

ii. Public Company:- Minimum 3 , Maximum 15.

 a company may appoint more than 15 directors after passing special
resolution.
Rotational and Non- rotational Directors

 Unless the articles provide for the retirement of all directors at every AGM,
atleast 2/3rd of the total number of directors of a public company shall be
eligible to retire by rotation.

 Out of such 2/3, 1/3 of the total number of directors shall actually retire by
rotation in every AGM.

 Independent directors are to be excluded in calculating total number of

rotational directors.

 Directors appointed by Central Govt.(CG), FIs/Banks shall also be excluded.

Women Directors
 The following class of companies shall appoint at least
one women director:-
i. Every Listed Company.

ii. Every other public company having –

a) Paid-up share capital of Rs 100 crore or more ,or

b) Turnover of Rs 300 crore or more.

 WHOLE-TIME INDEPENDENT NOMINEE PART-TIME
Board Composition TOTAL
DIRECTOR DIRECTOR DIRECTOR DIRECTOR
TOTAL
DIRECTOR
Women Women Other Women Other Women Other Women Other
Name of the Other
Directo Directo than Directo than Directo than Directo than
Company than WD
r (WD) r WD r WD r WD r (WD) WD
ONGC 7 1 8 2 1 17 18
Yes Bank 1 1 5 1 1 7 8
Indian Oil 7 10 1 1 1 18 19
Reliance Industries 5 8 1 0 14 14
East India Hotels
Limited 4 6 1 1 1 11 12
Infosys 2 3 5 3 7 10
Air India 4 2 1 1 1 7 8
Bata India 3 1 3 2 1 8 9
Allahabad Bank 1 2 3 2 2 1 9 10
Andhra Bank 2 2 1 1 1 1 6 7
 Key Managerial Personnel(KMP)

i. The Chief Executive Officer or the managing director or the manager.

ii. The company secretary.
iii. The whole-time director.
iv. The Chief Financial Officer.
 Every listed company and every other public company having paid-up share
capital of Rs 10 crore or more shall have whole-time KMP.
 Company having paid up share capital of Rs 5 crore or more shall have a
whole-tome company secretary.
Functions of Audit committee
 Recommend appointment, remuneration and terms of appointment of
auditors of the company.

 Review and monitor the auditor’s independence and performance and

effectiveness of audit process.

 Examination of the financial statement and the auditors’ report.

 Scrutiny of inter-corporate loans and investments

 Valuation of undertaking or assets of the company, wherever it is necessary.

 Evaluation of internal financial control and risk management system .
Functions of Nomination and Remuneration
Committee
 Nomination and Remuneration Committee shall identify persons to
be appointed as directors.

 Formulate qualification, positive attributes and independence of a

director.

 Recommend to the Board a policy, relating to the remuneration for

the directors, KMP and other employees.

 Policy recommended by Remuneration and Nomination Committee

shall be disclosed in the Board’s report.
Types of Directors
Type of Directors Appointing Authority Situation of Tenure of office
Appointment
First Director Article of Association At the time of Upto first AGM
registration
Additional Director Board of Directors In between two AGM Till next AGM or last
date on which AGM
should have been held.

Nominal Director Shareholder in AGM Normal To retire on the basis of

seniority.
Alternate Director Board of Directors When the original Till return of the
Director is out of India original director.
for more than 3 months

Independent Director Shareholders in AGM Paid up capital 1 term of 5 consecutive

10cr/turnover year and eligible for re-
100cr/outstanding appointment after
types of directors
Situation of
Type of Directors Appointing Authority Tenure of Office
Appointment
Directors appointed by Small shareholders who In AGM. Any Listed Upto 3 years. such
small shareholders holds shares of nominal company may upon director shall not retire
value of not more than notice of atleast 1000 by rotation and shall also
twenty thousand rupees small shareholders or be considered as an
1/10 of the total no. of
th
independent director.
such shareholders,
whichever is lower
Director Nominated by financial Where loan has been As per FI/Bank
appointed/nominated by institute appointed by taken from the
financial institute/Govt. shareholders at AGM institution, equity
investment in the
company
Shadow Director Legally not a director Person who control the
affairs or majority of the
Appointment of Retiring Director

 Nomination of appointment of a Director who retires in an AGM and is

eligible for re-appointment, automatically comes up in the said

meeting unless:

a) a resolution for the re-appointment of such director is put and lost

b) the retiring director by a notice in writing to the company expresses

his unwillingness to be re-appointed

c) he is disqualified for appointment

Powers of the Board
 to make calls on shareholders in respect of money unpaid on shares
 to authorise buy-back of shares
 to issue securities including debentures
 to borrow monies
 to invest the funds of the company
 to grant loan, give guarantee or provide security in respect of loans
 to approve financial statement and Board’s report
 to approve amalgamation, merger or reconstruction
 to make political contribution
 to appoint or remove Key managerial personnel
 to appoint internal auditors and secretarial auditor
 to diversify the business of the company
Restrictions on powers of Board

The following power cannot be exercised by Board unless specifically authorised by the shareholders in a
meeting through Special resolution.

 Sell, lease or dispose of substantial part of business, the value of which is 20% of the Net worth or
generates 20% of the income. of the company

 Investment of funds received as compensation of merger/amalgamation, other than in trust securities.

 borrow money exceeding aggregate of its paid up share capital and free reverses, other than
temporary loans. Loans taken for capital expenditure will include borrowing.

 give or extent time for repayment of loan recoverable from directors.

The resolution of the shareholders shall mention the maximum limit and condition, if any, in each of the
above situations.
Managerial Remuneration(section 197)

 The total managerial remuneration payable by a public company to all directors shall
not exceed 11% of the net profit.
 The company can also pay in excess of 11% subject to special resolution
 Except with the approval of the company in general meeting-
1. the remuneration payable to one managing director, whole-time director or manager
should not be more than 5% of the net profit of the company and if there is more
than one such director then 10% of the net profit to all such directors and managers
taken together.
2. the remuneration payable to any other director who are neither whole-time director
nor manager director shall not exceed-
a) 1% of the net profit of the company if there is MD, Whole-time director or
manager.
b) 3% of net profit, in any other case.
Political Contribution(section 182)

 A company other than a Government company and a company which has

been in existence for less than three financial years may directly or indirectly
contribute any amount to political party provided a resolution of the Board
has been passed in this regard.

 The aggregate of such amount shall not exceed 7.5% percent of its net profit
during the three immediately preceding financial years.

 The amount so contributed should be shown in its P/L account giving

particulars of the total amount contributed and the name of the party which
to which it has contributed.
Corporate Social Responsibility
 Every company which has:
 a net worth of five hundred crore or more or;
 turnover of one thousand crore or more or;
 net profit of five or more during any financial year,

 shall constitute a Corporate Social Responsibility committee consisting of

three or more directors out of which at least one should be independent
director.

 The Board shall ensure that a company spends at least two percent of the
average net profit of the company made during the three immediately
preceding financial years in CSR projects as mentioned under sh.VII of the
Proceedings in a Board meeting
 Chairman of the Board chairs the meetings of the Board. If the regular chairman is not
present and Articles of association permit, a director may be appointed as a chairman
of the meeting.
 Quorum: minimum number of directors to be present to make the meeting valid. If the
quorum is not present the meeting shall be automatically adjourned to same place,
time and venue on the same day next week.
 Quorum for board meeting is 1/3rd of the total no. of directors or two directors,
whichever is more.
 Each director has one vote. In case of a tie the Chairman will have a casting vote subject
to the provisions in the Articles of Association.
 Interested director shall not vote. ( Interest means personal interest) (disclosure of
interest under section 184 is compulsory at the time of joining)
 All decisions, except few, shall be simple majority decisions.
 Leave of absence: If a director is absent from 3 consecutive Board meetings without taking leave of
absence he will be disqualified from remaining a director of the company.

 Voluntary adjournment; The Board can voluntarily adjourn its meeting. In case of automatic
adjournment the meeting stands adjourned to next week same day, same time and same venue
unless another venue is fixed.

 Adjournment of meeting and deferment of consideration / decision of an item.

 One Board meeting in each quarter. not No limit for maximum number of meetings. no gap of 120
days between two meetings.

 10. Minimum 7 days notice of the Board meeting must be given to all directors staying even
outside India.

 11. Preponement and postponement of meetings can be done with proper authority of the
company.