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Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
Company law   part ii
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Company law part ii

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Company Law

Company Law

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  • 1. Company Law - Part II Unit II
  • 2. Managerial Personnel : Directors & Managers• Sec 2 (13) of Companies Act 1956, ‘Director’ includes any person occupying the position of director by whatever name called.• Minimum number of Directors : Atleast 3 (Public Company); Atleast 2 (Private Company)• Maximum number of Directors : – A company can by ordinary resolution passed in general meeting increase or decrease the number – Public Company or a Private Company which is a subsidiary of a Public Company cannot increase beyond the maximum specified in Articles without the approval of the Central Govt.
  • 3. Appointment of Directors• By the Articles as regards first Directors• By the Company in General Meeting• By the Directors• By third parties eg., lending institutions for nominee directors• By the principle of proportional representation• By the Central Government
  • 4. Legal Position of Directors• Directors are not the company’s employees nor its servants• They are treated as Officers of the Company for certain matters under Companies Act• They are Trustees of Company’s money and property and the powers entrusted to them• They control the affairs of the Company (artificial person governed by human agency) as its Agents; they are accountable to the company
  • 5. Legal Position of Directors• They are protected by an Indemnity Clause in the Articles of Association• Penalties imposable on Directors for the contravention or defaults are of two types – Those imposable on them directly as ‘Directors’ – Those imposable on them directly as ‘Officers who are in default’• Share Qualification : Articles requires that the qualification of a Director shall be holding of a specified number of shares known as Qualification shares; nominal value not to exceed Rs.5000
  • 6. Disqualification of Directors• Circumstances in which a person cannot be appointed as a director – Unsound mind – Insolvent – Convicted of an offence involving moral issues and sentenced to imprisonment for a period not less than 6 months and 5 years had not elapsed since the expiry of his sentence – Has not paid any call on shares held for 6 months from the last day fixed for payment – Disqualified by order of Court
  • 7. Restriction or Ceiling on number of directorships• After Amendment Act 2000, a person can be a director of not more than 15 companies• Companies excluded in calculating the number of companies of which a person may be a director – A private company which is neither a subsidiary nor a holding company of a public company – An unlimited company – An association not carrying on business for profit – A company in which such person is only an Alternate Director
  • 8. Vacation of Office by Directors• Director’s office become vacant if – He ceases to hold the share qualification required of him by the Articles of Association – Found to be Unsound mind by competent court – Insolvent – Convicted of an offence involving moral issues and sentenced to imprisonment for a period not less than 6 months and 5 years had not elapsed since the expiry of his sentence – He absents himself from 3 consecutive meetings of the Board of directors or from all meetings of the Board for continuous period of 3 months without obtaining leave of absence from Board
  • 9. Public Company• Atleast 3 directors• With paid up capital of 5 Crores or more and 1000 or more small share holders : Atleast 1 director elected by small shareholders (shareholder holding shares of value less than Rs.20000), elected in a prescribed manner• Removal of Directors : – Share Holders – Central Government – The Court of Law
  • 10. Remuneration of Managerial Personnel• Total Managerial Personnel Remuneration : Not exceed 11% of net profit for that financial year; Fees payable to directors for attending Board meetings is not included
  • 11. Remuneration of Managerial Personnel• Not exceeding ceiling limit of Rs.24,00,000 per annum or Rs.2,00,000 per month– Less than Rs. 1 crore : Rs. 75,000– Rs. 1 crore or more but less than Rs. 5 cr. : Rs. 1,00,000– Rs. 5 crore or more but less than Rs. 25 cr. : Rs.1,25,000– Rs. 25 crore or more but less than Rs. 50 cr. : Rs.1,50,000– Rs. 50 crore or more but less than Rs. 100 cr. : Rs.1,75,000– Rs. 100 crore or more : Rs. 2,00,000
  • 12. Remuneration of Managerial Personnel• Provided that the ceiling limits specified under this sub-paragraph shall apply, if – – Payment of remuneration is approved by a resolution passed by the Remuneration Committee; – The company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person.
  • 13. Remuneration of Managerial Personnel Where the effective capital of company is Monthly remuneration payable shall not exceedi) Less than Rs. 1 crore Rs. 1,50,000ii) Rs. 1 crore or more but less than Rs. 5 crore Rs. 2,00,000iii) Rs. 5 crore or more but less than Rs. 25 crore Rs. 2,50,000iv) Rs. 25 crore or more but less than Rs. 50 crore Rs. 3,00,000v) Rs. 50 crore or more but less than Rs. 100 crore Rs. 3,50,000vi) Rs. 100 crore or more Rs. 4,00,000
  • 14. Remuneration of Managerial Personnel• Provided that the ceiling limits specified under this sub-paragraph shall apply, if – – payment of remuneration is approved by a resolution passed by the Remuneration Committee; – the company has not made any default in repayment of any of its debts or debentures or interest payable for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person; – a special resolution has been passed at the general meeting of the company; – a statement along with a notice calling the general meeting is given to the shareholders containing the
  • 15. Remuneration of Managerial Personnel• A Statement along with a notice calling the general meeting is given to the shareholders containing the following information• General Information• Information about the Appointee• Other Information• Disclosures
  • 16. Remuneration of Managerial Personnel• Sitting Fee – Payable to director for each meeting – Not exceed ceiling prescribed by Central Government (presently Rs.5000)
  • 17. Directors Responsibility Statement• Applicable accounting standards have been followed in preparing annual accounts• Such accounting policies are selected and applied consistently• Have taken proper and sufficient care – For maintenance of adequate accounting records – For safeguarding assets of the company – For preventing and detecting fraud and other irregularities• Have prepared the annual accounts on a Going- concern basis
  • 18. Meetings of the Board• Atleast 1 in every 3 months• Atleast 4 in every year• Notice of meeting should be given in writing to every director• Quorum for a meeting is 1/3rd of its total strength• If meeting could not be held for want of quorum, then it would automatically adjourned to same day next week
  • 19. Powers of Board• General Powers – All such powers and do all such acts and things, as company is authorized to exercise and do• Powers to be exercised by Board only at meeting – Power to make calls – Issue debentures – Power to borrow money other than issue debentures – Power to invest the funds of the company
  • 20. Duties of Directors• Exercise some degree of skill and diligence• Act honestly in performance of his duties• Must perform their duties personally; not delegate to some other person• Is not bound to give continuous attention to the affairs of his company• Not bound to examine individual entries in the books of accounts
  • 21. Liabilities of Directors• Liability to Outsiders – Not personally liable to outsiders if they act within powers vested – Shall be personally liable if • They contract in their personal capacity • Act as agents of an undisclosed principal • Enter into contract on behalf of a prospective company • Contract is ultra-vires the company
  • 22. Liability to Company

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