Appointment and removal of director

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Appointment and removal of director

  1. 1. Presentation On Appointment and Removal of Director Submitted To: Ms. Anupama Goswami Assi. Prof K.K.PAREKH INSTITUTE OF MANAGEMENT STUDIES- AMRELI
  2. 2. Introduction The administration of the company is in the hands of the directors. They take decision on policy matters. They are not paid servants. They serve in three different ways: As a Trustee As an Agent As a Partner
  3. 3. First Directors Person named in the articles of association as directors become the first director of the company or in the absence of the provision in the articles regarding persons to be appointed first directors, the subscribers to the memorandum of association will become the first directors.
  4. 4. Appointment by Election The members at the general meeting of the company will elect the directors. This is the most common and usual mode of appointing directors. Section 255 provides for the procedure for election.
  5. 5. Appointment by nomination by Board of Directors The Board of Directors will fill up the casual vacancy arising among the directors by nomination. Directors so appointed will remain in the office only for the unexpired period for which the director whose post is empty, would have remained in the office.
  6. 6. Appointment by nomination by Central Government Under Section 408 of the Act, the central Government can nominate some directors to the Board in case of mismanagement and oppression.
  7. 7. Appointment by nomination in statutory corporation Certain statutory corporations possess similar powers, e.g. the industrial Finance Corporations Act of 1947 empowers the Corporation to nominate a director to the Board of a company to which it has advance money.
  8. 8. Appointment on the basis of qualification Shares Where person holds minimum number of shares as provided in the articles then he is said to have obtained ‘Qualification Shares’
  9. 9. Appointment on the basis of consent filed A person intending to be appointed as a director must sign and file with the company his consent to act as such, if appointed, unless he himself notifies his candidature to the company.
  10. 10. Appointment of alternate directors The Board of Directors of a company, may, if so authorized by its articles or by resolution passed by a company in general meeting, appoint alternate director during absence of existing director for a period not less than three months from the State in which meeting of the Board are ordinarily.
  11. 11. Disqualification of Directors According to Section 253 of the companies Act, 1956, only individual can be appointed as the director. However a person shall not be capable of being appointed as director of the company, if Unsound Mind Insolvent Application is pending Convicted by a Court Not paid any share
  12. 12. Removal of Directors The shareholders, the Central Government or the court may remove the directors. The rules regarding the removal of the directors are as follows:
  13. 13. Removal-by shareholders A company may by ordinary resolution remove a director before the expiry of period of office except in the following cases
  14. 14. Directors who cannot be removed An additional director appointed by the central Government under Section 408 in case of mismanagement and oppression cannot be removed. In a private company a director appointed for life and holding office as such on 1st April 1952 cannot be removed by member’s resolution. Where the articles of a company provide for the election of directors by proportional representation, a director elected by that method cannot be removed by the resolution.
  15. 15. Special Notice for removal of directors Special notice must be give of the resolution to remove a director, copy of which must be give to the director concerned. The meeting which removes a director can elect another in his place if the director was originally appointed by the election.
  16. 16. Removal by the central Government The central Government shall by order remove from the office any directors against whom there is a decision of the High Court, holding that he is not a fit or proper person to hold the office of director.
  17. 17. Remuneration to the director for this removal If a director, by an agreement or otherwise entitle to receive compensation for the premature termination of his service he can enforce his claim notwithstanding the removal by the resolution.
  18. 18. Removal by Court Section 402 read with Section 397 and 398 gives wide power to the court including the removal of the directors.
  19. 19. Power of Directors Section 291 of the Companied Act, 1956,- lays down that subject to the provisions of the articles, the board of Directors of a company shall be entitles to exercise all such powers and to do all such acts and things as the company is authorized to exercise and do.
  20. 20. Powers to be exercised by the Board of Directors Section 292 of the Companies Act provides that the Board of Directors shall exercise the following powers on behalf of the company: Make calls on shareholders Issue Debentures Borrows the money other than on debentures Invest the funds of the company
  21. 21. Right  A director validly appointed and if he is not otherwise disqualified to take part in discussion in the Board’s meetings, he is entitled to attend the meetings of the Board and participate in the discussion of the company’s affairs.  A director is entitled to receive remuneration fixed by the articles or otherwise, but subject to the provisions of the Act.  Managing Director and the whole-time director may be given compensation by the company if the company terminates the services of such a director prematurely.
  22. 22. Duties of the Directors Work according Business lines Act in good faith and with interest Reasonable care Degree of skill To attend meetings The director's duty of disclosure
  23. 23. Liabilities of Directors  Civil liabilities  Criminal liabilities  Unlimited liabilities
  24. 24. Civil liabilities Any false statement made in the prospectus. Where the director exceed the authority for entering into the contract. For any ultra virus act of the company. Where a director is negligent and the company suffers the loss due to the negligence of directors. If the director makes any secret profit in connection with the affairs of the company. If the directors commit any breach of trust relating to the properties and funds of the company.
  25. 25. Criminal liabilities  The companies act imposes criminal liabilities upon the directors for the breach of certain conditions.  Various provisions of the act provide for the imposition of fine for criminal performance Of the prescribed duties.  Imprisonment is also provided for in certain cases viz. False statement in prospectus, failure to keep certain registers, falsification of book and report, etc.  Negligence, breach of duty, the court can excuse him from any liability if it is of opinion that such director or officer has acted honestly and reasonably and that having regard to all the circumstances of the case, he ought fairly to be excused.
  26. 26. Unlimited liabilities of directors It may be provided in the memorandum of association that the liability of the directors or any director or manager may be unlimited.
  27. 27. Bibliography Material of LAB (MBA Sem. III)

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