2. Definition of director
Section 2(13) defines a „director‟ as including “any person occupying
the position of director by what ever name called”
Legal position of directors
Companies act makes it obligatory for all the companies to have
directors
The true position of company directors is that of agent and
principal
They have principal and agent relationship
Single director have no authority
If directors contract on behalf of Co. without using the word
Limited / Pvt. Ltd he is personally liable
3. Types of director
Inside director or executive director
Outside director
Professional director
Nominee director
Special director
Independent director
Interested director
Managing director
4. Director Identification Number
(DIN)
Sections 266A to 266G of companies act contain the
provision for DIN
All existing directors and individual intending to
become directors have to obtain DIN with in prescribe
time frame and in manner as prescribed
Central government has prescribed director
identification number rules, 2006, governing director
identification number
5. Who can be a director?
Anyone can become a director, with a few
exceptions:
Anyone disqualified by the company‟s own
Articles of Association (the rules relating to
the running of the company).
An undischarged bankrupt.
Someone disqualified by a court order.
The company‟s auditor
6. Qualification shares
No statutory requirement
Aoa may provide for qualification shares
Q/S should obtain within 2 months from
appointment
Maximum nominal value of shares not to exceed
Rs.5000
Q/S should be bought and not to take in gift
7. Number of directors (sec.252)
Public ltd company shall have at least 3 directors
Every Pvt company shall have at least 2 directors
Maximum No of directors 12 (Sec 259)
>12 central Govt permission is required
Restriction of Number of directorships (sec.278)
Maximum number of directorships 15
following are excluded from count (Sec 278)
•Directorship in unlimited company
•Directorship in non profit organization
8. Appointment of directors
By subscribes to the memorandum(first directors)
section 254
By members of general meeting section 255,256,257,256
By board of directors section 260,262
• additional directors
•Directors in casual vacancy
•Alternate directors
By central government section 408,409
By third parties if the articles provide
By small shareholders if articles provide
9. Removal of directors
Removal by shareholders
Shareholders may remove by passing ordinary resolution
The following directors cant be removed buy SH
o directors appointed by central govt
oLife time directors appointed prior to 1-4-1956
oAppointed by Financial institutions and banks
Removable by central government
• if director is guilty of fraud misfeasance negligence
• the business is conducted with unsound business
principles
10. Removal by company law board
• it has power to terminate, modify any agreements
between company and director
•Director cant sue for any compensation for loss of
termination of office
•Such person cant serve any company for a period of 5
years
11. Resignation of directors
Companies act does not make express provision for
resignation of a director
A director may resign in a manner according to the
company articles.
If the articles contain no provision regarding the
resignation by a director ,he may resign his office at
any time by giving reasonable notice to the company.
12. Remuneration of directors
Directors are not entitled to remuneration unless
agreement is made
But company can pay them salary or commission or
specified percentage of net profit
Reference to section 198,309to 311 and 387 suggests
director can get managerial remuneration
Sitting fees
It is not a part of remuneration (Section 198 (2))
it is paid to company which having paid up capital and
reserves of Rs.10 cores or above.
Up to Rs.20000 per meeting
13. Duties of Directors
Statutory duties
Duties to attend board meeting
Duty not to contract without board‟s consent
Duty in connection with general meetings
To disclose receipts transfer of property
To disclose receipt of compensation from transfer of shares
Duties to file declaration of solvency
Fiduciary and general duties
Duty of good faith
Not to make secret profits
Not to be negligent
