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Definition of directorSection 2(13) defines a „director‟ as including “any person occupyingthe position of director by what ever name called”Legal position of directorsCompanies act makes it obligatory for all the companies to havedirectorsThe true position of company directors is that of agent andprincipalThey have principal and agent relationshipSingle director have no authorityIf directors contract on behalf of Co. without using the wordLimited / Pvt. Ltd he is personally liable
Types of directorInside director or executive directorOutside directorProfessional directorNominee directorSpecial directorIndependent directorInterested directorManaging director
Director Identification Number(DIN)Sections 266A to 266G of companies act contain theprovision for DINAll existing directors and individual intending tobecome directors have to obtain DIN with in prescribetime frame and in manner as prescribedCentral government has prescribed directoridentification number rules, 2006, governing directoridentification number
Who can be a director?Anyone can become a director, with a fewexceptions:Anyone disqualified by the company‟s ownArticles of Association (the rules relating tothe running of the company).An undischarged bankrupt.Someone disqualified by a court order.The company‟s auditor
Qualification sharesNo statutory requirementAoa may provide for qualification sharesQ/S should obtain within 2 months fromappointmentMaximum nominal value of shares not to exceedRs.5000Q/S should be bought and not to take in gift
Number of directors (sec.252)Public ltd company shall have at least 3 directorsEvery Pvt company shall have at least 2 directorsMaximum No of directors 12 (Sec 259)>12 central Govt permission is requiredRestriction 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
Appointment of directorsBy subscribes to the memorandum(first directors)section 254By members of general meeting section 255,256,257,256By board of directors section 260,262• additional directors•Directors in casual vacancy•Alternate directorsBy central government section 408,409By third parties if the articles provideBy small shareholders if articles provide
Removal of directorsRemoval by shareholdersShareholders may remove by passing ordinary resolutionThe following directors cant be removed buy SHo directors appointed by central govtoLife time directors appointed prior to 1-4-1956oAppointed by Financial institutions and banksRemovable by central government• if director is guilty of fraud misfeasance negligence• the business is conducted with unsound businessprinciples
Removal by company law board• it has power to terminate, modify any agreementsbetween company and director•Director cant sue for any compensation for loss oftermination of office•Such person cant serve any company for a period of 5years
Resignation of directorsCompanies act does not make express provision forresignation of a directorA director may resign in a manner according to thecompany articles.If the articles contain no provision regarding theresignation by a director ,he may resign his office atany time by giving reasonable notice to the company.
Remuneration of directorsDirectors are not entitled to remuneration unlessagreement is madeBut company can pay them salary or commission orspecified percentage of net profitReference to section 198,309to 311 and 387 suggestsdirector can get managerial remunerationSitting feesIt is not a part of remuneration (Section 198 (2)) it is paid to company which having paid up capital andreserves of Rs.10 cores or above.Up to Rs.20000 per meeting
Duties of DirectorsStatutory dutiesDuties to attend board meetingDuty not to contract without board‟s consentDuty in connection with general meetingsTo disclose receipts transfer of propertyTo disclose receipt of compensation from transfer of sharesDuties to file declaration of solvencyFiduciary and general dutiesDuty of good faithNot to make secret profitsNot to be negligent