INTRODUCTION TO THE TERM DIRECTORS
APPOINTMENT OF DIRECTORS
REMOVAL/RETIREMENT OF DIRECTORS
RIGHTS & DUTIES OF DIRECTORS
ROLE OF DIRECTORS
MANAGING AND ADDITIONAL DIRECTORS
DIRECTORS WHO ARE THEY?
The company carries on its business through
individuals called directors.
Collectively they are called Board of Directors.
No body corporate, association or firm can be
appointed as a director of a company and only an
individual can be appointed.
Every public company must have 3 directors.
A Public Company having A paid up capital of Rs. 5 crore or more
and One thousand or more shareholders Can elect a director by
A private company must have at least 2 directors
Subscribers of the memorandum who are individuals,, are deemed to
be the directors of the company, until the directors are duly appointed
in accordance with the Act.
Directors are appointed in general meeting, in board meeting, by
central government, by proportional representation or a person can
stand for directorship, if eligible.
A company can have a maximum number of 12 directors and
to increase this number, the approval of Central Government
The board of directors can appoint Additional Directors, by
passing a resolution, if such a power exists in the articles.
If any vacancy arises in office of any director then subject to
the articles, the board of directors can fill the vacancy at a
meeting of the board.
One single resolution can appoint one director only and two or
A company, at a general meeting may, by ordinary resolution,,
increase or reduce the number of its directors within the limits
fixed in that behalf by its articles.
TYPES OF DIRECTORS
APPOINTMENT OF DIRECTOR
Any Person Can Be Eligible For Appointment To The Office
Of Director At Any Annual General Meeting, If…
He himself or some member intending to propose that person as a
Gives a sign notice in writing to company.
Signifying that persons for the office of director..
Along with a deposit of Rs. 500/- which is refundable subject to
appointment as a director .
The directors to retire by rotation at every AGM are those who
have been longest in office since their last appointment.
Removal Of Directors Is Conferred Upon
Shareholders,Central Government And
Company Law board.
REMOVAL OF DIRECTORS
A company may, by ordinary resolution, remove a director (not being
a director appointed by the Central Government in pursuance of
section 408) before the expiry of his period of office. This provision
shall not apply where the company has availed itself of the option
given to it of proportional representation on the Board of Directors to
appoint not less than two-thirds of the total number of directors
according to the principle of proportional representation
Special notice shall be required of any resolution to remove a director, or
to appoint somebody instead of a director so removed at the meeting at
which he is removed.
VACATION OF OFFICE BY DIRECTORS
The directorship of a director automatically ceases if,
He fails to obtain qualification shares.
He fails to pay any call in respect of sharesHe fails to
pay any call in respect of shares.
He absents himself from 3 consecutive meetings of the
of directors, or from all meetings of the board for a
continuous period of 3 months, whichever is longer,
without obtaining leave of absence from the board.
He is removed by the shareholders by resolution passed
in a general meeting.
A company can remove a director even before the
expiry of his period of office.
DISQUALIFICATION OF DIRECTORS
A person shall not be capable of being appointed director of a
He has been found to be of unsound mind by a Court of
competent jurisdiction and the finding is in force.
He is an undercharged insolvent.
He has applied to be adjudicated as an insolvent and his application is
He has been convicted by a Court of any offence involving moral
turpitude and sentenced in respect thereof to imprisonment for not
less than six months, and a period of five years has not elapsed from
the date of expiry of the sentence..
They are the minimum number of shares a person mustown, as
provided in the articles of the company, in order to qualify to become a
director of the company. Qualification shares must be acquired by a
director within 2 months of his appointment. The articles cannot
require a director to acquire qualification shares within a shorter
period. The face value of the qualification shares cannot exceed five
thousand rupees, or if the face value of one share is more than five
thousand rupees, then the qualification share will be one qualification
A director is required to hold certain shares as qualificationshares if
such requirement is There in the Articles of association of the
Every company, having a paid-up capital of Rs.
5crore or more must have a whole-time director.
A WHOLE TIME DIRECTOR is one who entirely
looks into the affairs of a company.
A person shall not act as director of a company
unless he has, by himself or by his agent authorized
in writing, signed and filed with the Registrar, consent
in writing to act as such director within 30 days of his
appointment.. This provision shall not apply to a
private company unless it is a subsidiary to a public
At a time a single whole time director can act as a
director for not more than 20 Companies.
The Board of directors may appoint additional directors if
such power is conferred on it by the articles of the
company. Such additional directors shall hold office only
up to the date of the next annual general meeting of the
The Board of directors of a company may, if so
authorized by its articles or by a resolution passed by the
company in general meeting, appoint an alternate
director to act for a director during his absence for a
period of not less than three months from the State in
which meetings of the Board are ordinarily held.
REMUNERATION OF DIRECTORS
Not more than 11% of the net profits of the company for that financial year
If a company has only one director
Not more than 5% of the net profits
If a company has more than one director
Not more than 10% of the net profits for all of them together
The director is not a whole time director
Not more than 1% of the net profits.
The overall maximum remuneration payable to directors and its managers in one
DIRECTOR CANNOT TO HOLD OFFICE OR
PLACE OF PROFIT:
Except with the previous consent of the company accorded by a
No director of a company can hold any office or place of profit in that
No partner or relative of such a director (i.e. a director holding an
office or place of profit in the company), no firm in which such a
director or relative is a partner, no private company of which such a
director is a director or member, and no director, or manger of such a
private company can hold any office or place of profit carrying
monthly remuneration in excess of the prescribed amount (Rs.
LOANS TO DIRECTORS
A company provides loan to its director (for a
guarantee or security)or the related parties, with
proper approval from Central Government. This is
to ensure that the Board Of Directors of a public
company does not misuse the funds of the
company for the benefit of its directors.
INTERESTS OF A DIRECTOR
When any company enters into contracts relating to the business
of the company with the directors, the consent of the board of is
required by way of resolution.
Every director of a company has to disclose the nature of his
concernor interest at a meeting of the board of directors.
Finally a decision will be taken by the BOARD OF DIRECTORS.
Every Director shall disclose the nature of his concern or interest
in a contract or arrangement at the meeting of the Board..
Disclosure is not required where any of the Directors of one
company or two or more of them together hold 2% or less than
2% of paid up share capital of the company.
Make Calls on shareholders in respect of money unpaid on their
Borrow moneys otherwise than on debenture.
Invest the funds of the company
Directors can exercise certain powers only at the
meetings of the board related to some significant
matters which need deliberations and
RESTRICTIONS & LAIBILITIES ON BOARD OF
Dispose of any Undertaking of the company.
Remit or to give time for the repayment of, any debt due by a
Invest, otherwise than in trust securities, the amount of
compensation received by the company in respect of the
Borrow moneys in excess of aggregate of the paid-up capital
of the company & its free reserves.
Contribute to charitable and other funds not directly relating to
the business of the company or the welfare of its employees.
Legal Aspects of Banking Operations By
Business Law for Management by K.R.
Indian Companies Act, 1956Indian
Companies Act, 1956
Company Law by Singh and Avatar
Company Law and Practice, Taxman, New
A Guide to the Companies Act, Wadhwa