Business Law “ Role Of Directors Of The Company” Submitted by:- Diganta Sankar Deb Chowdhury. MBA- 3 rd Sem, Sec-A, Roll No-39. Assam University, Silchar. Submitted to:- Lurai Rongmei. Asst. Professor. Assam University.
Meaning Of Directors
The Directors of a company are selected according to the Articles of Association of the Company and provisions of the Companies Act. They are in charge of the management of the affairs of the Company.
A director is an officer of the company within the meaning of section 2(30). Section 2(13) states that a director includes “any person occupying the position of a director by whatever name called”. They are professional men, hired by the company to direct its affairs.
Who can be a Director?
From the contract and the Companies Act, it can be said that the director must have the following qualifications.
A director must be capable of entering in to a contract I.e. (a) he must have attained the age of majority, (b) he must have sound mind and (c) he must not be disqualified from contracting by any law to which he is subject- Sec-11.
A director must be a natural person i.e. not an artificial person.
A director must have the requisite qualification shares.
A director must not be disqualified under the circumstances enumerated in Sec 274. E.g. if he is an undischarged insolvent or a person convicted by the court.
Prosecution Of Directors
1,000 directors are prosecuted each year for failing to deliver accounts and returns to the Registrar on time. Persistent failure to deliver the statutory documents on time may also lead to a director being disqualified from taking part in the management of a company, for a specific period.
This prosecution can be avoided if the company complies on time with all its filing obligations, not only in connection with its accounts and annual returns, but in connection with all other documents required under the act.
Role Of Directors Of A Company
Distribution of work - The manner in which the work of a company is to be distributed between the board of directors and the staff is a business matter to be decided on business lines by the director of a particular company.
Looking after management affairs - The directors are responsible for the management of the company. While their powers can be restricted by the company’s articles they can, in most cases do anything that the company can do. With these powers, come responsibilities. Since the directors can act as and for the company, they must ensure that the company does everything that it is obliged to do by law and that the decisions they make are in the best interests of the company.
In this context the interests of the company are those of the shareholders as a whole. These may be different from the interest of customers, employees, individual shareholders or the directors themselves.
A director's fiduciary duty -
In this fiduciary capacity, a director assumes two roles, as an "agent" acting on behalf of the company, and as a trustee who controls company assets.
To act in good faith towards the company.
To act only within their powers and use their powers only for purposes which benefit the organisation. Directors who act outside their powers bind the company to the transaction but may be held personally liable if a loss results.
Not to use for personal gain any information acquired in their capacity as a director.
To act in the best interests of the company and to avoid a conflict between personal and company interests.
To exercise independent judgment in decision-making. A director who is appointed to represent an interest group, for example employees, is nevertheless obliged to act in the best interests of the company as a whole.
The director’s duty of disclosure - The companies Act 1956 makes it obligatory upon directors to disclose certain facts to the company:
If a director is interested in any contract or arrangement to be proposed to be entered in to the company, he must disclose the interest to the Board of directors- Sec 299.
He must disclose, for the purpose of entry in the register of directors his name, address, occupation, nationality and certain other particulars- Sections 303 and 305.
He must disclose the number of shares of the company which he holds- Sec 308 .
Other duties - In addition to the duties mentioned above , every directors has the following roles to perform:
A director has to send to the registrar stating his consent to the post of director.-Section 266.
Every director must obtain the qualification share of directorship according to the article of the company.- Sec. 270 .
Every director must pay his share monies according to the ‘Call’ of the Board of directors.
A director must not participate in the meeting of the Board of Directors, when they decide his contract with the company.
So, in short
To convene Statutory, Annual General Meeting (AGM) and also Extraordinary General Meetings.
To prepare and place at the AGM, along with the balance sheet and, profit and loss account, a report on the company’s affairs, including the report of the Board of Directors.
To authenticate and approve annual financial statement.
To appoint first auditor of the company.
To appoint cost auditor of the company.
To make a declaration of solvency in the case of a member’s voluntary winding up.