a presentation on directors of company law

2. GROUP-04

3. DIRECTORS

5. Definition
 Selected according to the Articles of the
Association of the company.
 They are in charge of the management of the
affairs of the company.
 The Directors are collectively called the Board of
Directors.
 The Board is the Company’s executive authority

6. Number of Directors
 Appointed to the Board of Directors of a company is
determined by the articles
 The Act provides that there must be at least 3 directors
in a Public Company .
 At least 2 directors in other companies .
 A private company may become a public company by a
change in its structure of ownership.
 The company can increase the number of directors
beyond the maximum fixed by the articles provided
previous sanction of the Central Government is
obtained.

7. Mode of Appointment of Directors
01.First Directors-Person named in the articles of
association as directors become the first directors.
Person who sign the Memo
Election
02.Appointment of directors by Company
Appointed in a general meeting
03.Appointment of Directors by the Board of Directors
a)Additional Directors
b)Casual Vacancy
c)Alternate Directors

8. Mode of Appointment of Directors
04.Appointment of Directors by third Parties
Empower the debenture holders who have
advanced loan to appoint their nominees
05.Appointment of directors by proportionate
representation:
May provide for the appointment of not less than
two thirds of total number of directors of a public
company

9. Mode of Appointment of Directors
 06.Nomination by the Central government
The central government can nominate some
directors to the board of a company as the Tribunal
07.Nimination in Statutory Corporations
The Government can nominate a directors to the
board of a company coming within the purview of
the Industries.

11. WHO CAN BE A DIRECTOR??
 Qualification of a director : A director must be appointed
in the mode stated.
01. A director must be capable of entering into a contract.
a)must have attained the age of majority
b)must have sound mind
c)must not be disqualified from contracting by any law.
02.A director must have a natural person
03.A director must have the requisite qualifications
shares.
04.A director must not be disqualified under the
circumstances enumerated.

12. Retirement of Directors
 Rotation
the articles may be provided for the retirement of all
directors at every general meeting.
the Act provides that at every annual general meeting
after the one by which the first directors are appointed.
If the number of directors is not three or a multiple of three,
then the number nearest to one third shall so retire.
If the vacancy is not filled at the annual general meeting
or at the adjourned meeting , the retiring directors will be
deemed to be automatically

13. RESIGNATION OF A DIRECTOR
 The company Act does not provide for resignation of a
director
 But The Articles of a company may have express
provision of it
 A Director is an Agent of a company and ,therefore he
can resign his office by notice
 A resignation can not be withdrawn without the
consent of the company .
 If a director part with his qualification shares he has to
vacate his office.

15. Removal of Directors
Directors may be removed by shareholders ,the
Central Government or the Court.
01.Removal by Shareholders
1.An additional Director appointed by the central
Government can not be removed
2.A director appointed for life and holding office can
nit removed by a members’ resolution
3.When the Articles of a company provide for the
election of directors by proportional representation ,a
director elected by that method can not be removed by
resolution

16. ii) Removal by the Central Government
 The Central Government can make a reference to the
Tribunal to remove managerial personnel including
directors when-----
a)any person is guilty of fraud ,misfeasance, persistent
negligence or default etc
b)the business of the company is not following second
business principles
c)the company is causing damage to the trade and
industry of the business pertaining

17. iii)Removal by the Tribunal
 The tribunal for prevention of oppression of
oppression or mismanagement
 The tribunal finds that the relief ought to be granted
setting aside or modification of any agreement
between the company and the Director .
 When the appointment of a Director so terminated or
set aside , he or she can not sue the Company for
damages or compensation for loss of office

18. Managing Director
 The term Managing Director is defined of the Act.
 The Managing Director is a director who is entrusted
with any substantial powers of management
 The term Managing Director includes a director
occupying the position f a managing director ,by
whatever name called.

20. Loans to Directors , his
relatives etc
 Any director of the lending company or of a company
which is its holding company .
 Any firm ,in which any such director or relative is a
partner
 Any private company of which any such director is a
director
 Any body corporate at a glance meeting of which not
less than 25% of total voting power may be exercised.

21. Contracts in which a director is interested
 A director or his relative or a firm in which he is
partner or a private Company in which he is member
or director , shall not enter into contracts with the
company for the sale.
The above rule does not apply to the following cases:
a)Contracts for the purchase and sale of goods and
martials for cash prevailing market prices
b)Contracts for the sale, purchase or supply of goods
,martials and services

22. Register of directors etc
 Every company shall keep at its registered office
,registers containing particulars about its directors.
 Copies of the particulars entered in the aforesaid
registers shall be sent to the Registrar ,who shall keep
similar registers.
 All the registers can be inspected by any person
 The company must also maintain a register showing
the number of shares and debentures held by every
director and manager

23. Remuneration of Directors
 The remuneration payable to the directors of a
company shall be determined either by the articles or
by the resolution .
 If a director gives professional service to the company
,he may be paid for it ,provided that, in the opinion of
the Central Government .
 The remuneration of the Directors is a part of the
overall managerial remuneration which can not exceed
11% of the net profits

25. Meetings of the Board of Directors
 The Board of directors is the Executive Authority of the
company.
 Generally the directors exercise their power through
resolution
 Rules regarding Board meeting:-
01. In the case of every Company a meeting of its Board of
directors shall be held at least once in every three months
02.Notice of every meeting of the Board of directors shall
be given in writing to every director .
03.The quorum for a meeting of the Board of directors shall
be one third of its total strength or two directors ,whichever is
higher

26. Legal position of Directors
 There are different views about the legal position of
directors .
 Trustees: A director is not a trustee in the correct legal
sense of the term.
A trustee is a person who is the owner of
property and deals with it as principal
Fiduciary Position :
it is generally agreed that the directors occupy a
fiduciary position in the relation to the company .
Agents : It is more accurate to describe directors as
agents.The directors are agents of the company because
the company acts through the directors .

28. Powers of Directors
 Directors derive their power and authority from two
sources :
The Articles of Association of the Company
The Companies Act
The articles of association generally contain a list of the
powers which may be exercised by directors and
limitations on those powers if any.
The articles ,also contain a list of those matters which
are to be decided by the members in the general meeting
.

29. Contribution for Political
Purposes
 Notwithstanding anything contained in any other
provision of this Act ,neither a company in general
meeting nor its Board of Directors shall contribute any
amount or amounts---
 a)to any political party
 b)for any political purpose to any individual or body
Donation:
Companies can make donations to any individuals
or organization for charitable purposes and to other
funds up to 5%of its average profits.

30. Rights of Directors
 1.Participation
A director validly appointed to the Board and not
suffering from any disqualification which would prevent him
from acting as such ,is entitled to attend meetings of the
Board and participate in the direction of the company’s
affairs.
02.Remuneration
A director is entitled to receive the remuneration
fixed by the articles .
03. Compensation
A whole time director and a managing Director may be
given Compensation by the company

31. Duties of Directors
 Distribution :
 Good faith :
 Reasonable care
 Degree of skill
 To attend meetings
 The Director's duty of disclosure
 Other duties

33. Disabilities of Directors
 No assignment :A director can not assign his office.
 No indemnity: Any provision for exempting any officer of
the company or its auditor from any liability for negligence.
 Loans to directors: there are restriction for giving loans to
directors
 Contract with directors: there are restriction upon Contract
with directors
 Number of directorships : there are restriction upon the
Number of directorships
 Office or place of profit:

34. Liabilities of Directors
 I)Civil Liability:
01.the directors are liable for untrue statements
in the prospectus
02.For contracts entered into on behalf of the
company ,the directors are not personally liable.
03.The directors are liable to the company for Ultra
vires acts.
04.If a director performs his duties negligently and
the company thereby suffers damage

35. Liabilities of Directors
Criminal Liability :
for certain breaches of duty the Companies Act
imposes a criminal liability upon directors .
Various sections of the Act provide for the imposition
of fines for non –performance of the prescribed duties.
Unlimited Liability of Directors :
The memorandum of association of a company may
provide that the liability of the directors or any director
or manager , may be unlimited.