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Appointment of directors


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Appointment of directors

  1. 1. AApresentation onpresentation onTopic:-AppointmentTopic:-AppointmentofofDirectorsDirectors
  2. 2. Who is the DIRECTOR??Who is the DIRECTOR??Acc. To the Sec.2(13) of INDIAN COMPNIES ACT 1956,”Director includes any person occupying the position of thedirector by whatever name called”Director may be defined as an individual who directs ,controls or manages the affairs of the company.The directors of the company collectively are referred to asthe “board of directors” or “board”
  3. 3. QualificationQualificationNo educational or other qualifications are required in order tobecome director of the company whether public or private.Similarly, the Companies act 1956 does not prescribe anyrequirement as to age limit for becoming a director.The only condition is as per section 253 No body corporate, firms orassociates can become a director. Only Individual can be aDirector of a company because the office of a director is office ofresponsibility, accontability and position of trust.Section 274 negatively stipulates the eligibility requirement forbecoming a director by providing certain disqualifications.
  4. 4. Number of DirectorsNumber of DirectorsAs per section 252 every public company shall have 3 directors andevery other company shall have at least 2 directors.Maximum no. of directors in case of private company shall be asspecified by the articles. It could be 7 or 8 or even 20 or25.Central Govt. approval not required in case of any increase innumber.The act does not prescribe any maximum number of directors forpublic company also but if the maximum no of directors exceed12, prior approval of central Govt. would be required.Thus the approval of central govt will be necessary for the “increase”in number of directors , and not for the “appointment ”.
  5. 5. Appointment of DIRECTORSAppointment of DIRECTORSThe appointment of directors is accordingly regulated by the act.Directors may be appointed in following ways:-By the articles as regard first directors [sec. 254]By the company in general meeting [sec. 255 to257 , 263 , 264]By the directors [sec. 260 , 262 , 313]By third parties [sec. 255]By the principle of proportional representation [sec. 265]By the central government [sec. 408]
  6. 6. By the articles as regard firstBy the articles as regard firstdirectors section 254directors section 254The first directors are usually named in the articles. The articles may alsoprovide that both the number and the names of the first directors shall bedetermined in writing by the subscribers of the memorandum.Where the company has no articles or the articles are silent regarding theappointment of directors, the subscribers to the memorandum who areindivisuals shall be deemed to be first director until the directors areappointed at first annual general meeting.If all the subscribers to the memorandum happen to be bodies corporate ,none of the subscribers can be deemed to be directors and the company willhave no directors until the first directors are appointed under section 255.Where the person named in the list of first directors do not assume theoffice , for any reason for example , death, then it is the duty of thesubscribers of the memorandum to hold a meeting for appointment ofdirectors.
  7. 7. Appointment by the companyAppointment by the company[Section 255 to 257 , 263 , 264][Section 255 to 257 , 263 , 264]Appointment of subsequent directors is made at every annual generalmeeting of the company.Section 255 provides that not less than two third of the total number ofdirectors of a public company or a private company must be appointedby the company in general meeting.These directors must be subject to the retirement by rotation.Section 263 prohibites the placing of the composite motion for the electionof two or more directors before the general meeting . The purpose ofprohibition of composite motion is that it will enable shareholders toaccept or reject a perticular individual standing for directorship withoutbeing compelled to accept or reject all of them.
  8. 8. Section 264of the companies Act requires every director to give hisconcent to the directorship. There are two types of Consents :1.Concent of the candidate for Directorship to be filed with the company264(1)2.Concent to act as director to be filed with the registrar 264(2) .The consequence of a director continuing to act as such without filing hisconcent within the period specified would attract the penalty undersection 629A i.e.Rs. 500 Every day.Such concent may however be filled after the expiry of the said period onpayment of additional fees as contemplated by section 611(2).It is further open to the central government u/s 637B to condone thedelay in filling concent.
  9. 9. BY THE DIRECTORSBY THE DIRECTORSThe directors are empowered to appoint :-•Additional directors•Alternate directors•Directors filling casual vacancy
  10. 10. ADDITIONAL DIRECTORSADDITIONAL DIRECTORSThe board of director may appoint additional directorsfrom time to time if so authorised by the articles.The number of directors and additional directors mustnot exceed the maximum strength fixed for the boardby the articles.The additional directors shall hold office only upto thedate of next annual general meeting.
  11. 11. ALTERNATE DIRECTORSALTERNATE DIRECTORSThe board of directors may appoint an alternatedirector if authorized-By the articles-By a resolution of the company at general meetingAn alternate director acts in the place of a directorwho is absent for more than three months from thestate in which board meetings are held.He must vacate the office on the return of theoriginal director.
  12. 12. CASUAL VACANCYCASUAL VACANCYWhere the office of any director appointed by the company in general meetingis vacated before the expiry of his term the director may fill up the vacancy atthe meeting of board.Any vacancy other than one caused by retirement of a director by rotation is acasual vacancy.Such a vacancy may occur by reason of death , resignation , bankruptcy , ordisqualification.The director so appointed will hold office till the end of the term of thedirector in whose place he is appointed.
  13. 13. APPOINTMENT BY THIRDAPPOINTMENT BY THIRDPARTIESPARTIES[Section 255][Section 255]Section 255 permits that one third of the total number of directors of apublic company or a private company which is subsidiary of a publiccompany to be appointed by parties other than share holders on a non-rotational basis.The articles may give right to debenture holders , financial corporations orbanking companies who have advanced loans to the company to nominatedirectors on the board of company.The number of directors so nominated should not exceed one third of thetotal strength of the board.They are not liable to retire by rotation.
  14. 14. APPOINTMENT BYAPPOINTMENT BYPROPORTIONALPROPORTIONALREPRESENTATIONREPRESENTATIONDirectors of the company are generally appointed by a simple majority ofshareholders and a substantial minority cannot succeed in in placing even asingle director on the board.Section 265 intends to protect the interests of minority shareholders bygiving them an opportunity to place their nominees on the board.The articles of the company may provide that the appointment of not lessthan 2/3 of the total number of directors of the public company shall beaccording to the principle of proportional representation.
  15. 15. APPOINTMENT BY SMALLAPPOINTMENT BY SMALLSHAREHOLDERSSHAREHOLDERS[ Section 252 ][ Section 252 ]A small shareholders means a shareholder holding shares nominalvalue of Rs.20,000 or less he may be a holder of equity share orpreference share or both.Appointment of Small Shareholder director is not mandatory as persec 252 of the Companies Act 1956Applicability :The Provisions relating to appointment of a small shareholderDirctor apply to a company only if all the following conditions aresatisfied:(a) The Company is Public Company(b) The Paid Up Capital of Company is Rs. 5 crore or more’( c) The number of Small Shareholders in such a company is 1000 ormore
  16. 16. APPOINTMENT BYAPPOINTMENT BYCENTRAL GOVERNMENTCENTRAL GOVERNMENTThe central government has the power under section 408 toappoint directors on an order passed by the tribunal (earliercompany law board) to effectively safeguard the interest of thecompany or its shareholders or the public interest to preventmismanagement.Such directors shall hold office for a period not exceeding threeyears on any one occasion.
  17. 17. Managing Director:Managing Director:Managing Director means a director who :a. By Virtue of an agreement with the company orb. By resolution passed by the companyc. By Resolution passed by its Board of Directorsd. By virtue of its MOA or AOAIs entrusted with the substantial powers of management which would nototherwise exercisable by him, and includes a director occupying the positionof managing director , by whatever name called.Provided further that a managing director of a company shall exercise his powersubject to control & directions of its Board of Directors.Whole Time Director:Whole Time Director:whole time director is not defined by the companies act. As per section269,”Whole time director includes a director in whole time employment of acompany.The Department of Company Affairs Clearified that an whole time employeeappointed as a director will be a whole time director only if substantialpowers of management is vested with him.
  18. 18. Manager :Manager :Manager means an individual who subject to the control & direction of boardManager means an individual who subject to the control & direction of boardof directors has the management of the whole or substantlly the whole ofof directors has the management of the whole or substantlly the whole ofthe affairs of the company. And includes the director or the any otherthe affairs of the company. And includes the director or the any otherperson occupying the position of manager, by whatever name called,andperson occupying the position of manager, by whatever name called,andwhether under a contract of service or not.whether under a contract of service or not.A manager may or may not be a director of a company.A manager may or may not be a director of a company.Company cannot have simultaneously two managers .Company cannot have simultaneously two managers .Acompany cannot at a same time employ a managing Director and aAcompany cannot at a same time employ a managing Director and amanager. However a company can simultaneously a manager an da wholemanager. However a company can simultaneously a manager an da wholetime director .time director .Only An individual can be appointed as a manager. No firm or bodyOnly An individual can be appointed as a manager. No firm or bodycorporate can be appointed as a manager.corporate can be appointed as a manager.
  19. 19. Anyqueries..??