Companies Act, 2013 - Appointment of Directors, their Power and Liabilities.

1. LEGAL ASPECTS OF BUSINESS
PRESENTATION
ON
APPOINTMENT OF DIRECTOR, POWER
AND LIABILITIES
(UNDER COMPANIES ACT, 2013)
By:
Radhika Mangla – 24/024
Rahul Tanwar – 24/025
Rahul Sharma – 24/026
Rohit Grover – 24/027
Saif Abbas – 24/029
Mohit Kabra – 24/148
Vikash Mehta – 24/181

2. MINIMUM / MAXIMUM NUMBER OF DIRECTORS IN A COMPANY –
SECTION 149(1)
 Every company shall have a minimum no. of:
• 3 directors in case of a Public company,
• 2 directors in case of Private company, and
• 1 director in case of One Person Company.
 A company can appoint maximum 15 directors.
 A company can appoint more than 15 directors after passing Special
Resolution(SR) in general meeting.
 A period of one year has been provided to enable the companies
existing on or before the commencement of Companies Act, 2013 to
comply with this requirement.

3. NUMBER OF DIRECTORSHIP – SECTION 165
 Maximum no. of directorship, including any alternate directorship a
person can hold is 20.
 No. of directorship in public/private companies that are either holding or
subsidiary company of a public shall be limited to 10.
 Further the members of a company may restrict above mentioned limit by
passing SR.
 Every individual who is to be appointed as director of a company shall
make an application electronically in Form DIR-3 to the CG for the
allotment of a DIN.
Women Director – Section 149 & Rule 3 of Companies Rules, 2014
Following class of companies shall appoint at least one women director:
• Every listed company;
• Every other public company having –
 Paid –up share capital of 100 crore rupees or more; or
 Turnover of 300 crore rupees or more.

4. APPOINTMENT OF DIRECTORS – SECTION 152
First Director:
 Named in their Article.
 If not named in AOA of a company, First subscriber to the MOA who is individual
shall be deemed to be the first director of the company until the directors are duly
appointed.
Rotational Director:
 AOA of a company may provide the provisions relating to retirement of all the
directors.
 If there is no provision in the article, then not less than 2/3rd of the total no. of
directors of a public company shall be persons whose period of office is liable to
determination by Retirement by Rotation and eligible to be reappointed at AGM.
Additional Director:
 Board of Directors can appoint additional directors, if such power is conferred on
them by AOA.
 Such directors hold office only up to the date of next AGM or the last date on which
the AGM should have been held, whichever is EARLIER.
Alternate Director:
 Board of directors must be authorized by its AOA or by a resolution passed by the
company in general meeting for appointment of alternate director.
 The person in whose place the Alternate director is being appointed should be
absent for a period of not less than 3 months from India.

5. POWER OF BOARD OF DIRECTORS – SECTION 179
 The following (section 179(3) and Rule 8) powers of the Board of
Directors shall be exercised only by means of resolution (BR) passed
at meetings of the board.
1) To make calls on shareholders in respect of money unpaid on
their shares;
2) To authorise buy-back of securities under section 68;
3) To issue securities, including debentures;
4) To borrow monies;
5) To invest the funds of the company;
6) To grant loans/give guarantee & provide security;
7) To take over a company or acquire a controlling or substantial
stake in another company;
 The Board may, by a BR passed at a meeting, delegate to any
committee of directors, the managing director; the manager or any
other principal officer of the company the powers specified in (4) to
(6) above on such conditions as it may specify.

6. DUTIES OF DIRECTORS – SECTION 166
 A Director of a company shall :
 Act in accordance with the AOA of the company;
 Act in good faith in order to promote the objects of the company for
the benefits of its members as a whole, and in the best interest of the
company, its employees, the shareholders.
 Exercise his duties with due and reasonable care , skill and diligence
and shall exercise independent judgement.
 Not involve in a situation that possibly may conflict with the interest of
the company.
 Not achieve or attempt to achieve any undue gain or advantage
either to himself or to his relatives, partners, or associates.
 Not assign his office and any assignment so made shall be void.
If a director contravenes the provisions of this section, such
director shall be punishable with fine which shall not be less
than Rs. 1,00,000 but which may extend to Rs. 5,00,000.

7. CASE STUDY
ALAK PROKASH JAIN VS UNION OF INDIA
 Appellant: Alak Prokash Jain
 Respondent: Union of India
 FACTS
 The government filed a petition before the Companies Tribunal (after its
abolition, before the Bombay High Court) for a finding that certain
directors of Benett Coleman & Co. Ltd., being all the members of a
family, were not fit and proper persons for the office. Before the
petition came up for hearing they went in a writ petition before the
Calcutta High Court challenging the exercise of the power as well
as its constitutional validity.
 The appellant moved this court under a declaration that Sections 388B
to 388E of the Act were ultra vires the Constitution, and as such void,
and for appropriate writs directing the respondents in this appeal not to
proceed with Case No. 1 of 1964 and to withdraw the said proceedings.

8. JUDGEMENT
It seems to us that in the facts of this case, it cannot be said that there was no materials
to justify the opinion which the Central Government formed. The charges enumerated
above appear to us to be sufficiently grave and serious, namely, fraud,
misappropriation, manipulation of accounts, diversion of the company's funds, illegal
declaration of and unlawful payment of travelling expenses. Full particulars with dates
and amounts involved have been furnished
REASONING
 Section 388B:In opinion of Central government on basis of circumstances suggesting that a
person related to Management is indulge in fraudulent activity or default in carrying his
obligation. And Central government has right to open investigation against such person
or may state a case to remove such people.
 Section 388E: Power of Central Government to remove managerial personnel on the
basis of Company Law Board' s decisions.
The petitioner argued, in the second place that the requirements of section 388 B were not
satisfied. The central government can move against a director only when in its opinion the
circumstances contemplated in the sub-section exist. Building up their argument through the
decisions of the Supreme Court in Barium Chemicals Ltd. v. Company Law Board*35 and
Rohtas Industries Ltd. v. S.D. Agarwal, 36 they said that the relevant circumstances did not
exist and, therefore, the central government either did not apply its mind to their absence or
formed an unfounded opinion.
 The central government has already appointed an inspector which find irregularities related to
Dividend issued, Sale Proceedings, Share Issued at very low price to Director’s
relatives.