The document discusses the roles and responsibilities of directors in a company. It provides information on how directors are appointed, their duties to the company and shareholders, powers they can exercise individually or through board resolutions, and liabilities they may face. It also covers topics like types of directors, qualifications for becoming a director, restrictions on directorships, and roles of managing directors.

1. Kunal Upadhyay
Build RELATIONSHIP with Good Person is like SUGARCANE, you break it,
Crush it, Squeeze it or even Beat & Grind it, Still you will get only
SWEETNESS…!!!

2.  A company is an artificial person created by law.
 It has no physical existence but it exist in eyes of law.
 It cannot act itself.
 It acts through some persons who are representatives
of the shareholders.
 Shareholders do not manage the company.
 Shareholders elect directors which are collective
called “Board Of Directors”
Kunal B. Upadhyay

3. Shareholders
Board of Directors
Elect
Appoints
Chief Executive Officer
Sales
Manager
Production
Manager
Financial
Manager
HR
Manager
Kunal B. Upadhyay

4.  Person responsible for direction, control and
management of the affairs of the company
Number Of Directors
Public Company Minimum 3 directors
Private Company Minimum 2 directors
Kunal B. Upadhyay

5.  A person cannot become director of more than 15
companies.
 In computing the 15 directorship the followings are
not taken into account-
1) Private companies
2) Unlimited companies
3) Association not for profit
4) Alternate dictatorships
 If a person is director of more than 15 companies he
has to quit his office in one
 Punishable with fine 50,000
Kunal B. Upadhyay

6.  Directors as Trustees
◦ Holds property on trust for other person
◦ The directors are in charge of the properties and money of the
company or trust
 Directors as Agents
◦ The directors of the company act for and on behalf of the company
◦ They represent the company outside and enter into contract with
the outsiders
◦ Also manage the company’s business, formulate policies and take
decisions
Kunal B. Upadhyay

7.  Directors as Managing Partners
◦ Representative of the share holders
◦ Contribute share capital with others shareholders
◦ Authorized people who managed the companies
Kunal B. Upadhyay

8.  Directors can be appointed in following ways-
1) First directors
2) Appointment at general meeting
3) Appointment of directors by the board
4) Appointment of directors by third parties
5) Appointment of directors by proportional voting
6) Appointment by Central Government
Kunal B. Upadhyay

9.  the memorandum appoint the first director and their
names be mentioned in the articles
 At the incorporation stage of company the promoter
mentioned proposed directors name who act as
director of the company
 Articles may prescribe the method of appointing
them.
Kunal B. Upadhyay

10.  Not less two-third of the total number of directors
of a public company must be appointed in general
meeting
 The directors longest in the office shall retire in the
first place. The retiring director shall be eligible for
re-election
 Appointment of directors of a public company shall
be done individually by a separate resolution
passed by simple majority
Kunal B. Upadhyay

11.  Additional directors:
 additional directors shall hold office only up to the end of
the next annual general meeting
 Casual vacancies:
 If the office of a directors falls vacant for some reason
before his term expire.
 Alternate directors:
 alternate directors appoint during the absence of a directors
for more than three months.
Kunal B. Upadhyay

12.  The articles under certain circumstances give
power to vendors, banking companies,
financing corporations or debenture holders
 The numbers of directors so appointed shall
not exceed one-third of the total numbers of
directors.
Kunal B. Upadhyay

13.  The directors may be appointed either by a system of
straight majority of votes or by a system of
proportional representation
 showing hands,
 by saying yes or no,
 divide the group in two like fever and against,
 by poll
Kunal B. Upadhyay

14.  In case of mismanagement, the Central Government
may appoint any number of directors.
 Any director appointed by the central government
shall not be required to hold any qualification shares
nor hall his period of office be liable to termination
by retirement of directors by rotation
Kunal B. Upadhyay

15.  The Companies Act does not lay any academic or
shareholding qualification for a director
 Specific number of ‘ Qualification Shares’
 According to articles of company the director must
obtain specific Qualification shares within 2 months
 The Nominal Value of Qualification share must not
exceed Rs. 5000
 Punishable fine of Rs. 50 per day on failure to attain
Qualification shares
Kunal B. Upadhyay

16.  A person of unsound mind
 An undercharged insolvent
 A person who has applied to be adjudicated as
insolvent and his application is pending
 A person whose call in respect of shares of the
company held for more than six months have been
amount overdue
 As per Amendment, 2000 no person can hold office of
directorship in more than 15 companies
Kunal B. Upadhyay

17.  Powers to exercised by a resolution passed
at the Board Meetings
 Powers to be exercised with the consent of
General Meeting
Kunal B. Upadhyay

18.  To make calls on shareholders in respect of money unpaid
on their shares
 To issue debentures
 To invest the funds of the company
 To make loans
Other powers
 To fill casual vacancies
 To enter into contract
 To received notice of disclosure of directors interest in any
contract
Kunal B. Upadhyay

19.  To receive notice of disclosure of shareholding of
directors
 To appoint as managing director or manager a person
who is already a managing director or manager of other
company
 To make investments in companies in the same group
 To recommend dividends
Kunal B. Upadhyay

20.  To sell, lease or otherwise dispose off the whole or
substantially whole undertaking of the company
 To contribute to the charitable or other funds not
directly relating to the business of the company
 To contribute money to any political parties or to any
persons of political purpose
 To remit or give time for repayment of any debt due to
a director except in case of an advance made by
banking companies
Kunal B. Upadhyay

21.  Statutory Duties
◦ To organize Statutory Annual General Meeting and also
extra Ordinary General Meeting
◦ To prepare and place at annual general meeting along
with balance sheet and profit and loss account
◦ To authorized and approved annual financial statement
◦ To appoint the first auditor of the company
◦ To appoint the cost auditor of the company
◦ To make declaration of solvency in the case of a
member’s voluntary winding up
Kunal B. Upadhyay

22. ◦ To file return of allotments
◦ Not to issue irredeemable preference shares or shares
redeemable after twenty years
◦ To disclose interest in transaction of the company
◦ To attend board meeting
◦ To take and pay for qualification shares
◦ To make disclosure of shareholding
Kunal B. Upadhyay

23.  General Duties
◦ Duty of good faith:
 the first and the most obvious obligation of the directors is
to act with honesty in the discharge of their duties
◦ Duty with reasonable care:
 a director must exercise some degree of skill and diligence
◦ Duty to attend meeting:
 director are not bound to attend all meeting all of the
meeting of the board, but his general duties to attend
meetings
◦ To work in capacity:
 as agents, trustee and organ of the company
◦ Not to delegate duty:
 unless permitted by the Companies Act or Articles of the
company
Kunal B. Upadhyay

24.  Liability towards the company
 Liability to third parties
 Criminal Liability
Kunal B. Upadhyay

25.  For ultra vires act
◦ breaking to Memorandum or Articles, liable for damages
 For breach of trust
◦ Make secret profits or use company’s fund for their personal
purpose
 For gross negligence
◦ Fail to exercise reasonable case, skill and diligence, they shall
be liable for any loss or damages
 Willful misconduct
◦ Misapply or misappropriate money or properties of the
company
Kunal B. Upadhyay

26.  For misstatements in the prospectus
 For acting in their own name
 For breach of warranty
 Unlimited liability
 Fraudulent trading
 Board of Director’s Responsibility statement
Kunal B. Upadhyay

27.  Under Sec.63- for misstatements in the prospectus
 Under Sec.75- For failure to file return as to allotments with
registrar
 Under Sec.150- For not keeping registers of members and
debenture holders
 Under Sec.168- For failure to lay before the company at every
annual general meeting, annual accounts and balance sheet.
 Under Sec.274- For holding office as directors in more than
fifteen companies
Kunal B. Upadhyay

28.  Means a director who by virtue of (a) and agreement
with the company or (b) a resolution passed (i) by the
company in general meeting or (ii) by its Board of
directors or (c) by the memorandum and/for the articles
of association is entrusted with substantial powers of
management of the company
Kunal B. Upadhyay

29.  A managing director is appointed with the approval of
the Central Government
 In case of public company or a private company which
is subsidiary of a public company incorporated after the
commencement of the companies act 1988, the
appointment of a person as a managing
 Tem fixed for MD is FIVE years
Kunal B. Upadhyay

30.  MD or to a whole time director shall not exceed FIVE
percent of the be profit for on such director
 There are more than one such directors, TEN percent
for all of them together
 NO INCREASE IN REMUNERATION without
sanction of the Central Government
Kunal B. Upadhyay

31.  Two capacities of a Managing Director
◦ Director of company
◦ In contract with company for his services
 The whole time director
◦ The whole time director is entrusted with certain
duties & responsibilities
 Ambit of his jurisdiction
◦ Work only with the articles and provisions regarding
services
Kunal B. Upadhyay