Within a business, the managing director oversees daily operations to accomplish goals set by the board of directors, while the CEO provides the overall strategic vision. Both are top executive roles, with the managing director focused on operations and the CEO on goals and strategy. An auditor examines a company's accounts and provides an annual report to shareholders on the company's financial position. Auditors must be qualified chartered accountants and have rights like access to records and attendance at shareholder meetings to perform their examination. They have duties like inquiring about transactions and reporting on financial statements, and can be removed by shareholders or resign.

1. Company
Organisation –
UNIT 2
Presented by
Dr S SHEIK FAREETH
MBA., M.Phil., SET., NET., Ph.D
Assistant Professor
Department of Business Administration
Arul Anandar College (Autonomous)
Karumathur.

2. Hello!
I am Sheik Fareeth
I am here because I going
to discuss about directors
and their powers

3. Director – an Introduction

4. “Director means a
director appointed to
the board of a
company”
sec 2(34).

5. Powers of Directors
� Statutory Powers of Directors
� Other powers
� Powers only with a resolution
� Managerial powers of Directors

6. Statutory
Powers

7. � The power to make call on shares in respect of unpaid money.
� The power to authorize lack of shares
� The power to issue debentures, whether in or outside india.
� The power to invest in funds
� The power to borrow money otherwise than on debentures
� The power to make loans or give guarantee in respect of loans.
But a banking company does not require any resolution by the
board.
� The power to approve the financial statement and board’s report.
� The power to diversify the business of the company.
� The power to approve amalgamation, merger or reconstruction.
� The power to take over a company or acquire a company or
substantial stake in another company.
List of Statutuory powers

8. Other
Powers

9. � Power to fill casual vacancy 9sec 161)
� Power to appoint the first auditor of the company
� Power to make political contribution.
� Power to appoint alternate directors. (sec 161)
� Power to appoint additional directors. (sec 161)
� Power to declare interim dividend. ( 123(3))
� Power to appoint or remove key managerial personnel (KMP)
� Power to declare solvency , where the company winds up
voluntarily.
� Power to recommend the rate of dividend on the shares of the
company subjected to approval by shareholder of the company
List of Other powers

10. Powers by
Resolution

11. � To sell or lease any asset of the company
� To allow time to the director for the repayment of the loan
� To borrow money in excess of paid up capital and free reserves
� To appoint a sole agent for more than 5 years
� To issue bonus shares and for reorganization of share capital
� To contribute money for charitable purposes exceeding Rs. 50,000
or 5%
� of the average profits of 3 years whichever is greater
List of powers by resolution

12. Managerial
Powers

13. � Power to contract with the third party
� Power to recommend dividend
� Power to allot, forfeit or transfer shares of company
� Power to take decision regarding terms and conditions for the
issue of debentures
� Power to form policy and to issue instructions for the efficient
running of the business
� Power to appoint Managing Director, Manager, Secretary of the
company.
� Power of control and supervision of work of subordinates
List of Managerial Powers

15. Managing Director
� A Managing Director is someone who is responsible for
daily operations of a company, organization, or
corporate division. This position is a part of executive
management of a company who is responsible for day
to day management of the company.
� Managing Director can be appointed in a corporate
entity i.e. Limited Company etc.

16. � As per Section 2(54) of the Companies Act, 2013, a
“Managing Director” means a director who, by virtue of
the articles of a company or an agreement with the
company or a resolution passed in its general meeting,
or by its Board of Directors
� Managing Director is a person who is entrusted with
substantial powers of management of the affairs of the
company. This position falls under the definition of “Key
Managerial Personnel” under the Companies Act, 2013.

17. Role of Managing Director
� The term Managing Director is equivalent to CEO (Chief
Executive Officer) the executive head of a company. In
other countries, managing directors primarily work as the
heads of individual business units within a company
rather than heading up the company as a whole.
� Managing Director is someone who sees and manages
the operations of a company while having substantial
power to take decisions on the matters relating to the
business of the company.

18. How Managing Director is
appointed
� Appointment of Managing Director in a company is done in
accordance with the provisions of the Companies Act, 2013
� a company shall not appoint or reappoint any person as its
Managing Director for a term exceeding five (5) years at a
time and no reappointment shall be made earlier than one
year before the expiry of his term.

19. � The appointment of Managing Director is first approved
by the Board of directors at a meeting and then by an
ordinary resolution passed at a general meeting of the
company. A return in the prescribed form i.e. MR.1 is
required to be filed with Registrar electronically within 60
days from the date of such appointment

20. Who cannot become Managing
Director
� A person cannot become Managing Director who: is
below the age of Twenty one (21) years and has attained
the age of Seventy (70) years (can be appointed if
authorized by members) is an undischarged insolvent or
has at anytime been adjudged as an insolvent;
� Has at any time suspended payment to his creditors, or
makes, or has at any time made, a composition with them;

21. � or has at any time been, convicted by a court of an
offence and sentenced for a period of more than six
months had not been sentenced to imprisonment for
any period, or to a fine exceeding one thousand
rupees, for the conviction of an offence under various
Acts as mentioned under section 196 (3) of the
Companies Act, 2013.

22. Responsibilities of Managing Director
•Develop and execute the company’s business strategies in
order to attain the goals of the board and shareholders
•Provide strategic advice to the board and Chairperson so that
they will have accurate view of the market and the company’s
future
•Prepare and implement comprehensive business plans to
facilitate achievement by planning cost-effective operations and
market development activities
•Ensure company policies and legal guidelines are
communicated all the way from the top down in the company
and that they are followed at all times
•Communicate and maintain trust relationships with
shareholders, business partners and authorities

23. •Oversee the company’s financial performance, investments
and other business ventures
•Delegate responsibilities and supervise the work of
executives providing guidance and motivation to drive
maximum performance
•Read all submitted reports by lower rank managers to
reward performance, prevent issues and resolve problems
•Act as the public speaker and public relations
representative of the company in ways that strengthen its
profile
•Analyze problematic situations and occurrences and
provide solutions to ensure company survival and growth

24. Knowledge, skills and
experience required
� A proven record of success in senior level general or
commercial management, preferably in a related
industry.
� At least 10 years’ senior level experience of
management of people and resources.
� Graduate level of intellect preferably with a higher
degree in a management discipline or a professional
qualification.
� A wide knowledge of the industry.

25. � An understanding of financial management and wider
management principles and techniques.
� Political and presentational skills with an appreciation of
the demands of conflicting interests and of meeting
statutory requirements.
� A very high level of commercial awareness.
� Leadership skills.
� Excellent communication skills.
� Excellent organisational skills.
� Excellent analytical and problem-solving skills.

26. Duties
� the general duties of directors under the CA 2013 are as follows:
� to act in accordance with the articles of the company, in other words,
to act within powers;
� to act in good faith in order to promote the objects of the company for
the benefit of its members as a whole;
� to act in the best interest of the company, its employees,
shareholders, community and for the protection of environment;
� to exercise due and reasonable care, skill and diligence and
independent judgment;
� to avoid direct or indirect conflicts of interest;
� to avoid undue gain or advantage either to himself or relatives,
partners or associates; and

28. � Within a business, people and resources must be managed
efficiently using a strategic plan for growth and profitability.
The managing director controls the flow of work and
oversees the distribution of materials and staff toward
specific tasks. The chief executive officer confers with the
board of directors concerning company goals and works with
the managing director to accomplish these goals by
developing the overall business approach. The CEO is
ultimately the one who is held accountable if business goals
are not met. Both positions are considered top executive
positions. While the managing director oversees daily
operations, the CEO provides the vision for the organization.

30. Company Secretary
� According to sec 2(1)(c) of the companies
secretaries Act 1980 “company secretary
means a person who is a member of the
Institute of company secretaries of India”

31. � A company secretary is an important organ of
a company who performs various ministerial
and administrative duties. It is mandatory for
every company having a paid up share
capital of 5 crores or more to appoint fulltime
company secretary who is member of
Institute of company secretaries of India.

32. Appointment of Company
Secretary
� Only a individual who is a member of Institute
of company secretaries of India can be
appointed as a company secretary.
� Every listed company under the companies
act must have a full-time company secretary.
� Every Unlisted Company having a paid-up
capital of 5 crore or more must also have a
full-time secretary.

33. � Every Private company having a paid-up capital of 5
crore or more must also have a full-time secretary.
� A company Secretary is appointed by the resolution of
the board.
� A company secretary is entitled to become the director of
the company with the prior permission of the board.
� A company secretary is not allowed to hold office in more
than one company.
� The position of Company Secretary must not be vacant
for more than 6 months.
� In case of Default in complying with the above provisions
the company shall be fined ranging from Rs. 1 – 5 Lakh

34. Statutory Duties of Company
Secretary
� To sign documents and proceedings requiring
authentication by the company.
� To deliver registration and return of allotment to the
Registrar
� To give notice to registrar for increase in the share capital
� To deliver share certificate of allotment on within 2 months
after transfer
� To make entry for register of members of the share warrant
� To send annual return

35. � To make a statutory declaration for receiving
certificate of commencement of business
� To send notice of general meeting to every
member of the company
� To make statutory books
� To sign every balance sheet and P/L account
in case of a non-banking financial company
� To prepare minutes of every General Meeting
and Board Meeting within 30 days
� To file a resolution with the registrar

36. Topics covered under this chapter
• Company Auditor - Appointment, Qualifications, Removal, Powers, Duties
and Liabilities of an Auditor - Civil and Criminal
• Audit Report – Contents of Audit Report – Types of Audit Reports.
• Audit of Limited Companies - Audit of Financial Statements – Balance
Sheet & Profit & Loss Account, Audit of Share Capital and Transfer of
Shares, Kinds of Reserves - Specific, General Capital and Reserves,
Provision and Reserves.
Dr SHEIK FAREETH

37. Who is an Auditor?
An auditor is a qualified chartered accountant appointed for the
purpose of examining the accounts of a joint stock company
and giving the report there on to the shareholder every year at
the annual general meeting.
Dr SHEIK FAREETH

38. Qualification - Auditor
• A company auditor must be qualified as chartered accountant.
• A chartered accountant is a person who is a member of the Institute
of Chartered Accountants of India (ICAI).
• He will be deemed to be in practice of accountancy, individually or in
partnership with other chartered accountant.
Dr SHEIK FAREETH

39. Company Auditor - Appointment
• Appointment of First Auditor – Appointed by the board of directors within
one month of the registration of the company.
• Appointment of Subsequent Auditors – Appointed after the first auditor
every year at every annual general meeting by the shareholders.
• Appointment by Central Government – An order from the central
government involving appointment by Comptroller and Audit General.
• Appointment in case of Casual Vacancy – It is caused by resignation of
existing auditor and is appointed by the board of directors.
Dr SHEIK FAREETH

40. Company Auditor - Appointment
• Appointment by Special Resolution – The board of directors will appoint an
auditor by passing a special resolution in the annual general meeting.
• Appointment in place of Retiring Auditor – This appointment takes place at
the event of an auditor’s retirement.
• Appointment through Audit Committee – If the audit committee is
constituted, then all appointments of auditor shall be made after
considering their recommendations.
Dr SHEIK FAREETH

41. Company Auditor – Rights & Powers
• Right to receive information and explanation – For the purpose of audit
and drawing conclusions, the auditor has to obtain explanations and
information from the concerned staff of the company.
• Right to accessibility to the books and records – In order to provide
findings on financial statements, the auditor has to access the concerning
books, vouchers, evidences and records of the company.
• Right to visit branches – The results of branch operations have to be
displayed in the financial statements. Hence may have to visit the respective
branches to understand their functioning status.
Dr SHEIK FAREETH

42. Company Auditor – Rights & Powers
• Right to lien – It means the right of possession. Enjoys this right over the
books of the clients if there is a fee due to be cleared. It can be retained by
the auditor till all dues are cleared by the client.
• Right to attend general meetings – Has the right to receive notice of
general meeting and attend it accordingly. But he cannot participate in the
discussions unless and until directed by shareholders/management. Only a
right and not a duty. Purpose it is to clarify doubts raised.
Dr SHEIK FAREETH

43. Company Auditor – Duties & Liabilities
• Duty to enquire – Enquiry on loans & advances, transactions in book
entries, assets & liabilities of the company, regarding shares & debentures,
personal / business expenses.
• Duty to make a report – On financial position of the company at the end of
the financial year. Repot on Balance Sheet and P/L Account.
• Duty to state the following in the audit report – Whether he has obtained
all the required information and explanation from the concerned staff.
Previous years financial statements, observations and his opinion on books
of accounts.
Dr SHEIK FAREETH

44. Company Auditor – Duties & Liabilities
• Duty to provide reasons for negative answers – He may have to clarify with
justifiable reasons for the comments made on his report.
• Duty to sign the auditor’s report – Auditor’s Signature is mandatory on the
auditor’s report.
• Duty to certify the prospectus and statutory report – Certification by the
auditor is compulsory.
• Duty to attend audit committee meetings – Important to understand the
proceedings of the audit committee, hence mandatory to attend.
Dr SHEIK FAREETH

45. Company Auditor – Ethical Liabilities
• Toserve the clients wholeheartedly and be loyal to their duties in work
• Tostudy hard, renew existing knowledge, combine theory and practice
• Toabide by state laws and regulations
• Toexercise due professional care, fair and practical in handling audit items
• Towithdraw or cease from performing audit where auditors have
personal interests involved in the audited items
• Tobe obliged to safeguard state secrets and the audited bodies’ trade
secrets in the course of audit
• Tobe modest and prudent, treat others as equals and create a
reputable image
Dr SHEIK FAREETH

46. Company Auditor – Legal Status / Position
• An Agent of the Shareholders – Auditor is expected to safeguard the
interests of the shareholders. He has to examine the books of accounts and
report the financial position of the company to the shareholders.
• An Officer of the Company – Tosome extent auditor is called an officer of
the company as he should be aware of the company policies and will be
auditing the books of that respective company.
• A Servant of the Company – Will be associated with an attitude to serve
and provide professional service to the client. Auditor is paid for the
services rendered.
Dr SHEIK FAREETH

47. Company Auditor – Removal & Resignation
• Removal - The auditor appointed under Sec.139 may be removed from his
office before the expiry of his term only by a special resolution of the
company, after obtaining the previous approval of the Central Government in
that behalf in the prescribed manner
• Resignation - The auditor who has resigned from the company shall file
within a period of 30 days from the date of resignation, a statement in the
prescribed form with the company and the Registrar. In the case of non-
compliance, the auditor shall be punishable with fine which shall not be less
than Rs.50,000 to Rs.5,00,000
• Retirement - Special notice shall be required for a resolution at an annual
general meeting appointing as auditor a person other than a retiring auditor
or specifically providing that retiring auditor shall not be reappointed.
Dr SHEIK FAREETH

48. Dr SHEIK FAREETH