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Directors
The document discusses the roles and responsibilities of company directors under Indian law. It defines a director and outlines their legal position as agents of the company. There are different types of directors such as executive, outside, and independent directors. All directors must obtain a Director Identification Number. Directors can be appointed through various means and removed by shareholders, government, or courts. Their duties include attending meetings, not contracting without board consent, disclosing property transfers, and acting with good faith and without negligence.
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Directors
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- 2. Definition of director Section2(13) defines a „director‟ as including “any person occupying the position of director by what ever name called” Legal position of directors Companies act makes it obligatory for all the companies to have directors The true position of company directors is that of agent and principal They have principal and agent relationship Single director have no authority If directors contract on behalf of Co. without using the word Limited / Pvt. Ltd he is personally liable
- 3. Types of director Insidedirector or executive director Outside director Professional director Nominee director Special director Independent director Interested director Managing director
- 4. Director Identification Number (DIN) Sections266A to 266G of companies act contain the provision for DIN All existing directors and individual intending to become directors have to obtain DIN with in prescribe time frame and in manner as prescribed Central government has prescribed director identification number rules, 2006, governing director identification number
- 5. Who can bea director? Anyone can become a director, with a few exceptions: Anyone disqualified by the company‟s own Articles of Association (the rules relating to the running of the company). An undischarged bankrupt. Someone disqualified by a court order. The company‟s auditor
- 6. Qualification shares No statutoryrequirement Aoa may provide for qualification shares Q/S should obtain within 2 months from appointment Maximum nominal value of shares not to exceed Rs.5000 Q/S should be bought and not to take in gift
- 7. Number of directors(sec.252) Public ltd company shall have at least 3 directors Every Pvt company shall have at least 2 directors Maximum No of directors 12 (Sec 259) >12 central Govt permission is required Restriction of Number of directorships (sec.278) Maximum number of directorships 15 following are excluded from count (Sec 278) •Directorship in unlimited company •Directorship in non profit organization
- 8. Appointment of directors Bysubscribes to the memorandum(first directors) section 254 By members of general meeting section 255,256,257,256 By board of directors section 260,262 • additional directors •Directors in casual vacancy •Alternate directors By central government section 408,409 By third parties if the articles provide By small shareholders if articles provide
- 9. Removal of directors Removalby shareholders Shareholders may remove by passing ordinary resolution The following directors cant be removed buy SH o directors appointed by central govt oLife time directors appointed prior to 1-4-1956 oAppointed by Financial institutions and banks Removable by central government • if director is guilty of fraud misfeasance negligence • the business is conducted with unsound business principles
- 10. Removal by companylaw board • it has power to terminate, modify any agreements between company and director •Director cant sue for any compensation for loss of termination of office •Such person cant serve any company for a period of 5 years
- 11. Resignation of directors Companiesact does not make express provision for resignation of a director A director may resign in a manner according to the company articles. If the articles contain no provision regarding the resignation by a director ,he may resign his office at any time by giving reasonable notice to the company.
- 12. Remuneration of directors Directorsare not entitled to remuneration unless agreement is made But company can pay them salary or commission or specified percentage of net profit Reference to section 198,309to 311 and 387 suggests director can get managerial remuneration Sitting fees It is not a part of remuneration (Section 198 (2)) it is paid to company which having paid up capital and reserves of Rs.10 cores or above. Up to Rs.20000 per meeting
- 13. Duties of Directors Statutoryduties Duties to attend board meeting Duty not to contract without board‟s consent Duty in connection with general meetings To disclose receipts transfer of property To disclose receipt of compensation from transfer of shares Duties to file declaration of solvency Fiduciary and general duties Duty of good faith Not to make secret profits Not to be negligent
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