2. Table of Contents – Chapter-1
Introduction
Definition/Meaning
Types of Directors
Legal Position of Directors
Number of Directors
Restrictions on Number of Directorship
Director Identification Number
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3. Table of Contents – Chapter- 2
Appointment of Director
Modes of Appointment of Director (S-152)
By Subscribing to the Memorandum ( First Director),
By Members in general meeting,
By Board of Directors
By Central Government
By Small Shareholders, if the articles so provide.
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4. Modes of Appointment of Director
A. Appointment of first Director
B. Appointment by Members in General Meeting (S-150)
• Appointment of Person other than Retiring Director
C. Appointment of Directors By Board ( Section-161)
• Additional Director-S.161(1)
• Alternate Director- S.161(2)
• Appointment of Nominee Director- S.161(3)
• Causal Vacancies- S.161(4)
D. Appointment of Directors by Central Government
E. Appointment of Director by Small Share-holders- (S.151)
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5. F. Disqualifications of Director (Section-164)
G. Duties of Directors (Section-166)
H. Vacation of Office of Directors (Section-167)
I . Resignation of Directors (Section-168)
J. Removal of Directors (Section-169)
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7. Introduction
• When a company is registered under the Companies Act,2013, it becomes
legal entity. Upon the Incorporation, a company becomes an artificial
person in the eyes of law, having perpetual succession, and common seal. A
company is empowered to hold all properties in its own name. It can sue
others and can be sued by others in its own name.
• However, a company has no physical existence i.e. it has no eyes, no ears,
no hands to sign and execute documents, no brain to think etc. Thus, it acts
through an appointed team of professionals known as Board of Directors.
The person managing the affairs of the company are termed as ‘Directors’
and collectively called as ‘Board of Directors’.
• They are responsible for decision-making regarding company management.
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8. Definition/Meaning
• As per Section-2(34), a ‘director’ means a director appointed
to the Board of a company. As per Section 2(10), ‘Board of
Directors’ or ‘Board’ in relation to a company means a
collective body of the directors of the company. Thus,
directors are individuals appointed in the prescribed manner
and authorized to direct, control, conduct the affairs of a
company. The Board frames the general policy of a company
manage its affairs, appoint officers and ensure performance of
duties.
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9. Types of Directors
• Whole-time Directors:- means a director who is in whole-time
employment of a company. A whole-time director devotes all his
time and attention to the management of the company. Where a
director is appointed to act as Technical Director, Finance Director,
Production Director, Sales Director on full time basis, he is a whole
time director.
• Managing Directors:- A Managing Director is a director who is
entrusted with substantial power of management, which would not
otherwise be exercisable by him, and includes a director occupying
the position of a Managing Director, by whatever name called. A
Managing Director has a contractual relationship with the company.
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10. Types of Directors
Executive Director:- This are the directors who are involved day-
to-day management of a company and allocate their efforts for the
company. The term executive directors is used by SEBI and this
category may include a Managing Director, Whole-time Director,
Finance Director, Technical Director etc.
Non-Executive Director:- This are the directors, who are not in
full-employment of a company and hence not associated with the
day-to-day working of the company. Basically, non-executive
directors are professionals who are associated with a company for
their expertise and rich experience in certain fields such as taxation,
banking, foreign trade etc. Normally their remuneration is in the
form of sitting fees for attending Board Meetings.
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11. Types of Directors
Nominee Directors :- This are the directors appointed by
financial institutions or banks or Debenture-holders, which
provide term loans and / or working capital assistance or any
other type of financial assistance to companies. The purpose of
nominee directors is supervision, monitoring and control over
the companies to whom funds are provided. Nominee directors
may be appointed as per contract terms and or in case of any
contravention/default.
Interested Directors:- This are the directors who have any
personal interest/benefit in a particular Board resolution .
Hence, their presence is not counted for the purpose of quorum
at such resolutions at Board meeting.
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12. Types of Directors
Independent Directors:- The concept of independent directors was created for ensuring transparency,
ethical management and good corporate governance. As per Section 149(6) of the Companies Act, 2013,
an independent director means a director other than a managing director or whole-time director or a
nominee director. An independent director shall satisfy the following conditions:-
1. A person of integrity and possesses relevant expertise and experience;
2. Who is or was not a promoter of the company or its holding, subsidiary or associate company; who is
not related to promoters or directors in the company, its holding, subsidiary or associate company.
3. Who has or had no pecuniary relationship with the company, its holding, subsidiary or associate
company or their promoters, directors, during two immediately preceding financial years or during
current financial years.
4. None of his relatives have of had pecuniary relationship or transaction with the company, its holding,
subsidiary or associate company or their promoters, or director, amounting to 2% or more of its gross
turnover or total income or Rs 50Lakhs or higher amount as prescribed whichever is lower, during
the two immediately preceding financial years or during the current financial year;
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13. 5. Who, neither himself nor any of his relatives;
i. Holds or has held the position of a KMP or is or has been employee of the
company or his holding, subsidiary or associate company in any of the three
financial years immediately preceding the FY in which he is proposed to be
appointed;
ii. Is or has been an employee or proprietor or partner, in any of the three FY
immediately preceding the FY in which he is proposed to be appointed;
iii. Holds together with his relative 2% or more of the total voting power of the
company
iv. Is a Chief Executive or Director by whatever name called, of any non profit
organization that receives 25% or more of its receipts from the company any of
its promoters, director or its holding, subsidiary or associate company or that
holds 2% or more of the total voting power of the company .
6. Who posses such other qualification as may be prescribed.
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14. Provision Related to Independent Director
• Every listed public company shall have at least one-third (1/3rd) of the total number
of directors as independent directors ( any fraction to be rounded-off to 1). The
Central Government may prescribe minimum number of independent directors for
certain class of public companies.
• As per Rule-4 of the ( Appointment and Qualifications of Directors) rules 2014,
provides that the following class or classes of companies shall have at least 2
directors as independent directors-
i. Public Companies having paid-up share capital of Rs 10 crores or more; or
ii. Public Companies having turnover of Rs 100 crores or more; or
iii. Public Companies which have, total outstanding loans, debentures and deposits,
exceeding Rs 50 crores
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15. • An independent director shall not be entitled to any remuneration, except sitting
fees, reimbursement of expenses for attending Board meetings.
• An independent director shall possess appropriate skills, experience and knowledge
in fields of finance, law, management, sales, marketing, administration, research.
Corporate governance, technical operations or other disciplines related to the
company’s business.
• Independent directors may be selected from a ‘data bank’ of eligible and willing
persons maintained by an agency ( authorized by Central Government). The data
bank of independent directors shall be available on the MCA website. Any
Individual who desires to get his name included in this data bank shall make an
application in Form DIR-1.
• An independent director shall follow the Code of Conduct as specified by the
Companies Act. The Code includes the guidelines of professional conduct, roles
and functions, duties, manner of appointment/re-appointment, removal and
resignation, separate meetings etc.
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16. • An independent director who resigns or is removed from the Board of the company
shall be replaced by a new independent director within a period of not more 180
days from the date of such resignation or removal. However, such replacement is
not mandatory, if the criteria of minimum number of independent director is not
met.
• All independent director of a company shall hold at least one meeting in a year,
without the attendance of non-independent directors and members of management.
• Tenure- An independent director shall hold office for 5 consecutive years on the
Board of a company, but shall be eligible for re-appointment on passing of a special
resolution by the company. An independent director shall not hold office for more
than two consecutive terms ( 5 years each). However, such independent director is
eligible for re-appointment after the expiration of three years of ceasing to become
independent director.
• Retirement by rotation is not applicable for independent director.
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17. Legal Position of Directors
• It is difficult to define the exact legal position of the directors of a company. In various
judgments, directors of a company have been described as agents, trustees or managing
partners.
• As Agents:
• The company being an artificial person, has to act through some human agency and directors act
as that necessary agency. So the
relationship between the company and its directors is that of the principal and agent.
• In the case of Ferguson vs. Wilson, this position of directors was described as follows : The
company is no person. it can act only through its directors. it is an ordinary case of principal and
agent. Wherever an agent is liable, these directors are liable and wherever the principal is liable,
the liability is of the company. As agents, directors must conduct business with reasonable care
abiding by the company’s Memorandum of Association and Articles of Association.
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18. • Whatever they do, ultimately binds the company. They
enter into contract and wherever , they put their
signatures, they do so only on behalf of the company. But
directors are not completely like agents.
• Agents are appointed by the principal but the directors
are elected by the shareholders. Again agents get
commission for the work done but the directors are
expended to work without reward. Further, an agent may
not disclose’ the name of his principal but a director has
to do so. Thus, the directors are not the agents in the
true sense
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19. • As Trustees:
• In certain respects, the directors are the trustees of the company. They are the
guardians or custodians of the money and properties of the company. They stand
in a fiduciary capacity to protect the interests of the company. Moreover, almost
all the powers of directors are like powers in trust. The power to make call, to
forfeit shares, to issue further capital, the general powers of management and the
power to accept or refuse a transfer of shares, are all powers in trust .which have to
be exercised in good faith for the benefit of the company as a whole. The directors
are trustees of the company and not of individual shareholders of the company.
• Directors are not also trustees for third parties who have made contracts with the
company. They are not trustees for the creditors of the company. But, directors are
not trustees in the true sense because the ownership of the property held in trust
by them does not vest in them as in case of an ordinary trust. Further, unlike a
trustee, they, enter into contracts in the name of the company.
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20. • As Managing Partners:
• The directors, who manage the company, do so for themselves as well as for
the benefits of others. They are also elected representatives. Thus, their
position is similar to that of a managing partner because they are appointed
to their posts by an arrangement between them and all the shareholders.
Being important shareholders, they are partners with shareholders.
But their liability is restricted to the amount unpaid on their shares. A
director cannot bind another director like partners in a firm, unless he has
been expressly authorized to do so.
• There is no mutual agency amongst directors as in the case of partners. To
sum up, we can say that the directors are neither agents nor trustees or
managing partners in the strict sense of the term. They combine in
themselves all these positions. They stand in a fiduciary position towards
the company in respect of their powers and capital under their control.
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21. Number of Directors
• As per Section 149(1) of the Companies Act, 2013, every
Public company shall have minimum 3 directors,
Private company shall have minimum 2 directors,
One person company shall have minimum 1 directors
Basically, a company can appoint maximum 15 directors.
However, a company may appoint more than 15
directors by passing special resolution in general
meeting of members. Central Government approval is
not required. A transition period of one year has been
provided to enable the companies to comply with the
above provi
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22. Restrictions on Number of Directorship
• As per Section 165 of the Companies Act, 2013,
an individual can become director (including
Alternate Director) in maximum 20 companies
(public and private) at the same time.
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23. Director Identification Number
• As per Section 153 of the Companies Act, 2013, every Director must
obtain Director Identification Number (DIN). It is unique identification
number allotted to an individual who is an existing director or intends
to be appointed as director of a company.
• The DIN application shall be made in Form DIR 3 to the Central
Government, through MCA portal. The Central Government shall allot
the DIN (8 digit number) within one month from receipt of application.
DIN is valid for life-time.
• An individual cannot possess more than one DIN i.e. application for
another DIN is an offence which is punishable with imprisonment upto
6 months or fine of Rs 50,000 or both .
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24. Director Identification Number
• Every existing director shall intimate his DIN to
every company where he is a director. Such
intimation shall be given within one month of
receipt of DIN from the Central Government. Also,
every director shall mention his DIN in every
communication, return, information etc in relation
to the Act.
• Every company shall (within 15 days) of receipt of
DIN, furnish the DIN of all its directors to ROC.
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26. Appointment of Director
Basic provisions relating to appointment of directors-
• Only an individual can be appointed as directors of a
company.
• Minimum number of directors:- 3 for public company, 2 for
private company and 1 for one person company. The
maximum number of directors can be 15 ( it may exceed 15
with special resolution in general meeting)
• Resident Director in India is compulsory i.e. every company
shall have at least one director who stayed in India for a total
period of not less than 182 days in the previous calendar year.
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27. Appointment of Director
• Certain class of companies shall have at least one woman director.
Following class of companies are applicable-
a. Every listed company;
b. Every other public company having-
i. paid-up share capital of Rs 100 crores or more; or
ii. Turnover of Rs 300 crores or more
A period of six months is provided from the commencement of the
Companies Act,2013 to comply with the appointment of woman director.
However, any vacancy of a woman director shall be filled-up by the
Board prior to the immediate next Board meeting or three months from
the date of such vacancy, whichever is later.
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28. Appointment of First Directors
• First director means the director of a company who assumes office from the date of
incorporation of the company.
• Generally, the first directors are named in the Articles. If they are not mentioned in the
Article, the Articles may authorize the subscribers of Memorandum of Association to appoint
the first directors and the subscribers may appoint the first directors.
• However, if such directors are not so appointed, the subscribers to the Memorandum ( who
are individuals) are deemed to be the first directors of the company.
• DIN is compulsory for appointment of directors. The first director hold office till the end of
the first general meeting of the company.
• But, if all the subscribers to the memorandum are bodies corporate, none of them can be
deemed to be directors. In such cases, the Articles must contain names of first directors until
they are appointed at first general meeting.
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29. Appointment by Members in General Meeting
• Directors are elected by members through ordinary resolution and separate
resolution for each director elected.
• In Public Limited Company, unless the Articles provide otherwise, two-
third (2/3rd) of the total number of directors shall retire by rotation. In other
words, the remaining one-third directors can be permanently appointed.
• At every AGM, one-third of the above mentioned (2/3rd) directors are
eligible for re-appointment. Those who have been longest in office shall
retire first. Any fraction is to be rounded 0off to next higher number.
• The vacancies created by such retirement are filled up by the members in
the same AGM by any ordinary resolution. Either retiring directors are re-
elected or a new aspiring individuals are appointed as directors.
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30. Appointment by Members in General Meeting
• For example- if there are 9 directors, 3 directors (1/3rd) are permanent. Out
of the remaining (2/3rd) i.e. 6 directors, (1/3rd) directors i.e. 2 are eligible
for retirement and re-appointment.
• In the above example, 2 directors will retire in each of the three years. The
retirement is based on tenure as a director, i.e. longest in office shall retire
first.
• Nominee Directors, Independent Directors and Government appointed
Directors are not liable to retirement by rotation.
• Generally, the Articles contain an express provision excluding the
managing director or whole-time director from the requirement of
retirement by rotation.
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31. Appointment by Members in General Meeting
• If such vacancy is not filled, the meeting stands adjourned till the same day in the
next week, at the same time and place. If at the adjourned meeting also, the
vacancy is not filled up, the retiring directors shall be deemed to have been re-
appointed at the adjourned meeting. The re-appointment is effective from day of
adjourned meeting. However, such directors shall not be re-appointed in the
following cases.
o At that meeting a resolution for the re-appointment of such a director has been put
to the meeting and lost;
o The retiring director has expressed his unwillingness to be so appointed;
o He is not qualified or is disqualified for appointment.
• If AGM of the company is not held or cannot be held, the directors due to retire by
rotation shall retire on the last day on which the AGM should have been held. If
AGM is adjourned, then they will retire at the adjourned AGM.
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32. Appointment of Person other than Retiring Director
• As per Section 160, an individual who is not a retiring director shall be
eligible for appointment to the office of a director at any general meeting.
• Hence any person (including a non-member) may give a written application
to a company, not less than 14 days before a general meeting about his
candidature as a director.
• Such application shall be accompanied with a deposit of Rs 1 Lakh. The
amount is refunded, if the person succeeds in getting elected as a director or
obtains minimum 25% valid votes in the meeting, else amount is forfeited.
• On receipt of such an application the company must inform its members (
not less than 7 days) before the general meeting, instead personal notices, a
company may publish the notice in one English Language newspaper and
one regional language newspaper circulating in the place where registered
office of the company is situated.
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33. • Principle of Proportional Representation (Section-163)- Minority
shareholders given an opportunity to have their representative on the
Board. A public or private company may provide in its Articles for
the appointment of not less than two-thirds of the directors, as per
the principal of proportional representation. The directors appointed
as per this principle hold office for 3 years and cannot be removed
by the company in general meeting.
• As per Section 162 (1) a single resolution shall not be passed for
the appointment of two or more individuals as directors of a
company. Any resolution passed in contravention of this provision
shall be void.
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34. Appointment of Directors by the Board Meeting-S-161
A. Additional Director- S-161(1) :-
• As per Section 161(1), if the Articles authorize, the Board of Directors may appoint additional
directors. It is applicable to both, public companies and private companies.
• The additional director shall hold office only up to the date of the next AGM of the companies.
But, if the AGM is not held or cannot be held, the person appointed as additional director vacates
his office on the last day on which such AGM should have been held.
• It must be ensured that the total number of directors, including the additional director, shall not
exceed the maximum number as fixed by the Articles.
• A person who fails to get appointed as director in general meeting cannot be appointed as
additional director.
• The additional director are not counted for the purpose of retirement by rotation.
• If additional director of a company is also appointed as Managing Director, the latter
appointment (i.e. M.D) also comes to an end at the next AGM, as his directorship is terminated.
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35. B. Alternate Director- S-161(2) :-
• As per Section- 161(2), the Board may appoint an alternate director, to act for a
director during his absence for a period of not less than 3 months from India.
• Appointment of alternate director shall be authorized by the Articles or a resolution
passed in general meeting.
• An alternate director performs all duties and assumes all the liabilities of a director.
• For counting the number of directorship, the alternate director is considered.
• An alternate director may be appointed as a managing director or whole-time
director.
• An alternate director cannot hold any alternate directorship for any other director in
the company. However, an alternate director may be an ordinary director as well as
an alternate director to another director at the same time.
• Alternate director may be appointed in place of an independent director, provides
he fulfills the required conditions of an independent director.
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36. C. Appointment of Nominee Directors- S-161(3)-
• Banks, Financial institutions, can nominate such persons as
directors. Generally, such power is granted in the loan
agreement itself, to safeguard the interests of such banks,
financial institutions or other lenders.
• As per Section-161(3), if the Article authorize, the Board may
appoint nominee directors, as nominated by the banks or
financial institutions
• Every such nominee director is entitled to attend all general
meetings, Board meetings, and Committee meetings.
• Nominee Directors are not eligible for retirement by rotation.
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37. D. Casual Vacancies- S.161(4)-
• Casual Vacancy means any vacancy, which occurs by reason of death or resignation
of a director, who was appointed by the shareholders in general meeting.
• As per Section 161(4), the Board is empowered to fill casual vacancies. Thus, if a
director vacates his office before his term expires, the resulting casual vacancy may
be filled by the Board, subject to the provision of Articles. The Vacancy is filled in
a properly convened Board Meeting.
• The new director appointed by filling the casual vacancy will hold office for the
entire period which the original director was supposed to hold.
• If the new director appointed by filling casual vacancy also vacates office in the
same manner then such vacancy is not treated as casual vacancy and cannot be
filled by the Board.
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38. • Example :- Amit was appointed as an additional
director by the Board of Prudent Ltd. in its meetings
held on 20th July 2019. Later, Amit was appointed as
director by the members of the company in its AGM
held on 2nd September 2019. Whether Amit is again
required to file consent to act as director?
• Hint- Yes, since term of additional director expires at
next immediate AGM. He must file fresh consent of
appointment.
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39. Appointment of Directors by Central Government
• The Central Government may appoint Directors, to
safeguard the interests of the company, its
shareholders or in the interest of public.
• Directors appointed by Central Government are not
subjected to retirement by rotation .
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40. Appointment of a Director by Small Shareholders S-151
• As per Section 151, every listed company may have one director elected by
the small shareholders.
• Small Shareholder means a shareholder holding shares of nominal value of
Rs 20,000 or less in company.
• A listed company may have a director from amongst small shareholders
elected suo moto or upon notice of small shareholders who are not less
than 1/10th of total small shareholders or not less than 1000 members.
• Such notice duly signed by the small shareholders should be served upon
the company at least 14 days before the general meeting at which such
appointment is intended. The notice shall contain details of the proposed
director such as his DIN, qualifications and consent to become director.
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41. • Tenure small shareholders director shall be maximum
period of 3 years. On expiry of the tenure, such director
shall not be eligible for re-appointment.
• Small Shareholders director shall not be liable to retire by
rotation.
• A person cannot become a small shareholder’s director in
more than two companies at a time. Also, the second
company where he is appointed as a small shareholder’s
director shall not be competing or in conflict with the
business of the first company.
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42. Disqualifications of Directors (Section-164)
• Section- 164, provides for disqualifications of directors.As per Section-164(1), a person shall not be
capable of being appointed director of a company, if-
1. He is of unsound mind and declared by a competent court;
2. He is undischarged insolvent;
3. He has applied to be adjudicated as an insolvent and his application is pending;
4. He has been convicted by a court of any offence involving moral turpitude and sentenced to
imprisonment for not less than six months, and a period of five years has not elapsed from the date of
expiry of the sentence;
5. An order disqualifying him for appointment as director has been passed by the tribunal;
6. He has not paid any call in respect of the shares of the company held by him, and six months have
elapsed from the last day fixed for the payment of the call.
7. He has been convicted of an offence of related party transactions ( Section-188) during the last
preceding five years;
8. He has not got DIN.
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43. • As per Section- 164(2), an additional disqualification is provided relating non-filling of financial
statements or annual returns. Any person who is or has been director of any company which has-
i. Not filled any Financial Statements and Annual Returns for three continuous financial years;
or
ii. Has defaulted in payment of debentures/deposit/dividend etc.
Shall not be eligible for appointment as director of any public company and for re-
appointment in the same company for a period of five years from the date on which the
default was committed. In fact, a person disqualified by Section- 164(2) is not eligible to
be appointed as director of any public company (including same company) for a period
of five years from the date of default, as specified therein. Such company is called
disqualifying company.
A private company (which is not a holding or subsidiary of a public company) may, by its
Articles, provide for additional disqualifications for appointment as a director, in addition to
those specified above.
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44. Removal of Directors S-169
Section-169 empowers a company to remove director before the expiry of his period
of office.
• Removal is effected by an ordinary resolution in general meeting, after giving
reasonable opportunity of being heard.
• Directors appointed through proportional representation cannot be removed by a
company.
• The intending member shall give a special notice of any resolution to remove a
director or to replace a director, at the meeting at which he is removed.
• On receipt of such special notice to remove a director, the company shall forward a
copy to the director concerned. Such director shall be entitled to be heard on the
resolution at the meeting.
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45. • The concerned director may make a written representation to the company. If time
permits, such representation may be sent to every member of the company. Else,
the representation may be read out at the general meeting.
• As per Section- 169, vacancy created by the removal of a director may be filled by
appointment of another director in his place at the meeting at which he is removed.
• The newly appointed director shall hold office till the date up to which his
predecessor would have held office if he had not been removed.
• Further, the director who was removed from office shall not be re-appointed as a
director by the Board.
• As per Section-207, if a director is convicted of an offence ( including fraud,
misfeasance etc) such director shall be deemed to have vacated his office and he is
disqualified from holding an office in any company. The NCLT or the Central
Government may carry-out an inspection/ investigation and thereafter remove the
guilty directors.
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46. Resignation of Directors S-168
• As per Section 168 of the Companies Act 2013, following are the provisions
relating to the resignation of directors
1. Generally, a director may resign from his office by giving notice in
writing.
2. On receiving the notice, board shall intimate the ROC within 30 days.
Further, the board shall insert this fact in the directors report of
subsequent general meetings of the company as well as post on website.
3. The director shall forward a copy of resignation along with detailed
reason to the ROC within 30 days from the date of resignation.
4. The resignation shall become effective from the date on which the notice
is received by the company or the date specified in the notice. (if any,
whichever is later)
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47. 5. However, the resigning director shall be liable
for the offences which occurred during his
tenure.
6. If all the directors of a company resign from
their office the promoter or the central
government shall appoint the required number
of directors to hold office till the directors are
appointed by the company in general meeting.
By:- Prof. Sumit
Maheshwari
47
48. Powers of the Directors
• The powers of a company are divided between the Board and
shareholders. The power which belong to the board can be
exercised only by the Board i.e. shareholder cannot interfere
in their exercise and vice-versa. Directors are the exclusive
representatives of the company and they are responsible for
administration of its internal affairs, management and
effective use of its assets. Hence, it can be said that power of
the board are co-extensive with the company itself.
• Generally, the shareholders cannot take over the powers of the
directors.
By:- Prof. Sumit
Maheshwari
48
49. Powers to exercised only at Board Meeting (Section-179)
1. To make calls on shareholders in respect of money unpaid on their shares,
2. To authorize buy-back of securities under Section-68,
3. To issue securities including debentures whether in or outsider India,
4. To borrow money,
5. To invest the funds of the company,
6. To grant loans or give guarantee or provide security in respect of loans,
7. To approve financial statements and the boards report,
8. To diversify the business of the company,
9. To approve amalgamation, merger or reconstruction,
10. To take over a company or acquire a controlling or substantial stakes in
another company,
11. To make political contributions,
12. To appoint or remove KMP, internal auditor and secretarial auditor,
13. To invite or accept or renew deposit,
14. To approve quarterly, half-yearly and annual financial statements or
financial results as the case may be.
By:- Prof. Sumit
Maheshwari
49
50. Remuneration of Directors
• In the absence of any agreement, directors are not
entitled to remuneration for their services.
Managerial Remuneration may be in the form of
monthly salary, percentage of profits, commission,
sitting fees etc. Besides, remuneration includes:
1. Any expenditure incurred by the company in
providing accommodation to its directors,
2. Any expenditure incurred by the company in
providing any other benefits, amenities free of cost
or concession rate;
3. Any expenditure incurred by the company on
insurance, pension, annuity or gratuity of family of
a director.
By:- Prof. Sumit
Maheshwari
50
51. • Section-197 states that the maximum ceiling for
payment of managerial remuneration by a public
company to its directors (including the managing
director, whole-time director) is 11% of the net
profits in that financial year. The computation of
profits is laid down in Section-198 of the Act.
However, a company may authorize remuneration
exceeding 11% of the net profits, through special
resolution in general meeting and Central
Government approval.
By:- Prof. Sumit
Maheshwari
51
