DIRECTOR – AN OVERVIEW             By     Mihir Panchmatiya                         1
Requirements of the BoardBOARD OF DIRECTORSA corporation has neither a mind nor a body of its own. This makes itnecessary ...
Requirements of the BoardBOARD OF DIRECTORS• Obligation to constitute the Board of Directors which is central to  its deci...
REQUIREMENTS OF THE BOARD      Framework encompassing      Continuous Improvement of               I System,       II proc...
MINIMUM AND MAXIMUM NUMBER OF DIRECTORS• Section 252 of the Companies Act provides for 2 minimum  number Directors in case...
BOARD MEETINGS• In case of every Company, a meeting of its Board of directors  shall be held at least once in every three ...
ROLES OF DIRECTORS                To act as Agent of the Company         To exercise Power in good faith and honestlyTo en...
COMPLIANCES BY A DIRECTOR» Apply for Director Identification No. (DIN) (sec. 266 A)  Every Individual intends to be appoin...
DISCLOSURES BY A DIRECTOR» Disclosure under Section 299  Every Director is required to submit a general notice to the Boar...
DISCLOSURES BY A DIRECTOR» Memberships/Chairmanships of Committees of Directors  In terms of the Listing Agreement, Direct...
DISCLOSURES BY A DIRECTOR» Declaration under Section 274 (1)(g)   Pursuant to the provisions of Section 274(1)(g) of the C...
DISCLOSURES BY A DIRECTOR» Disclosure under Insider Trading Regulations  In terms of Clause 5.1 (c) of Schedule I of the  ...
RESPONSIBILITES OF A DIRECTOR• Not to hold Office of Director in more than 15 Public  Companies (Sec. 277)• Not to wrongfu...
Not to make Loans / give Guarantee / provide Security tothe following categories of persons, except without theprevious ap...
Not to enter into following Contract without the consentof the Board of Directors of the Company & the priorapproval of th...
POWERS THAT CAN BE EXCERCISED ONLY AT A         BOARD MEETING (SEC. 292 )• Power to make calls on shareholders in respect ...
When an Office of Director becomes Vacant ?The office of a Director shall become vacant, if:-• He fails to obtain within t...
• He absents himself from 3 consecutive meetings of the  Board of Directors or from all meetings of the Board for a  conti...
PENALTIES• Any person who holds office or acts as a director of more  than 15 Companies in contravention of Section of 277...
PENALTIES• Any Director who is knowingly a party to any contravention  of the provision of Section 295 which deals with lo...
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Directors an overview

  1. 1. DIRECTOR – AN OVERVIEW By Mihir Panchmatiya 1
  2. 2. Requirements of the BoardBOARD OF DIRECTORSA corporation has neither a mind nor a body of its own. This makes itnecessary that the company’s business should be entrusted to someHuman agents.The Company is governed by the broad Policies formulated by Boardof Directors which requires ethical behavior coupled with honesty.The policies formulated by the Board is of long term strategy and itwill not only involve the regulatory and statutory requirements butalso the organizational need coupled safety, environmental issues andcreating wealth to its stakeholders. 2
  3. 3. Requirements of the BoardBOARD OF DIRECTORS• Obligation to constitute the Board of Directors which is central to its decision making and governance process of the company.• Only individuals can be appointed as directors. No body corporate, association or firm can be appointed as the director of a Company• Board of Directors has to exercise strategic oversight over business operations.• Board has to ensure with the legal framework, integrity of financial and reporting systems.• To ensure proper and timely disclosures 3
  4. 4. REQUIREMENTS OF THE BOARD Framework encompassing Continuous Improvement of I System, II processes and controls 4
  5. 5. MINIMUM AND MAXIMUM NUMBER OF DIRECTORS• Section 252 of the Companies Act provides for 2 minimum number Directors in case of a Private Company and 3 for a Public Company• Section 259 provides for the maximum Directors in a Public Company which shall not be more than 12 for a Public Company• A Private Company can provide for the maximum number of Directors in its Articles of Association 5
  6. 6. BOARD MEETINGS• In case of every Company, a meeting of its Board of directors shall be held at least once in every three months and at least four such meetings shall be held in every year• The quorum for a meeting of the Board of directors of a company shall be one-third of its total strength (any fraction contained in that one-third being rounded off as one), or two directors, whichever is higher 6
  7. 7. ROLES OF DIRECTORS To act as Agent of the Company To exercise Power in good faith and honestlyTo ensure due Compliance with the Provisions of the Companies Act and all other laws, bylaws governing the corporate Sector To avoid Direct or Indirect Personal Involvement in any Transaction Of the Company Not to make Secret Profit in derogation of his fiduciary position towards the Company 7
  8. 8. COMPLIANCES BY A DIRECTOR» Apply for Director Identification No. (DIN) (sec. 266 A) Every Individual intends to be appointed as Director of a Company shall make an application for allotment of DIN to the Central Government in Form DIN 1along with a fee of Rs. 100 and such other documents as may be prescribed.» Consent to act as Director (sec. 264) Every Person proposed as a candidate for the office of a Director shall sign, and file with the Company his Consent in writing to as a director, if appointed 8
  9. 9. DISCLOSURES BY A DIRECTOR» Disclosure under Section 299 Every Director is required to submit a general notice to the Board of Directors disclosing his directorships held in other companies as well as shareholding exceeding 2 % of paid-up share capital of any public company, membership / partnership in any private company/ firms which may tantamount to stating that he may be regarded as concerned or interested in any contract or arrangement. The Notice is required to be given in the prescribed form 24AA under the Companies (Central Government’s) General Rules & Forms, 1956. This form is required to be submitted at the time of appointment and afresh in each Financial Year, which is being presented to the Board at their Meeting next to the receipt of the Notice. 9
  10. 10. DISCLOSURES BY A DIRECTOR» Memberships/Chairmanships of Committees of Directors In terms of the Listing Agreement, Directors cannot be members in more than 10 Committees or act as Chairman of more than 5 Committees of Public Limited Companies. For the purpose Chairmanship/Membership of the Audit Committee and the Shareholder’s Grievance Committee are to be considered. Further, it is mandatory annual requirement for every Director to inform the Company about the Committee position he occupies in other Companies and notify changes as and when it takes place 10
  11. 11. DISCLOSURES BY A DIRECTOR» Declaration under Section 274 (1)(g) Pursuant to the provisions of Section 274(1)(g) of the Companies Act, 1956 declarations are to be provided by all the Directors of following Compliances by all Companies on which Directorships held to be presented to Statutory Auditors.• The Company has not failed to file the Annual Accounts and Annual Returns for the previous 3 financial years• The Company has not failed to repay its deposits or interest thereon on due dates or redeem its debentures on due date or pay dividend on them 11
  12. 12. DISCLOSURES BY A DIRECTOR» Disclosure under Insider Trading Regulations In terms of Clause 5.1 (c) of Schedule I of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 every Director/ officer/ designated employee of a Listed Company, shall forward the Annual Statement of all holding in their securities transactions including the statement of dependant family members to the Compliance Officer 12
  13. 13. RESPONSIBILITES OF A DIRECTOR• Not to hold Office of Director in more than 15 Public Companies (Sec. 277)• Not to wrongfully obtain possession of any property of a Company or having any such property in possession, wrongfully withhold it or knowingly applies it to purposes other than those expressed or directed in the Articles and authorized by the Companies Act,1956 (Sec. 630)• Not to hold any office or place of profit carrying a total monthly remuneration of not less than Rs.50,000 under the Company either by himself / by his partner / his relative without the prior approval of Central Government (sec. 314) 13
  14. 14. Not to make Loans / give Guarantee / provide Security tothe following categories of persons, except without theprevious approval of Central Government (Sec. 295):-• Any director of the Company or• Any Director of the Holding company;• Any partner or relative of any of such Director;• Any firm in which any such Director or relative is a partner;• Any Private Company of which any such Director is a Director or Member;• Any Body Corporate in which not less than 25% of the total voting power may be exercised or controlled by any such Director or by two or more such Directors together. 14
  15. 15. Not to enter into following Contract without the consentof the Board of Directors of the Company & the priorapproval of the Central Government (Sec. 297):-• for the sale, purchase or supply of any goods, materials or services, the cost of which is not less than Rs. 5,000 in the aggregate in any year; or• for undertaking the subscription of any shares in or debentures of the Company 15
  16. 16. POWERS THAT CAN BE EXCERCISED ONLY AT A BOARD MEETING (SEC. 292 )• Power to make calls on shareholders in respect of money unpaid on their shares• Power to authorise the buy back of shares• Power to issue Debentures• Power to borrow moneys otherwise than on debentures• Power to invest the funds of the Company• Power to make loans. 16
  17. 17. When an Office of Director becomes Vacant ?The office of a Director shall become vacant, if:-• He fails to obtain within the time specified in Section 270(1) the Share qualification, required by him by the Articles of the Company• He applies to be adjudicated/ adjudged as an insolvent• He acts in contravention of section 299 17
  18. 18. • He absents himself from 3 consecutive meetings of the Board of Directors or from all meetings of the Board for a continuous period of 3 months, whichever is longer, without obtaining leave of absence from the Board• He either by himself or by any person for his benefit/any firm in which he is partner/any private company of which he is a director guarantee/security for a loan from the company in contravention of Section 299 of the Companies Act,1956• Having been appointed a Director by virtue of his holding any office or other employment in the company, he ceases to hold such office or other employment in the Company. 18
  19. 19. PENALTIES• Any person who holds office or acts as a director of more than 15 Companies in contravention of Section of 277 shall be punishable with fine which may extend to Rs.50000/- (Sec. 279)• Any Director of the Company who holds the property of the Company in contravention of Section 630 of the Companies Act shall be punishable with fine which may extend to Rs.10,000/- (Sec. 630)• Any Director who fails to comply with the provisions of Section 299 with regard to the disclosure of their interest at Board Meetings shall be liable to punishment which may extend to Rs. 50,000/- (Sec. 299) 19
  20. 20. PENALTIES• Any Director who is knowingly a party to any contravention of the provision of Section 295 which deals with loan to director without the previous approval of the Central Government shall be punished with fine which may extend to Rs. 50,000/- or with simple imprisonment for a term which may extend to 6 months. (Sec. 295)• Every Directors are liable to be punished with simple imprisonment for a term which may extend 3 years and also liable to fine, if they fail to pay dividend within 30 days of its declaration by the shareholders. 20

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