COMPANY MANAGEMENT

Directors

Company should have directors - 252 Board of directors Committee management Minimum number of directors The company may increase or decrease the number of directors within the limit - 258 Only individuals to be directors 253 Director identification number Positions of Directors

Directors

Appointment of first directors 254 Appointment at general meeting 255 Appointment by ordinary resolution Reappointment of directors in place of retired directors 256 Reappointment of directors may not be completed when The retiring director has no given consent of reappointment Lost the appointment by less number of vote during election Suffered disqualification New director in place of the old director can be elected 257 Appointment by proportional representation 265

Directors

Casual directors - 262 Additional Directors 260

Exempted

from filing the consent to act a director

Alternate director 313 Appointment of directors by third parties nominee directors Appointment by Central Government 408 Appointment by the NCLT - 402

Directors

Qualifications

Share qualification 270 Qualification share should be taken within 60 days of appointment Punishable with fine which may extend upto Rs. 500
Unsound mind undercharged insolvent Sentenced to at least six months of imprisonment five years elapsed from the date of the expiry of the sentence He has not paid for six months any call on his shares Disqualified under S 203 - for preventing fraudulent persons Director of a public company where

Disqualification 274

The company failed to refund the deposit Failed to file the annual accounts

Directors

Restrictions on appointment of directors

Filing of consent in writing with the Registrar Filing of affidavit to the effect of qualification shares
Not more than 15 companies at the same time Failed to acquire the required qualification shares For disqualifications Absents himself from three consecutive meetings of the Board Takes a loan in contravention of section 275 Disqualified by an order of the court

Number of Companies 275 & 276

Vacation of office by directors 283

Directors

Removal of directors Removal by the Shareholders

expiry of term- by ordinary resolution 284 Before expiry of term
On

notice to the director Special notice for the removal of the director Special resolution of not less than 14 days before meeting along with directors explanation Provided the director is not appointed by the CG or other nomination

Directors

Removal by the Central Government

On

the recommendation of the Tribunal 388 B to E

For

the reasons of the guilty of fraud, misfeasance, negligence, or default in carrying the obligations Failed to follow the sound principles of the management Conducted the business against the interests of the business practices or industry concerned Against the interests of public
During

the pendency of case with the Tribunal, the director may be ordered not to discharge the functions

Removal by the Tribunal

Directors

Register of Directors

Every company should keep a register of directors at its RO 303 Register should contain the information relating to

Name and addresses of the directors Nationality , origin and business or occupation of the director Particulars of the office held by the directors If the director is nominated, details of the body nominating and details of directors of the body

Register of directors should be available for inspection 304 RoC also should maintain the Register of directors 306 Register of directors shareholdings 307 Register and shareholdings should be made available at the AGM default is punishable with fine upto Rs. 5,000/-

Directors - Powers

Powers are derived from

The company Act Articles of Association Board Resolution Resolution in general meetings Agreements or contracts with the company

General powers and Specific powers Powers of Board of directors

All the powers authorized by the MoA and AoA Powers are coexisting with the powers of company Individual directors have the power given by the MoA, AoA Delegation of powers by the Board by way of resolution

Directors powers

Shareholders intervention
When the shareholders lose confidence on the BoD When the directors with malfide intentions When the directors act against the interests of the company When the directors have interest in the transactions of the company When there is a deadlock in the decision

Specific powers
Specific mention of powers and the manner of discharge 292 Delegation should by special resolution

Directors Powers

Restrictions on the powers of the BoD 293

Power to sell, lease out, or otherwise dispose the company property Power to remit any debt due by a director Power to invest the amount of compensation received by the company in respect of compulsory acquisition Power to borrow the money beyond permissible limit Power to contribute to charitable and other funds not connected with the business of the company Power not to transfer to welfare of its employees beyond Rs. 50,000 per year or 5% of the average net profits during the three years

Restrictions are not applicable to private company

Duties of Directors

Duty of integrity and honesty Duty of good faith Duty not to make secret profits Employ reasonable care and skills Attend meetings Send the consent letter to RoC on appointment Obtain qualification shares wherever applicable Pay call amount Disclose the interest in the company and contracts

Violation is punishable with fine up to Rs. 50,000 The director has to disclose when the company enters into contract having interest in the contract

Not to delegate his functions except authorized Not to take part in the deliberations of the Board during the discussions having the interest 287

Directors

Consequences

Pay penalty Vacate the position of director Liable to refund the remuneration or benefit To attend the meetings of the company To participate in the management of the company affairs To receive remuneration Cannot assign his office or delegate his functions Cannot avail loan from the company except with the prior approval of the Central Government Cannot hold any place of profit in the company without consent of the company by special resolution

Rights

Disabilities

Directors - Liabilities

Liability for officer who is in default Duty of Reasonable care

Prudent care and exercise due diligence Should not be negligent Should not be honest and reasonable Decisions should be bonafide

No indemnity against the liability of negligence 201 Company can indemnity if acquitted by the courts Personal liability if the loan/guarantee given by company against the law or MoA 372 A Strict liability in case of default of payment to small investors

Directors Liabilities

No personal liability for payment of taxes unless the statute provides Liability if personal guarantee given by the director Estate of director is liable after the death of director Director liable for contempt of court by company Liability of directors during winding up process Liability under other statutes

Directors personal Liability

Personal liability of directors

Failure

to pay interest/principal amount to small depositors 58AA Civil liability for stating wrongs in prospectus 62 Allotment of shares without receiving minimum subscription 69 (5) Irregular allotment of shares - 71 (3) Non-payment of dividend within 30 days 207 Non maintenance of books 209 Loans against the provisions

Directors- Remuneration

Remuneration shall include 198(4)

Cost

of rent-free accommodation or any other benefit or amenity in place of accommodation to the director Any concession or extent of amount of concession given expenditure incurred in respect of any obligation or service given to the director or manager Expenditure incurred to effect any insurance on the life of the director, or pension or annuity or gratuity Any amount paid directly to the director

Directors - Remuneration

The amounts may be paid by a way of monthly, quarterly or annual appointment with the approval of CG Ceiling of total Remuneration -198 (1)
Not to exceed 11% of net profits MD/WD should not exceed 5% if one MD/WD 309 (3) 10% if more than one MD/WD If the company suffers loss, it will not pay any thing except with the previous approval of the CG

The remuneration shall not include

Remuneration paid for services rendered as

Directors - Remuneration

Sitting Fee paid to the director to attend each meeting of the company or any committee constituted by the company during the period of occupying the position controversy Payment for non-executive directors by way of share of net profits- permitted by the Articles or by resolution By way of Commission by special resolution

1% of net Profits excess of 1% should be made with the approval of CG

Increase in remuneration - approval by the CG310 Permission is not required if the increase is within the permissible limit - 310

Directors - Disclosures

Bound not to make secret profits or misuse position Contract should be by or on behalf of the company Interest should be pecuniary interest or advantage direct or indirect Disclosure of interest to the Board - 299 (1)

in the contract or arrangement made by the company Disclosure in the first meeting Disclose the list of the companies in which they are interested Notice expires in the last month of financial year Required to be renewed Violation penalty upto Rs. 5000/Disclosure may be formal or informal

Director deemed to be interested if he singly or jointly hold more than 2% or more shares 299 (6) Interest means personal interest not official interest

Directors - disclosures

Effect of non-disclosure of interest in contract

Director vacates the office 283 (1) The contract is valid Penalty Rs 50,000/-

Sanction of Board essential when director is interested in a contract 297 Director not to vote when he is interested 300 Register of contracts, companies and firms in which directors are interested 301 Section 297 applicable for purchases Section 299 applicable for contracts does not require any approval Disclosure of directors interest to members

Loans to directors and his relatives

Loans to directors and his relatives 295

Previous approval of the Central Government To any director or to his relative To a company or the firm in which the director or his relative have the interest A deposit with the other company is also considered as a loan There should not be relationship of creditor and debtor To any company in which the director or two or more directors together hold at least 25% voting power in GM The restrictions are not applicable to the private company unless they are subsidies of public companies violation - fine up to Rs. 50,000/ or simple imprisonment up to six months

Board Committees

Remuneration Committee
Remuneration to non-executive directors shall be decided by the Board Remuneration to executive directors decided by the remuneration committee Committee shall have three non executive directors and chairman should be independent director Considers factors like the financial position of the company, minimum and maximum permissible remunerations, trends industry, qualifications and performance of the directors, past remuneration paid to the directors

Recruitment Committee Ethics Committee

Board Committee

Audit Committee 292 A

Public company having paid up capital of not less than five crores Not less than three directors members shall elect the Chairman Ex-officeo members, Auditors, internal auditors Act according to the terms specified by the Board Have the right to access all the information relating to the company Shall attend the annual general meeting Discusses the audit report and makes investigation into issues

Managerial Persons

Company Act permits the appointment of

Managing Director and Manager

Director entrusted with the substantial power of Management which are otherwise not exercisable Company having a paid up share capital of Rs. 5 crores or more Powers may be granted by

Managing Director 2 (26)

Agreement between the company and MD By resolution in the AGM By resolution of the Board MoA and AoA provisions

Managing director dual positions director and employee Must be individual Exercise powers under the control and supervision of the

Managerial Persons

Appointment of MD -269
By resolution or by agreement Approval of the CG Appointment within 90 days of approval of CG CG approval is not necessary, if the appointment is according to Part I and II of the Schedule XIII Should be a director of the company For not more than five years -317 (1) Age not less than 25 years but not more than 70 years

Disqualifications of a MD -267
Insolvency, insane, Convicted by a court for an offence of moral turpitude

Managing Persons

Director can act as MD for one company at a time 316

Can be appointed for more than one company provided approved by the board by resolution Permitted by the CG Five years - 317 Can be extended for further period of five years

Tenure of MD

Remuneration MD is not personally liable for the acts discharged by him during his tenure MD and WD

Managing persons

Manager
Individual

who has the management of whole or substantially whole of affairs of the company 2(24) CEO of the company Qualifications Number of Managership Tenure of the Manager MD and Manager Remuneration

Company Secretary