Company Management

Directors

• A person who has control over the direction,

governance, policies or superintendence of
affairs of a company

• Occupy a pivotal position in the company

• Collectively known as board of directors

• Only individuals can be directors

 Board of directors

Supreme policy framing and

decision making organ of a
company
 Deemed/Shadow director

Any person in accordance with whose

directions or instructions, the board of
directors of a company is accustomed
to act
 Number of directors
• Public company
minimum 3 maximum
12
• In general meeting by
passing an resolution
can increase or
reduce the number of
directors
 Appointment of directors
• Appointment of first directors:

Articles name the first directors

if it didn’t subscribers to the

memorandum are deemed to be the
directors
• Appointment by the General Meeting:

2/3rd of the directors must be appointed in

general meeting
these

Appointment of each director must be

voted individually

Filing of written consent by director

• Appointment of directors by the Board:
Board appoint Additional directors,
Alternate directors and Directors to fill
casual vacancy
• Appointment by third parties :
If article permits debenture holders,
banking Company ,Financial Corporation
which advanced loans can appoint
directors
Directors such appointed should not
exceed 1/3rd
• Appointment by principal of proportional
representation:
At least two third of selected
directors must be appointed by single
transferable vote or by cumulative voting
Appointment such made is for 3 years
• Appointment by Central Government:

Appoint directors on a order passed by the

company law board on the basis of the
reference by the central government or on
the application of not less than 100
member or members holding one tenth of
the total voting power

Not subject to retirement or holding of

Qualifying shares
Restrictions on the appointment of
the directors
• Only individuals can be
appointed as directors
• Prohibited to hold directorship
of more than 15 companies
• Cannot become director if he
doesn’t obtain Qualifying
shares
• If not given written consent
 Different positions of
directors
• Directors as agents

• Directors as trustees

• Directors as managing partners

• Directors as employees
 Retirement
• At least 2/3rd of directors are subject to
retirement by retirement at every Annual
General Meeting
• Articles may provide for retirement of all
directors
• Retired directors can be reappointed
• If the vacancy caused by retirement is not
filled at the AGM or adjourned meeting
retired director is automatically re-elected
 Powers of Directors
1. General powers: powers listed in the articles
2. Powers which can be exercised only in board’s
meeting:
• power to make call on shareholders in respect
of money unpaid on their shares
• Power to issue debentures
• The power to borrow moneys
• The power to invest company’s funds
• The power to take loans
 Duties
• Duty to exercise their power in good faith
and for the benefit of the company as a
whole
• Duty of care and skill
• Duty not to delegate
• Duties to disclose interest
 Statutory duties
• Duty not to allot shares until minimum
subscription is raised
• Duty to sign annual returns
• Duty to send statutory reports to every
member of the company
• Duty to call AGM every year
• Duty to call extraordinary general meeting
• Duty to prepare Profit and loss account
and balance sheet and to lay before the
company
• Duty to take qualification shares
• Duty to disclose share holding
• Duty to summit a statement of affairs on
winding up
• Duty to maintain register of members
 Remuneration of directors
• Determined by the articles or by a
resolution passed in a General meeting of
the members
• It should be sanctioned by the Central
Government
• Fees for board and committees held
before the commencement of the
company should be paid in monthly basis
for a period of 2 years
• Directors fee for attending a meeting of
the board can be increased up to Rs5000
without Govt’s sanction
• If a directors give professional service to
the company he should be paid for it
• The remuneration of the directors is part of
the overall managerial remuneration which
shouldn't exceed 11% of the net profits or
RS 50000 in certain exceptional cases
 Removal of directors
1. Removal by shareholders
: by passing an ordinary resolution
before expiry of this period of office
:must give notice to the company 14
days before the meeting
4. Removal by the Central Government:
: on an reference to and after an
adverse findings against him
: the director can show reasonable cause
: removed director cannot hold such
position for 5 years

3. Removal by the tribunal

: can remove a director for preventing
oppression and mismanagement
Compensation for the loss of office
shall not be paid
• The director resigned his office in view of
the reconstruction or amalgamation
• The director had office on his own accord
• The company is winding up on account of
negligence or default by the director
• The director has been found guilty of fraud
or breach of trust or of gross management
• The termination of office has been due to
his own instigation
 Register of directors
– Must keep register of its directors,
managing director, manager and
secretary containing their particulars
– Must send a duplicate copy in the
prescribed form of the contents of the
register to the Registrar within 30 days
of the appointment of the directors
– Register of the company must open for
inspection to any member of the
company without any charge
• A director who, by virtue of
an agreement with the
company or of a resolution Managing
passed by the company in
a general meeting or by its
Director
board of directors or a
provision in the
memorandum or articles, is
entrusted with
substantial powers of
management which would
otherwise not be
exercisable by him and
includes a director
occupying the position of a
managing director
 Appointment of MD
• Company having a paid up capital of
more than Rs5 corer or must have a
managing or whole time director

• Must be approved by central

government
 Essential features of a MD
• A MD is one of the directors
• He is entrusted with substantial powers of
management
• Any director entrusted with a managerial
functions will be a managing director
• He acts under the direct provision and
control of the Board
 Restrictions on the appointment of
Managing Director

• Term of a MD shall not exceed 5 at a

time
• He shall not hold the office of MD
more than 2 companies
• He shall not be appointed without the
approval of central Government