LEGAL ASPECTS OF BUSINESSPRESENTATION

ONAPPOINTMENT OF DIRECTOR,

POWER AND LIABILITIES(UNDER COMPANIES ACT, 2013)

By:Radhika Mangla – 24/024Rahul Tanwar – 24/025Rahul Sharma – 24/026Rohit Grover – 24/027Saif Abbas – 24/029Mohit Kabra – 24/148Vikash Mehta – 24/181

MINIMUM / MAXIMUM NUMBER OF DIRECTORS IN A COMPANY – SECTION 149(1)

Every company shall have a minimum no. of: • 3 directors in case of a Public company, • 2 directors in case of Private company, and• 1 director in case of One Person Company.

A company can appoint maximum 15 directors.

A company can appoint more than 15 directors after passing Special Resolution(SR) in general meeting.

A period of one year has been provided to enable the companies existing on or before the commencement of Companies Act, 2013 to comply with this requirement.

NUMBER OF DIRECTORSHIP – SECTION 165 Maximum no. of directorship, including any alternate directorship a

person can hold is 20. No. of directorship in public/private companies that are either holding

or subsidiary company of a public shall be limited to 10. Further the members of a company may restrict above mentioned

limit by passing SR.

Every individual who is to be appointed as director of a company shall make an application electronically in Form DIR-3 to the CG for the allotment of a DIN.

Women Director – Section 149 & Rule 3 of Companies Rules, 2014

Following class of companies shall appoint at least one women director:• Every listed company;• Every other public company having – Paid –up share capital of 100 crore rupees or more; or Turnover of 300 crore rupees or more.

APPOINTMENT OF DIRECTORS – SECTION 152

First Director: Named in their Article. If not named in AOA of a company, First subscriber to the MOA who is

individual shall be deemed to be the first director of the company until the directors are duly appointed.

Rotational Director: AOA of a company may provide the provisions relating to retirement of all the

directors. If there is no provision in the article, then not less than 2/3rd of the total no. of

directors of a public company shall be persons whose period of office is liable to determination by Retirement by Rotation and eligible to be reappointed at AGM.

Additional Director: Board of Directors can appoint additional directors, if such power is conferred

on them by AOA. Such directors hold office only up to the date of next AGM or the last date on

which the AGM should have been held, whichever is EARLIER.Alternate Director: Board of directors must be authorized by its AOA or by a resolution passed by

the company in general meeting for appointment of alternate director. The person in whose place the Alternate director is being appointed should

be absent for a period of not less than 3 months from India.

POWER OF BOARD OF DIRECTORS – SECTION 179 The following (section 179(3) and Rule 8) powers of the Board of

Directors shall be exercised only by means of resolution (BR) passed at meetings of the board.

1) To make calls on shareholders in respect of money unpaid on their shares;

2) To authorise buy-back of securities under section 68;3) To issue securities, including debentures;4) To borrow monies;5) To invest the funds of the company;6) To grant loans/give guarantee & provide security;7) To take over a company or acquire a controlling or

substantial stake in another company;

The Board may, by a BR passed at a meeting, delegate to any committee of directors, the managing director; the manager or any other principal officer of the company the powers specified in (4) to (6) above on such conditions as it may specify.

DUTIES OF DIRECTORS – SECTION 166 A Director of a company shall : Act in accordance with the AOA of the company; Act in good faith in order to promote the objects of the company

for the benefits of its members as a whole, and in the best interest of the company, its employees, the shareholders.

Exercise his duties with due and reasonable care , skill and diligence and shall exercise independent judgement.

Not involve in a situation that possibly may conflict with the interest of the company.

Not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates.

Not assign his office and any assignment so made shall be void.

If a director contravenes the provisions of this section, such director shall be punishable with fine which shall not be less than Rs. 1,00,000 but which may extend to Rs. 5,00,000.

CASE STUDYALAK PROKASH JAIN VS UNION OF INDIA

Appellant: Alak Prokash Jain Respondent: Union of India

FACTS The government filed a petition before the Companies Tribunal

(after its abolition, before the Bombay High Court) for a finding that certain directors of Benett Coleman & Co. Ltd., being all the members of a family, were not fit and proper persons for the office. Before the petition came up for hearing they went in a writ petition before the Calcutta High Court challenging the exercise of the power as well as its

constitutional validity.

The appellant moved this court under a declaration that Sections 388B to 388E of the Act were ultra vires the

Constitution, and as such void, and for appropriate writs directing the respondents in this appeal not to proceed with Case No. 1 of 1964 and to withdraw the said proceedings.

JUDGEMENT

It seems to us that in the facts of this case, it cannot be said that there was no materials to justify the opinion which the Central Government formed. The

charges enumerated above appear to us to be sufficiently grave and serious, namely, fraud, misappropriation, manipulation of accounts, diversion of the company's funds, illegal declaration of and unlawful payment of travelling

expenses. Full particulars with dates and amounts involved have been furnished

REASONING Section 388B:In opinion of Central government on basis of circumstances suggesting that a

person related to Management is indulge in fraudulent activity or default in carrying his obligation. And Central government has right to open investigation against such

person or may state a case to remove such people.

Section 388E: Power of Central Government to remove managerial personnel on the basis of Company Law Board' s decisions.

The petitioner argued, in the second place that the requirements of section 388 B were not satisfied. The central government can move against a director only when in its opinion the circumstances contemplated in the sub-section exist. Building up their argument through

the decisions of the Supreme Court in Barium Chemicals Ltd. v. Company Law Board*35 and Rohtas Industries Ltd. v. S.D. Agarwal, 36 they said that the relevant circumstances did not exist and, therefore, the central government either did not apply its mind to their absence

or formed an unfounded opinion.

The central government has already appointed an inspector which find irregularities related to Dividend issued, Sale Proceedings, Share Issued at very low price to Director’s

relatives.