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INDIAN COMPANIES ACT, 1956 With Respect to DIRECTORS

DIRECTORSDIRECTORS

INDIAN COMPANIES ACT, 1956INDIAN COMPANIES ACT, 1956

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SUNIL PANDEY

AKHIL SARVAIYA

ARUN SINGH

SHRIJESH NAIR

AMIT SHAH

SANJOG DEVRUKHKAR

Presented by :

NAME OF THE STUDENT ROLL NUMBER

MFM SEM – I (2008-11)

INTRODUCTIONINTRODUCTION

INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956

TYPES OF COMPANIESTYPES OF COMPANIES

INTRODUCTION TO THE TERM ‘DIRECTORS’INTRODUCTION TO THE TERM ‘DIRECTORS’

APPOINTMENT APPOINTMENT OF DIRECTORSOF DIRECTORS

REMOVAL / RETIRMENT OF DIRECTORSREMOVAL / RETIRMENT OF DIRECTORS

RIGHTS AND DUTIES RIGHTS AND DUTIES OF DIRECTORSOF DIRECTORS

ROLE OF DIRECTORSROLE OF DIRECTORS

MANAGING DIRECTORS AND ADDITIONAL DIRECTORSMANAGING DIRECTORS AND ADDITIONAL DIRECTORS

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INTRODUCTION TO A COMPANY &INDIAN COMPANIES ACT, 1956

MANAGEMENT OF A COMPANYMANAGEMENT OF A COMPANY

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A company functions through the medium of Board of Directors. A company functions through the medium of Board of Directors.

However, certain powers have been reserved to be exercised by However, certain powers have been reserved to be exercised by

shareholders in general body meetings. Section 291 of the shareholders in general body meetings. Section 291 of the

Companies Act, 1956 confers general power on the Board of Companies Act, 1956 confers general power on the Board of

Directors. It provides: “Subject to the provisions of the Act, the Board Directors. It provides: “Subject to the provisions of the Act, the Board

of Directors of a company shall be entitled to exercise all such of Directors of a company shall be entitled to exercise all such

powers, and to do all such acts and things, as the company is powers, and to do all such acts and things, as the company is

authorized to exercise and do. authorized to exercise and do.

DIRECTORSDIRECTORS

The company carries on its business through individuals called The company carries on its business through individuals called

directors.directors.

Collectively they are called Board of DirectorsCollectively they are called Board of Directors

No body corporate, association or firm can be appointed as a director of No body corporate, association or firm can be appointed as a director of

a company, and only an individual can be appointeda company, and only an individual can be appointed7

CONSTITUTIONCONSTITUTION

Every Public Company must have at least Every Public Company must have at least 33 directorsdirectors

A Public Company having A paid up capital of Rs. 5 crore or more and A Public Company having A paid up capital of Rs. 5 crore or more and

One thousand or more shareholders Can elect a director by small One thousand or more shareholders Can elect a director by small

shareholders.shareholders.

A private company must have at least A private company must have at least 2 directors2 directors

Subscribers of the memorandum who are individuals, are Subscribers of the memorandum who are individuals, are

deemed to be the directors of the company, until the directors deemed to be the directors of the company, until the directors

are duly appointed in accordance with the Act.are duly appointed in accordance with the Act.

Directors are appointed in general meeting, in board meeting, by central Directors are appointed in general meeting, in board meeting, by central

government, by proportional representation or a person can stand for government, by proportional representation or a person can stand for

directorship, if eligible. directorship, if eligible.

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A company can have a maximum number of A company can have a maximum number of 12 directors12 directors and to and to increase this number, the approval of Central Government is required.increase this number, the approval of Central Government is required.

The board of directors can appoint Additional Directors, by passing a The board of directors can appoint Additional Directors, by passing a resolution, if such a power exists in the articles.resolution, if such a power exists in the articles.

If any vacancy arises in office of any director then subject to the If any vacancy arises in office of any director then subject to the articles, the board of directors can fill the vacancy at a meeting of the articles, the board of directors can fill the vacancy at a meeting of the board.board.

One single resolution can appoint one director only and two or more.One single resolution can appoint one director only and two or more.

A company, at a general meeting may, by ordinary A company, at a general meeting may, by ordinary resolution, increase or reduce the number of its directors resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles.within the limits fixed in that behalf by its articles.

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CONSTITUTIONCONSTITUTION(…Continued)

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APPOINTMENT OF DIRECTORAPPOINTMENT OF DIRECTOR

He himself or some member intending to propose that person as a He himself or some member intending to propose that person as a

director.director.

Gives a sign notice in writing to company.Gives a sign notice in writing to company.

Signifying that persons for the office of directorSignifying that persons for the office of director

Along with a deposit of Rs. 500/- which is refundable subject to Along with a deposit of Rs. 500/- which is refundable subject to

appointment as a directorappointment as a director

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Any Person Can Be Eligible For Appointment To The Office Of Any Person Can Be Eligible For Appointment To The Office Of Director At Any Annual General Meeting, IfDirector At Any Annual General Meeting, If

RETIREMENT OF DIRECTORSRETIREMENT OF DIRECTORS

The directors to retire by rotation at every AGM are those who have been

longest in office since their last appointment.

REMOVAL OF DIRECTORSREMOVAL OF DIRECTORS

Removal Of Directors Is Conferred Upon Shareholders, Removal Of Directors Is Conferred Upon Shareholders,

Central Government And Company Law BoardCentral Government And Company Law Board

A company may, by ordinary resolution, remove a director (not being a A company may, by ordinary resolution, remove a director (not being a

director appointed by the Central Government in pursuance of section director appointed by the Central Government in pursuance of section

408) before the expiry of his period of office. This provision shall not 408) before the expiry of his period of office. This provision shall not

apply where the company has availed itself of the option given to it of apply where the company has availed itself of the option given to it of

proportional representation on the Board of Directors to appoint not less proportional representation on the Board of Directors to appoint not less

than two-thirds of the total number of directors according to the principle than two-thirds of the total number of directors according to the principle

of proportional representation.of proportional representation.

Special notice shall be required of any resolution to remove a director, Special notice shall be required of any resolution to remove a director,

or to appoint somebody instead of a director so removed at the meeting or to appoint somebody instead of a director so removed at the meeting

at which he is removed.at which he is removed.12

VACATION OF OFFICE BY DIRECTORSVACATION OF OFFICE BY DIRECTORS

The directorship of a director automatically ceases if,The directorship of a director automatically ceases if,

He fails to obtain qualification sharesHe fails to obtain qualification shares

He fails to pay any call in respect of sharesHe fails to pay any call in respect of shares

He absents himself from 3 consecutive meetings of the He absents himself from 3 consecutive meetings of the

board of directors, or from all meetings of the board for a board of directors, or from all meetings of the board for a

continuous period of 3 months, whichever is longer, without continuous period of 3 months, whichever is longer, without

obtaining leave of absence from the boardobtaining leave of absence from the board

He is removed by the shareholders by resolution passed in a He is removed by the shareholders by resolution passed in a

general meetinggeneral meeting

A company can remove a director even before the expiry of his A company can remove a director even before the expiry of his

period of officeperiod of office13

DISQUALIFICATION OF DIRECTORSDISQUALIFICATION OF DIRECTORS

A person shall not be capable of being appointed director of a A person shall not be capable of being appointed director of a

company, if,company, if,

he has been found to be of unsound mind by a Court of competent he has been found to be of unsound mind by a Court of competent

jurisdiction and the finding is in force jurisdiction and the finding is in force

he is an undercharged insolvent he is an undercharged insolvent

he has applied to be adjudicated as an insolvent and his application he has applied to be adjudicated as an insolvent and his application

is pending is pending

he has been convicted by a Court of any offence involving moral he has been convicted by a Court of any offence involving moral

turpitude and sentenced in respect thereof to imprisonment for not turpitude and sentenced in respect thereof to imprisonment for not

less than six months, and a period of five years has not elapsed less than six months, and a period of five years has not elapsed

from the date of expiry of the sentence from the date of expiry of the sentence 14

QUALIFICATION SHARESQUALIFICATION SHARES

They are the minimum number of shares a person must own, They are the minimum number of shares a person must own,

as provided in the articles of the company, in order to qualify as provided in the articles of the company, in order to qualify

to become a director of the company. Qualification shares to become a director of the company. Qualification shares

must be acquired by a director within 2 months of his must be acquired by a director within 2 months of his

appointment. The articles cannot require a director to acquire appointment. The articles cannot require a director to acquire

qualification shares within a shorter period. The face value of qualification shares within a shorter period. The face value of

the qualification shares cannot exceed five thousand rupees, or the qualification shares cannot exceed five thousand rupees, or

if the face value of one share is more than five thousand if the face value of one share is more than five thousand

rupees, then the qualification share will be one qualification rupees, then the qualification share will be one qualification

share.share.

A director is required to hold certain shares as qualification A director is required to hold certain shares as qualification

shares if such requirement is here in the Articles of Association shares if such requirement is here in the Articles of Association

of the company.of the company. 15

WHOLE WHOLE TIME TIME

DIRECTORDIRECTOR

Every company, having a paid-up capital of Rs. 5 Every company, having a paid-up capital of Rs. 5

crore or more must have a whole-time director.crore or more must have a whole-time director.

A WHOLE TIME DIRECTOR is one who entirely looks A WHOLE TIME DIRECTOR is one who entirely looks

into the affairs of a company.into the affairs of a company.

At a time a single whole time director can act as a At a time a single whole time director can act as a

director for not more than 20 Companies.director for not more than 20 Companies.

A person shall not act as director of a company A person shall not act as director of a company

unless he has, by himself or by his agent unless he has, by himself or by his agent

authorized in writing, signed and filed with the authorized in writing, signed and filed with the

Registrar, consent in writing to act as such Registrar, consent in writing to act as such

director within 30 days of his appointment. This director within 30 days of his appointment. This

provision shall not apply to a private company provision shall not apply to a private company

unless it is a subsidiary of a public companyunless it is a subsidiary of a public company

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ADDITIONAL DIRECTORSADDITIONAL DIRECTORS

The Board of directors may appoint additional directors if such power The Board of directors may appoint additional directors if such power

is conferred on it by the articles of the company. Such additional is conferred on it by the articles of the company. Such additional

directors shall hold office only up to the date of the next annual general directors shall hold office only up to the date of the next annual general

meeting of the companymeeting of the company

The Board of directors of a company may, if so authorized by its The Board of directors of a company may, if so authorized by its

articles or by a resolution passed by the company in general meeting, articles or by a resolution passed by the company in general meeting,

appoint an alternate director to act for a director during his absence for appoint an alternate director to act for a director during his absence for

a period of not less than three months from the State in which a period of not less than three months from the State in which

meetings of the Board are ordinarily held.meetings of the Board are ordinarily held.

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REMUNERATION OF DIRECTORSREMUNERATION OF DIRECTORS

Directors Remuneration The overall maximum remuneration payable to directors and its managers in one financial year

Not more than 11% of the net profits of the company for that financial year

If a company has only one director

Not more than 5% of the net profits

If a company has more than one director

Not more than 10% of the net profits for all of them together

The director is not a whole time director

Not more than 1% of the net profits

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Except with the previous consent of the company accorded by a

special resolution:-

No director of a company can hold any office or place of profit in

that company

No partner or relative of such a director (i.e. a director holding an

office or place of profit in the company), no firm in which such a

director or relative is a partner, no private company of which such a

director is a director or member, and no director, or manger of such

a private company can hold any office or place of profit carrying

monthly remuneration in excess of the prescribed amount (Rs.

10000/-).

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DIRECTOR CANNOT TO HOLD OFFICE OR PLACE OF PROFIT:

LOANS TO DIRECTORSLOANS TO DIRECTORS

A company provides loan to its director (for a guarantee or security) A company provides loan to its director (for a guarantee or security)

or the related parties, with proper approval from Central Government. or the related parties, with proper approval from Central Government.

This is to ensure that the Board Of Directors of a public company This is to ensure that the Board Of Directors of a public company

does not misuse the funds of the company for the benefit of its does not misuse the funds of the company for the benefit of its

directors.directors.

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INTERESTS OF A DIRECTOR INTERESTS OF A DIRECTOR

When any company enters into contracts relating to the business of When any company enters into contracts relating to the business of

the company with the directors, the consent of the board of directors the company with the directors, the consent of the board of directors

is required by way of resolution.is required by way of resolution.

Every director of a company has to disclose the nature of his concern Every director of a company has to disclose the nature of his concern

or interest at a meeting of the board of directors.or interest at a meeting of the board of directors.

Finally a decision will be taken by the BOARD OF DIRECTORS.Finally a decision will be taken by the BOARD OF DIRECTORS.

Every Director shall disclose the nature of his concern or interest in a Every Director shall disclose the nature of his concern or interest in a

contract or arrangement at the meeting of the Board. Disclosure is contract or arrangement at the meeting of the Board. Disclosure is

not required where any of the Directors of one company or two or not required where any of the Directors of one company or two or

more of them together hold 2% or less than 2% of paid up share more of them together hold 2% or less than 2% of paid up share

capital of the companycapital of the company21

SPECIAL AUTHORITIESSPECIAL AUTHORITIES

Directors can exercise certain powers only at the meetings of the board Directors can exercise certain powers only at the meetings of the board

related to some significant matters which need deliberationsrelated to some significant matters which need deliberations

and discussions. They are:and discussions. They are:

Make Calls on shareholders in respect of money unpaid on their sharesMake Calls on shareholders in respect of money unpaid on their shares

Issue debenturesIssue debentures

Borrow moneys otherwise than on debenturesBorrow moneys otherwise than on debentures

Invest the funds of the companyInvest the funds of the company

Make loansMake loans

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RESTRICTIONS & LAIBILITIES ON RESTRICTIONS & LAIBILITIES ON BOARD OF DIRECTORSBOARD OF DIRECTORS

Dispose of any Undertaking of the companyDispose of any Undertaking of the company

Remit or to give time for the repayment of, any debt due by a Remit or to give time for the repayment of, any debt due by a

directordirector

Invest, otherwise than in trust securities, the amount of Invest, otherwise than in trust securities, the amount of

compensation received by the company in respect of the compensation received by the company in respect of the

compulsory acquisitioncompulsory acquisition

Borrow moneys in excess of aggregate of the paid-up capital of Borrow moneys in excess of aggregate of the paid-up capital of

the company & its free reservesthe company & its free reserves

Contribute to charitable and other funds not directly relating to Contribute to charitable and other funds not directly relating to

the business of the company or the welfare of its employeesthe business of the company or the welfare of its employees23

BIBLIOGRAPHYBIBLIOGRAPHY

Legal Aspects of Banking Operations By MacmilanLegal Aspects of Banking Operations By Macmilan

Business Law for Management by K.R. BoolchandaniBusiness Law for Management by K.R. Boolchandani

Indian Companies Act, 1956Indian Companies Act, 1956

Company Law by Company Law by Singh and AvatarSingh and Avatar

Company Law and Practice, Taxmann, New DelhiCompany Law and Practice, Taxmann, New Delhi

A Guide to the Companies Act, Wadhwa and Company, NagpurA Guide to the Companies Act, Wadhwa and Company, Nagpur

www.google.comwww.google.com

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Thank

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