What is company ?

DIRECTORS UNDER COMPANIES ACT 1956

What is company ?A company is a form of business organisation in which the funds of a large number of investors are managed by a few persons for the purpose of earning profit which are shared by all the investors. In common usage a company means an association of persons associated for some common purpose. It is therefore defined as an association of persons united for a common object. Section 3 (1) (i) of the companies act,1956 defines a company as A company means a company formed and registered under this act or an existing company.Features of a companyRegistration A company is to be compulsory registered under the companies act.Perpetual successionA company incorporated never dies. It has aperpetual succession. Its members may come and go but the company can go on for ever and remain the same entity.Limited liabilityThe novel idea of limited liability was for thefirst introduced by the companies act of 1857.CONTDCommon SealThe company has a separate legal existence under its own common seal. The common seal of the company gives it an independent existence.Separate PowerThe company being a distinct and legal personality can own enjoy and dispose off property in its own name.Capacity to sue and be sued:A company can sue and be used in itscorporate name.MANAGEMENTCONSTITUTION OF BOARD OF DIRECTORS(SEC 2-13, 252-3,253& 312)The company being an artificial person carries on its activities and business through individuals called directors. Director includes any person occupying the position of a director by whatever name called. Any person in accordance with whose directions or instructions the Board of Directors of a company is accustomed to act shall be deemed to be a director of the company.(NUMBER OF DIRECTORS SC-252, 258 & 259)Every public company, other than a public company which has become such by virtue of section 43A, shall have at least 3 directors. Every other company shall at least 2 directors(sec 252)A public company having-A paid up capital of five crores rupees or moreOne thousand or more small shareholders

Where the no. of directors falls below the maximum no, the remaining directors cannot act.The maximum no. of directors is fixed by articles. The maximum permissible limit of directors is 12. POSITION OF DIRECTORS1. DIRECTORS AS AGENTS: Co. being an artificial person , is governed by human agency. Directors control the affairs of the co. as its agents. They are the agents of the co. and not of individual shareholders.2. DIRECTORS AS TRUSTEES: Directors have been very often referred to as the trustees of cos money and property. The directors may be called upon to refund to the co. any money and property improperly and negligently applied by them.CONTD3. DIRECTORS AS PARTNERS: Directors are appointed by the co. as paid employees to control its affairs. They do manage its affairs and day-to-day transactions, but they are not partners since they are employees of the co. and no director can bind by his acts the other directors.4. DIRECTOR AS EMPLOYEES: The director may hold an office or place of profit as a salaried employee in addition to directorship. However, his rights as a director will be distinct from that of an employee of a co, and he will not be entitled to claim privileges and benefits granted to other employees of a co. Types of companies or corporationsPublic companiesPrivate companiesUnlimited companiesDisqualification of directors sec.274A person shall not be capable of being appointed director of a company ,if: he has been found to be of unsound mind by a court of competent jurisdiction.he is an undischarged insolvent;he has not paid any call in respect of shares of the company held by him whether alone or jointly with others and 6 months have elapsed from the last day fixed for the payment of the call orAn order disqualifying him for appointment as a director has been passed by a court on account of fraud or misfeasance.

ContdSuch person is already a director of a company , which-has not filed the annual accounts and annual returns for any continues three financial years commencing on and after.has failed to repay its deposits or interest thereon due date or redeem its debentures on due date or pay dividend and such failure continues for one year or more. A person shall not be able eligible to be appointed as a director of any other public company for a period of 5 years from the date on which such public company failed to file annual accounts and annual returns or has failed to repay its deposits or interest or redeem its debentures on due date or pay dividend for one year or more.REMOVAL OF DIRECTORS(Secs.284, 388 B to 388 E,402 & 407)1. BY SHAREHOLDERSBY SHAREHOLDERS(Sec.284) A company may, by ordinary resolution remove a director before the expiry of his period of office by :-Special notice of any resolution is required to remove the director under this section . On a receipt of notice of resolution to remove a director a company shall forthwith send a copy to the director concerned and the director shall be entitled to be heard on the resolution at the meeting.BY CENTRAL GOVERNMENT(Secs.388 B TO 388 E)The Central government may state a case against any person and refer the same to the Company law board & with a request to Company law board to inquire into the case & record the decision whether or not the person is fit for the director of a company.BY COMPANY LAW BOARD(Secs. 402 &407)On application by any member of the company in case of oppression or mismanagement the Company Law Board may terminate any agreement between company and the director ,managing director and the manager of company.The Director remove by the Company Law Board shall not be entitled to any claim of damages or for compensation for loss of office.Exception of Removal of DirectorsDirectors appointed by the Central Government.

In the case of private company ,the director holding office for life as on 01/04/1952.

When the director has been appointed by the principles of representation.Vacation of Office of Directors (sec 283)The office of the director shall become vacant if:He is found to be of unsound mind by a court of competent jurisdiction.He applies to be adjusted insolvent.He is adjusted an insolvent.He is removed before the expiry of period of his office.He resigns from his office(resignation tendered cannot be withdrawn without the company's or board's consent).He fails to make disclosure to the board in respect of contracts in which he is interested.Retirement of Directors by Rotation (sec 255,256)Unless the articles provide for the retirement of all directors at every annual general meeting , not less than 2/3rds of the total number of directors of a public company ,or of a private company which is a subsidiary of a public company , shall be person whose period of office is liable to determination by retirement of directors by rotation by the company in general meeting.

Factors :

At that meeting a resolution for the re-appointed of such directorhas been put to the meeting and lost.He is not qualified or is disqualified from appointment.A resources , whether special or ordinary , is required for hisappointment or re-appointment. Managing Director and whole time Director (2(26)Managing director means a director who by virtue of an agreement with the company , or of a resolution passed by the company in general meeting or by its board of director , or by virtue of its memorandum or articles of associationPower of managing director or whole time director:-A managingdirector of a company shall exercise his power subject to thesuperintendence , control and directors of its board of directors.Appointment of managing director or whole time director:-On and from 15.06.1988 , every public company, or a private company which is a subsidiary of a public company, having a paid up share capital of rupees five crore or more, shall have a managing or whole time director or a manager. Remuneration of DirectorsThe remuneration payable to the directors of a company, including any managing or whole-time directors , shall be determined in accordance with provision of section 198 and 309 by the articles of the company by resolution or if the articles so require by a special resolution

Remuneration shall include:any expenditure incurred by the company in providing any otherbenefit or amenity.any expenditure incurred by the company in respect of any obligation or service. Power, Rights, Duties , Liabilities, Disliabilities of Directors (sec 291,292)Power - The board of directors derive their powers from:The companies act Articles of associationBoard resolutionResolution in general meetingsAgreement The board of directors shall exercise the following powers:The power to make calls on shareholdersThe power to issue debenturesThe power to make loans Power, Rights, Duties , Liabilities, Disliabilities of Directors (sec 291,292)RightsTo attend meetings of the company.To participate in the management of the company's affairs.To receive remmuneration, if any, fixed.

DutiesAct honestly.Must not make secret profiles.Attend board meeting.Obtain qualification shares where applicable.Pay call amount.

CONTD.DisabilitiesHe cannot assign his office or delegate his functions.He cannot hold any place of profit in the company without consent of the company by a special resolution.LiabilitiesFor untrue statement in the prospectus.For ultra vires acts.For irregular allotment of shares.Where the directors act unlawfully.

Prepared by F.B.M.S. AROHIT VERMA 5636RAMESH PANDIT 5637AMIT PAL 5638CHIRANTAN 5638RAHUL PANCHANL 5640KAVITA SHETTIER 5642THANK YOU !!