COMPANY

MANAGEMENT AND
DIRECTOR
Kazi Murad Hossain
Assistant Professor, Law Discipline , Khulna
University
MEANING OF THE COMPANY MANAGEMENT

• The board of directors, president, vice-president, and CEO are all examples of top-
level managers.
• These managers are responsible for controlling and overseeing the entire
organization. They develop goals, strategic plans, company policies, and make
decisions on the direction of the business.
• Management’s primary function is to get people to work together for the attainment
of an organization’s goals and objectives.
MEANING OF THE COMPANY MANAGEMENT

• Management is the act of getting people together to accomplish desired goals and
objectives using available resources efficiently and effectively.
• Since organizations can be viewed as systems, management can also be defined as
human action, including design, to facilitate the production of useful outcomes from a
system. This view opens the opportunity to manage oneself, a pre-requisite to
attempting to manage others.
MEANING OF THE COMPANY MANAGEMENT

• Management functions include: Planning, organizing, staffing, leading or directing,

and controlling an organization (a group of one or more people or entities) or effort
for the purpose of accomplishing a goal.

• Management is the organization and coordination of the activities of a business in

order to achieve defined objectives.

Read more: http://www.businessdictionary.com/definition/management.html

 DEFINITION OF DIRECTORS (SECTION 90-
110)
• The Companies Act does not precisely define the term ‘director’.
• An appointed or elected member of the board of directors of a company who, with
other directors, has the responsibility for determining and implementing the
company's policy.
• A company director does not have to be a stockholder (shareholder) or an employee
of the firm, and may only hold the office of director (see qualifications for directors).
•
Read more: http://www.businessdictionary.com/definition/company-director.html
 CONT…

• Directors act on the basis of resolutions made at directors' meetings, and derive their
powers from the corporate legislation and from the company's articles of association.

• The directors are the persons elected by the shareholders to direct, conduct, manage
or supervise the affairs of the company.
• Section 90 clearly provides that only a natural person may be appointed as a director.
• So, no body corporate, association, firm or any other juristic person shall be eligible
for director.
 NUMBER OF DIRECTORS

• The number of directors and the name of the first directors shall be determined by
the majority of the subscribers to the memorandum.
• Under Section 90, every public company shall have at least 3 directors.
• On the same way, in case of all other companies the minimum number of directors
must not less than two.
• Subject to this minimum number, number of directors of a company will be fixed by
the Articles of the company.
 MATTERS TO BE KEPT IN MIND IN REGARD TO THE NUMBER
OF DIRECTORSHIP

• No one is eligible to hold the position of director in more than twenty companies at a
time.
• A person who is appointed as a director in a company despite holding the
directorship in twenty more companies, his appointment is not effective long he
continues to hold the directorship of that number of companies.
• His appointment may be regularized by leaving the position of director from any of
these companies within a period of 15 days.
 EXCLUSION OF CERTAIN DIRECTORSHIP

• In calculating the number, the following shall be excluded:

a) A private company which is neither a subsidiary nor a holding of public company;
b) An unlimited company;
c) An association not carrying on business for profits;
d) An alternative director of a company.
 APPOINTMENT OF DIRECTORS

• Subscribers of the memorandum act to as directors

• First directors
• Directors appointed subsequently by members
• Appointment of directors retired by rotation
• Additional directors
• Appointment of directors due to casual vacancies
• Appointment of alternate director
• Appointment of directors by third parties
• Appointment of directors by government
 QUALIFICATION SHARES

• It is that number of shares which a shareholder must hold in order to be eligible for
election as a director.
• A share of common stock that a candidate for a company's Board of Directions (BOD)
is required to own. The term does not reflect a difference in the properties of a
qualifying share compared to common shares held by other shareholders. Instead, it
refers to the requirement that a member of the board must hold a vested interest in
the operation of the enterprise in the form of company stock.

Read more: http://www.businessdictionary.com/definition/qualifying-share.html

 TIME FOR OBTAINING SHARE QUALIFICATION
AND EFFECT OF NON-OBTAINING SHARE
QUALIFICATION

• Section 97 of our companies Act, 1994 provides that it shall be the duty of every director
to hold the qualification share to be specified in the articles
• If he has no qualification share , he has to obtain the qualification share within sixty days
of his appointment.
• It becomes incumbent on the part of every director to hold qualification shares and if he
does not hold them at the time of his appointment as director, he must acquire them within
[two months] after his appointment as director otherwise
• His Office will be vacated or
• Fine will be imposed
 DISQUALIFICATIONS OF DIRECTORS

• Unsoundness of mind
• Insolvency
• Failure to pay call in shares
• Minority
• Conviction
• Illness
• Removal by the Government
• Additional Disqualification in case of private company
 QUALIFICATION OF DIRECTORS

• A I Khan, Fundamentals of Company Law, update Edition, University Publications,

Page 254.
• He must obtain share qualification; [section 97]
• He must be of sound mind;
• He must be solvent;
• He must pay the call money if demanded to him;
• He must be a major;
• He is to be a person of high morality etc.
 CONT…

• Apart from the above mentioned qualification Section 92 provides some additional
qualifications:
• I) consent to act as a director
• II) qualification to act as a director in case of a company having share capital.
 VACATION OF OFFICE OF DIRECTORS

• He fails to obtain qualification shares within two months of his appointment (S. 97)
• He is found to be of unsound mind by a court of competent jurisdiction (S. 94)
• He is adjudged as insolvent
• He fails to pay calls made on him in respect of shares held by him within six months
from the date of such calls being made
 CONT…

• He accepts or holds any office of profit under the company other than that of the
managing director or manager, or legal or technical advisor or banker;
• He absents himself from three consecutive meetings of the directors without leave of
absence from the board of directors (U/S 108)
• He accepts a loan from the company. (U/S 103)
• He is concerned of participates in the profits of nay contract with the company
• He is punishable with imprisonment for a term exceeding six months.
 ADDITIONAL GROUNDS FOR VACATION OF
OFFICE
• A I Khan, Fundamentals of Company Law, update Edition, University Publications,
Page 256
 POWER OF DIRECTORS

• For the benefit of company , the board of directors is allowed to exercise all
reasonable powers with being its own ambit.
• Generally power of directors are conferred by the articles of association of the
company.
• Powers must not be inconsistent with the provisions of companies Act , MOA or AOA.

• A I Khan, Fundamentals of Company Law, update Edition, University Publications,

Page 259
 PRINCIPLE OF NON-INTERFERENCE

• The principle of non-interference shows that the company shall not interfere
arbitrarily with the activities of the directors, if once any power is vested upon the
board.
• Board of directors will act within the limit and for the good of the company.
• Case: Gramophone & Typewriter Ltd. Vs Stanley [1909]
• “Even a resolution of numerical majority at a general meeting can’t impose its will upon
the directors when the articles have confided them to control of the companies affair. ”
 CONT…

• Show & Sons (Salford) Ltd –vs- Shaw and Shaw

• Automatic self cleansing , etx, vs Cunignhame
 PRINCIPLE OF NON-INTERFERENCE:
EXCEPTIONS
• Directors acting malafide
• Board’s incompetence to act
• Deadlock in company’s management
 POWERS OF DIRECTORS AT MEETING

• A) make calls on shareholders in respect of moneys unpaid on their shares

• B) issue shares
• C) Issue debenture
• D) Borrow money otherwise than on debentures
• E) Invest funds of the company
• F) Make loans etc.
 DELEGATION OF POWER

• Though the office of the director can’t be transferred but some of the powers of a
director may be delegated to any committee of directors, the managing director, the
manager or any other principle officer of the company subject to a resolution passed
at the board meeting.
 RESTRICTIONS ON THE POWER OF
DIRECTORS
• Assignment of office
• Loans to directors
• Holding office of profit
• Restrictions on exercising powers
• Restrictions in case of certain contracts
• Exemption from liability
• Contribution to the charitable purpose
 LIABILITIES OF DIRECTORS

• Civil Liability
• Liability to outsider
• Liability to company

• Criminal liability
 MANAGING DIRECTOR

• A managing director is someone who is responsible for the daily operations of a company,
organization, or corporate division. In some countries, the term is equivalent
to CEO (Chief Executive Officer) the executive head of a company.
• In other countries, managing directors primarily work as the heads of individual business
units within a company rather than heading up the company as a whole. As a member
of senior management, the managing director is also expected to keep a company solvent
and to promote expansion and innovation within the industry.

• A I Khan, Fundamentals of Company Law, update Edition, University Publications, Page

285
 APPOINTMENT OF MANAGING DIRECTOR

• i) by an agreement with the company

• II) by a resolution passed in the general meeting of the company
• III) by virtue of the provision of memorandum or article
• IV) by the government
 RESTRICTION ON APPOINTMENT

• No person shall be appointed as a managing director if he is already a managing

director of another company. (Exception of private compay)
• In general meeting (Exception: government appointed MD)
• Managing director not to be appointed for more than five years. [Section 110 (1)]
• Re-appointement is possible.
 REQUIRED REFERENCES:

• (i) Dr. M Zahir, Company and Securities Laws , Revised and Updated edition 2005,
The University Press Limited.
• (ii) The Companies Act, 1994 (Govt. Publication).
• (iii) Avtar Singh, Company Law, Fourteenth Edition, 2004, Eastern Book Company.
• (iv) A I Khan, Fundamentals of Company Law, update Edition, University Publications
 FURTHER READING

• https://www.businessmanagementideas.com/management/directors-of-a-company-
meaning-legal-status-and-resignation/8982
• https://www.businessmanagementideas.com/management/difference-between-
managing-director-and-whole-time-directors/8996