MANAGEMENT OF A COMPANY

PRESENTED BY-: Niharika Singh(131123) Gabbula Sairam(131117) Stanam Sai Deepthi(131109) Dharur Anirudh(131149) Nigar Alam Khan(131146) Rajeev M(131107)

WHO IS A DIRECTOR?
A company being a separate legal personality should be

operated at a distance from its share holders.

In order to facilitate this, the share holders elect & appoint

their representatives who can be entrusted with the responsibility of running the company.
These elected members, actually concerned in the operation

of the company(on behalf of owners) are known as directors.

The directors so appointed constitute a Board of Directors &

they jointly oversee the activities of the company.

If the board wishes one person to be represent on their behalf,

that person is appointed as the managing director or the whole time director.

WHO CAN BE A DIRECTOR?

A director refers to any person occupying the position of director.
Apart from this obligation, there are no formal academic or

professional qualifications or an upper age limit.

QUALIFICATION SHARES
The Act does not impose any share qualifications on directors. If the companys articles so provide, a director must acquire

the shares prescribed therein within two months of assuming office.

A director should hold shares worth of at least Rs.5000

CONSEQUENCE OF NOT HOLDING QUALIFICATION SHARES

If the director does not acquire shares within two months of his

joining office, is liable up to a fine of Rs.5500 per day till he continues to act as director.
Besides, if a person does not acquire qualification shares

within prescribed time, it will result in vacation of the office of director.

The vacation is automatic and no notice to director is required.

DISQUALIFICATION OF DIRECTORS
As per Section 274(1), a person shall not be capable of being

appointed director of a company under the following circumstances: If he is of unsound mind If he has applied to be adjudicated as an solvent and the application is pending If he has been convicted by a court for any offence and sentenced to imprisonment for not less than six months and a period of five years If he has not paid any call in respect of shares of the company held by him and six months have elapsed from the last day fixed for the payment of the call If there is an order qualifying him for appointment as director has been passed by a court in pursuance of Section 203

CONTINUED..
If he is a director of public company that

a) has not filed its annual accounts for any three consecutive financial years commencing on or after 1 April 1999 , or
b) has failed to repay its deposit or interest on due date, or redeem its debentures on due date or pay dividend and such failures continues for more than one year or more.

APPOINTMENT OF DIRECTORS
Appointment of first directors. Appointment by Board of Directors. Appointment by Central Government. Appointment by Third parties. Appointment by proportional representation.

APPOINTMENT OF FIRST DIRECTORS

Generally named in its articles. In case of default, subscribers of memorandum are deemed to

be the directors.-section 254.

Directors so appointed shall hold the office until new

appointment decision comes from first AGM .

According to sec. 255, not less than 2/3 of total number of

directors of a public company or private company must be appointed by the company in general meeting.

APPOINTMENT BY BOARD OF DIRECTORS

Additional directors [section 260]

either at the meeting of BOD or passing a special resolution.

Casual directors [section 262]

incase of death, resignation, disqualification or failure of an elected director to presume his office.
Alternate directors [section 313]

a temporary vacancy filled.

APPOINTMENT BY CENTRAL GOVERNMENT

Companies act empowers the Central Government to appoint

directors on the Board on an order passed by the NCLT.

In case of misuse of power and mismanagement. If the tribunal is satisfied after making the enquiry, it can

specify the no. of directors that can be appointed.

APPOINTMENT BY THIRD PARTIES

Third parties such as debenture holders, banks, financial

institutions, government, etc.

The no. of directors appointed so by third parties, known as

nominee directors, should not exceed 1/3rd of total strength of the board.
Such directors are not subject to retirement by rotation.

APPOINTMENT BY PROPORTIONAL REPRESENTATION

Act enables minority shareholders to have their representation

on the board, by giving an option to companies to appoint directors through a system of proportional representation.
Such appointments shall be made once in every three years.

MANAGERIAL REMUNERATION
It takes the form of salary, dearness allowance, perquisites, fees for

attending each meeting of the board of any committee thereof, commission, a specified percentage of net profits of the company or partly by one and partly by the other.
Whole time director- remuneration cannot exceed 5% of the net profits of

the company.
Total managerial remuneration payable by a public or a private company,

which is a subsidiary of a public company, to its manager and directors in any FY must not exceed 11%of the net profits of the company. [according to sec 349, 350,351.]

DIRECTOR OTHER THAN MD

According to sec 309(4). 1% of the net profits of the company if the company has a managing

director or whole time director or a manager.

3% of the net profits of the company in any other case.

REMUNERATION FOR
Companies having profits.

salary, DA, perquisites, commission, and other shall not exceed 5%of its profit.
Companies not having profits or inadequate profits.

allowance which

not exceeding a ceiling limit of Rs. 2400000 per annum. (managerial person).

IF EFFECTIVE CAPITAL OF COMPANY IS :

stipulated monthly remuneration
Less than 1 crore. Between 1 and 5 crore Between 5 and 25 crore Between 25 and 100 crore More than 100 crore

<= 75000 <= 100000 <= 125000 <= 150000 <= 200000

MANAGING DIRECTOR
Managing director means a director who is entrusted with

substantial powers of management which would not otherwise be exercisable by him.

Every public company(including a deemed public company) or a

private company having a paid up capital of Rs. 5 crore must have a managing director or whole time director or manager.

MODE OF APPOINTMENT
According to Section 2(26) a managing director may be

appointed by virtue of any of the following modes:

An agreement with the company or
A resolution passed by the company in a general meeting or A resolution passed by the Board of Directors or The Memorandum or Articles of Association The application for approval must be made to Central

Government in Form 25 A within 90 days of appointment.

According to Section 316 the number of managing

directorships cannot exceed two.

DISQUALIFICATIONS OF MANAGING DIRECTOR

Section 267 provides that no company can appoint or employ

or continue the appointment or employment of any person as its managing or whole time director who:
Is an undischarged insolvent, or has at any time been

adjudged an insolvent.
Suspends, or has at any time suspended, payment to his

creditors or makes, or has at any time made, a composition with them.

Is, or has at any time been, convicted by a Court in India of an

offence involving moral turpitude.

ROLE AND TERM OF MANAGING DIRECTOR

It is stipulated that a managing director shall be the member

secretary of the Board of Directors and shall function concurrently as an executive director or Chief Executive Officer(CEO) of the company.
No company can appoint or employ any individual as its

managing director for a term exceeding five years at a time.

However, a person may be re-appointed or his term of office

further extended by further periods not exceeding five years.

Such re-appointment or extension cannot be sanctioned

earlier than 2 years from the date on which it has come into force.(Section 317)

MANAGER
According to Section 2(24), manager means an individual who

has the management of the whole or substantially the whole of the affairs of a company.
He is subject to the superintendence, control and direction of the

Board of Directors.
Manager includes a director or any other person occupying the

position of a manager, by whatever name called, and whether under a contract of service or not.

WHO CAN BE A MANAGER?

According to Section 384, only an individual can be appointed as

a manager of a company. No company shall employ a firm or body corporate or association as its manager. The section clearly states that no company shall appoint or employ, or continue the appointment or employment of, any person as its manager who: Is an undischarged insolvent, or has, at any time within the preceding 5 years, been adjudged an insolvent or Suspends, or has at any time within the preceding 5 years suspended, payment to his creditors, or makes, or has at any time within the preceding 5 years made, a composition with them. Is, or has at any time within the preceding 5 years been, convicted by a court in India of an offence involving moral turpitude.

COMPARISON BETWEEN MANAGING DIRECTOR AND MANAGER

MANAGING DIRECTOR
A managing director is entrusted

with substantial powers of the management. A company may have two managing directors. A managing director must be a director A managing director is appointed by the directors from among themselves and appointed either under an agreement or by a resolution of the Board of general meeting.

MANAGER A manager has the management of the whole, or substantially the whole of the affairs of a company. A company can have only one manager as he is vested with the management of the whole or substantially the whole of the affairs of the company. A manager may or may not be a director. A manager is usually appointed by the Board of directors.

WHOLE-TIME DIRECTORS
Whole-time Directors or Functional Directors are the

Directors on the Board of Directors of the Company who are in whole-time employment of the company
A managing director is entrusted with substantial powers of

management [Sec. 2(26)] whereas a whole time director is just an ordinary employee of the company having no discretionary power to take decisions on policy matters regarding pricing of products, rate of allowable trade discount, buying and selling policy, etc.

CONTINUED..
The appointment of a managing director does not require the

consent of the shareholders but for the appointment of a whole-time director the sanction of the shareholders, by means of a special resolution, is necessary except when he is appointed in the capacity of trustee for debenture holders or manager (Sec. 314).
A managing director and a manager cannot exist

simultaneously in any company (Sec. 197-A), whereas a whole time director may be appointed along with a managing director or a manager.

CONTINUED..
A managing director can be a managing director of more than one

company (Sec. 316) but a whole time director, being a whole-time employee of the company, cannot be a whole-time director in more than one company
A managing director of a public company or a subsidiary thereof

can be appointed for a maximum period of five years at a time (Sec. 317), whereas there is no such restriction regarding the term of appointment of a whole-time director.

INDEPENDENT DIRECTOR
Independent Director means non-executive Director who,

apart from receiving directors remuneration, does not have any material/ pecuniary relationship or transaction with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates, which in judgment of the Board may affect independence of judgment of the Director.

CONTINUED..
As per revised clause 49 of the Listing Agreement the definition of

the term independent directors would mean a non-executive director who: Does not have a pecuniary relationship with the company, its promoters, senior management or affiliate companies. Is not related to promoters or the senior management. Has not been an executive with the company in the immediately three preceding financial years. Is not a partner or executive of the auditors/lawyers/consultants of the company for the last three years. Is not a supplier, service provider or customer of the company. Does not hold 2 per cent or more of the shares of the company.

DUTIES AND RESPONSIBILITIES

The duties and responsibilities of independent Directors are

normally as they are of director of the Company:

He should furnish information in the prescribed form to the

company about disclosure of General Notice of directorship, membership of body corporate and other entities.
He should also inform the Company about any change in the

details submitted subsequently.

He should provide a list of his relatives as defined in the

Companies Act and their directorship and interest in other concerns.

The Director shall have fiduciary duty to act in good faith and

in the interest of the company.

CONTINUED..
It is the duty of the Independent Director to acquire proper

understanding of the business of the Company. He should act only within the powers laid down by the Memorandum of Association and Articles of Association and by applicable law and regulations. He should not be a Director of more than fifteen Companies. Recommending to Board on the appointment, re-appointment and if required replacement or removal of statutory auditor and fixation of audit fees. Such an Independent Director could be working as member of Audit Committee prescribed under Section 292A of the Companies Act. In such situation he has to look into the obligations of Audit Committee and perform the duty.

THANK YOU