Who is a

director
O An appointed or elected member of the board of directors of a company.

O He has the responsibility for determining and implementing the

company’s policy.

O A company director need not

✓ to be a shareholder or
✓ an employee, and
may hold only the office of director under the provisions of the Act.

O Directors derive their powers emanating from board resolutions

O Unlike shareholders, directors cannot participate through proxy.

O Unlike employees, cannot absolve themselves of their responsibility for

the delegated duties.
 Definition of
•
Directors/BODs
“director” means a director appointed to the
Board of a company;
(“director” includes any person occupying the
position of director, by whatever name called)

• “Board of Directors” or “Board”, in relation to a

company, means the collective body of the
directors of the company;
(“Board of Directors” or “Board”, in relation to a
company, means the board of the directors of the
company)
General Rules about appointment of
Directors
• Directors should be individuals, i.e. natural persons
• Minimum and maximum number of directors

Private Public OPC

•2 •3 •1
• 15 • 15 • 15

• The maximum limit of 15 directors can be increased by

passing a special resolution.
(Earlier the limit was 12 directors and approval
of Central Government was required for
raising the limit)
General Rules about appointment of Directors
contd…
Every director to be appointed in general meeting, unless
otherwise provided in Act.

Before appointment, person to hold DIN and furnish the same to

company along with a declaration that he is not disqualified to
become a director under this Act.

Every director to provide his consent to act as director and the

consent should be filed with ROC before the concerned director can
act as director.

In case of a public company, atleast 2/3rd of directors will be

“directors to retire by rotation” and out of them atleast 1/3rd to
retire every year.
General Rules about appointment of Directors
contd…

Every company to have atleast one director who has stayed in

India for a period of not less than 182 days in the previous
calendar year

All listed companies and other public companies having paid up

capital of Rs. 100 crore or more of turnover of Rs. 300 crore or
more to have atleast one WOMEN DIRECTOR.

All listed companies and other public companies having paid up

capital of Rs. 100 crore or more of turnover of Rs. 300 crore or
more or deposits/loans outstanding of Rs. 300 crore or more to
have atleast 1/3 rd directors as INDEPENDENT DIRECTORS.
General Rules about appointment of Directors
contd…
Directors of companies can be appointed by the
following:
Small
Promoters Shareholders
Shareholder
s

Board of
NCL
Director T
s
Banks/ Financi
al
Institutions
 Limit on number of
Directorships
• A director not to hold office in more than 20 companies
including alternate directorship.

• Out of the 20 companies mentioned above, not more

than 10 companies can be public.

• Public company includes private companies which

are subsidiaries or holding companies of public
companies

• the members of a company may, by special resolution,

specify any lesser number of companies in which a
director of the company may act as directors.
Disqualifications for appointment of
director
A person shall not be eligible for appointment as
a director of a company, if —
he is of unsound mind and stands so declared by a competent court

he is an undischarged insolvent

he has applied to be adjudicated as an insolvent and his

application is pending

He has been convicted and sentenced to imprisonment for

atleast 6 months and five years from expiry of sentence have not
got over

He has been convicted and sentenced for a period of seven years

or more
Disqualifications for appointment of director
contd…
A person shall not be eligible for appointment as
a director of a company, if —

an order disqualifying him for appointment as a director has

been passed by a court or Tribunal and the order is in force

he has not paid any calls in respect of any shares of the company
held by him & 6 months have elapsed from the last day fixed for
the payment of the call

he has been convicted of the offence dealing with related party

transactions under section 188 at any time during the last
preceding five years

He has not obtained DIN

Disqualifications for appointment of director
contd…
A person shall not be eligible for appointment as
a director of a company, if —
A person who is director of a company which has not filed
financial statements or annual returns for 5 continuous yrs, till
expiry of 5 yrs from date of default

A person who is director of company which has failed to repay

deposits, debentures or distribute dividend for a period of one
year, till expiry of 5 years from date of default

Private Companies can provide for additional disqualifications in

their Articles
Qualifications for Appointment of MD /WTD
/Manager
Following conditions to be satisfied:

• he had not been sentenced to imprisonment for any period, or to a fine

exceeding one thousand rupees, for the conviction of an offence under any of
the Acts like Stamp Act, Customs Act etc.

• he had not been detained for any period under the Conservation of Foreign
Exchange and Prevention of Smuggling Activities Act, 1974

• he has completed the age of 21 years and has not attained the age of 70 years
(with special resolution person above 70 years can be appointed.)

• where he is a managerial person in more than one company, he draws

remuneration from one or more companies subject to the ceiling provided in
section V of Part II

• he is resident of India.
For the purpose of this Schedule, resident in India includes a person who has been
staying in India for a continuous period of not less than twelve months immediately
preceding the date of his appointment as a managerial person and who has come to
stay in India,—
(i)for taking up employment in India; or (ii) for carrying on a business or vacation in
India.
 Types of directors
Executive director
H/she is the full-time working director of the
company. They have a higher responsibility
towards the organization. The company and its
employees expect them to be efficient and
careful in all the dealings.

Non-Executive Directors
H/she are non- working directors and are not
involved in the everyday working of the
company. They might take part in the planning or
policy-making process. They challenge the
executive directors to come up with decisions
and solutions that are in the best interest of the
company.
Managing directors
They have a substantial ability to make decisions,
manage and direct other members of the company. A
Public Company or a subsidiary of a Public
Company that has a share capital of more than Five
Crore rupees must have a Managing Director.
Independent directors
They are the ones who do not have any direct
relationship with the company. Their experience is
their asset and gives expert advice to the board when
required. Public companies who have paid-up share
capital, turnover, or outstanding loans of Rs. 100
Crores, Rs.100 Crores, and Rs.50 Crores or more
need two independent directors.
Qualifications to be an independent director:
•Must have expertise and experience;
•Must be a person of integrity;
•Should not be a promoter of the company or its
subsidiaries;
•Should have no relations (financial/personal) with the
promoters, or directors of the company;
•Should not have been key managerial personnel of the
company or any of its holdings and subsidies;
•Should not hold total voting power exceeding two
percent in such company.
Residential director
A director who has lived in India for at least 182
days is a residential director. A company should
have one residential director.
Small Shareholder Directors
They are the ones who can appoint a single
director in a listed company. By issuing a
notice to at least 1000 shareholders or
1/10th of the shareholders whichever is
lesser, to approve this action.
Women directors
The companies who have their securities
listed on the stock exchange or have a paid-
up capital of Rs. One hundred
crores/turnover of Rs. Three hundred crore
or more must have a women director.
Additional Directors
An individual can act as an additional director by
taking the position of a director until the next
Annual General Meeting.
Alternate director
When a director is absent for more than three
months; an alternate director comes on board on
his behalf. He acts as a director for a temporary
period. And can only hold office as permissible
to the director whose office this director holds.
Nominee Director
Shareholders, central government or third parties
appoint them. Nominee directors come on board
when there is grave mismanagement or the board
members abuse their powers.
A Director is part of a collective body of

Directors called the Board, responsible for the

superintendence, control and direction of the

affairs of the Company.

 Legal position of directors

a) Directors as Agents b) Directors c) Directors as officers

as employees
A company as an ➢Director treated as officers
artificial person, acts When the director of an company.
through directors who is appointed as
are elected whole time ➢They are liable to certain
employee of the penalties if the provisions of
representatives of the
company then the companies act are not
shareholders and who that particular strictly complied with.
execute decision directors shall be
making for the benefit considered as Director as trustees:
of shareholders. employee director
➢Director are treated as
or whole time
director. trustees of the company,
money and property: and of
the powers entrusted to
and vested in them only as
trustee.
 Duties of
• Director toDirectors
act in accordance with AOA.

• A director of a company shall act in good faith

in order to promote the objects of the
company for the benefit of its members as a
whole, and in the best interests of the
company, its employees, the shareholders, the
community and for the protection of
environment.

• A director of a company shall exercise his duties

with due and reasonable care, skill and
diligence and shall exercise independent
judgment.
 Duties of Directors
• contd…
A director of a company shall not involve in a
situation in which he may have a direct or
indirect interest that conflicts, or possibly may
conflict, with the interest of the company.

• A director of a company shall not achieve or

attempt to achieve any undue gain or
advantage either to himself or to his relatives,
partners, or associates
• A director of a company shall not assign his
office and any assignment so made shall be
void.
 Duties of Directors
contd…enquiry and investigation
During Inspection,

• Where a Registrar or inspector calls for the books of account and

other books and papers, it shall be the duty of every director,
officer or other employee of the company to produce all such
documents to the Registrar or inspector and furnish him with such
statements, information or explanations in such form as the
Registrar or inspector may require and shall render all assistance to
the Registrar or inspector in connection with such inspection.

Investigation by SFIO

• The company and its officers and employees, who are or have been
in employment of the company shall be responsible to provide all
information, explanation, documents and assistance to the
Investigating Officer as he may require for conduct of the
investigation.
 Duties of Directors
contd…
During windup by Tribunal (Section 274)

• (3) The directors and other officers of the company, in

respect of which an order for winding up is passed by the
Tribunal under clause (d) of sub-section (1) of section 273,
shall, within a period of thirty days of such order, submit, at
the cost of the company, the books of account of the
company completed and audited up to the date of the
order, to such liquidator and in the manner specified by the
Tribunal.
Powers of director