DIRECTORS

“The company itself cannot act in its own person, for it has
no person; it can only act through directors, and the case is,
as regards those directors, merely the ordinary case of
principal and agent.”

Definition:
‘Director’ includes any person occupying the
position of director, by whatever name called.

A Director may, therefore be defined as a person

having control over the direction, conduct, management or
superintendence of the affairs of a company.
Only individuals can be directors:
- There should be somebody readily available who can be
held responsible for the failure to carry out the trust.
Number of Directors
Minimum number:
Every public company shall have at least 3 directors
and every other company at least 2 directors.
A public company having-
(1)A paid-up capital of 5 crore or more;
(2)One thousand or more small shareholders,
“Small shareholder”- a shareholder holding shares of nominal
value of Rs 25,000 or less in a public company.
-Increase or reduction of number of directors
-Sanction by Central Government
APPOINMENT OF DIRECTORS
1.First Directors
(a) The Articles of a company usually name the first directors
by their respective name or prescribe the method of appointing
them.
(b) If not, the directors shall be determined in writing by the
subscribers of the Memorandum or a majority of them.
(c) If not, subscribers of Memorandum who are individuals
become directors of the company.
2.Appointment of directors by company
(1)Directors must be appointed by shareholders in general
meeting.
(2)At least 2/3rd of the total number of directors shall be liable
to retire by rotation.
The appointment or re-appointment of the directors by
company in general meeting is governed by the
following provisions:
Ascertainment of directors retiring by rotation and
filling of vacancies.
(1) At the AGM 1/3rd of the rotational directors shall retire
from office.
(2) Those who have been the longest in the office since their
last appointment shall retire.
 (3) Company may fill up the vacancy by appointing the
retiring director or some other person.
(4) If the place of the retiring Director is not filled, for two
weekly meetings, the retiring director shall be deemed to have
been appointed except in case:
(a) A resolution for the re-appointment is lost.
(b) Director is unwilling
(c) Disqualified
(d) Special or ordinary resolution is required.
Appointment of a new director:
(1) Fourteen day’s notice and deposit of Rs 500.
(2) Consent in writing to act as director
(3) Separate ordinary resolution for each appointment.
3.Appointment of directors by directors (Sec
260, 262 and 313)
(1) As additional Directors
(2) In a casual Vacancy
(3) As alternate Director-if it is so authorised by
(i) The Articles of the company
(ii) A resolution passed by the company in the general
meeting
4.Appointment of directors by third parties
-By share holders or other creditors
5.Appointment by proportional
representation
-Not less than 2/3rd of the total number of Directors
6.Appointment of directors by the central
government (Sec 408)
-To effectively safeguard the interests of the company or its
shareholders of the public interest.

POSITION OF DIRECTORS
It is very difficult to pinpoint the exact legal position of the
directors of a company.
Directors as Agents
-Charged with the obligation of carrying on its Business.
-Nature of his duties is determined partly by the statute and partly
by the law of agency.
-Directors are not personally responsible as agents
-Directors are personally responsible as agents where:
(1)The contract is in their own names
(2)Use company’s name incorrectly
(3)The contract signature is not clear
(4)Exceed powers given in the Memorandum
-Directors as Employees
-Can hold a salaried office or employment in a company
(Sec.77(2))
-Directors as Officers
-Liability to certain penalties
-Directors as Trustees
(1)Of the company’s money and property
(2)Of the powers entrusted to them.
-They are actually Qausi -Trustees only.
 NUMBER OF DIRECTORSHIPS
-No person to be a director of more than 15 Companies
-Exclusion of certain Directorships
-Choice of person becoming more than 15 companies
-Penalty

QUALIFICATION OF DIRECTORS
A director must-
(1)Be an individual
(2)Be competent to contract
(3)Hold a share qualification if so required by the
Articles.
 DISQUALIFICATION OF
DIRECTORS
The following persons are disqualified for appointment as
directors;
1. A person of unsound mind.
2. An un discharged insolvent.
3. A person who has applied to be adjudicated as an insolvent.
And his application is pending.
4. A person who has been convicted by a court of any offence
involving moral turpitude.
5. Whose calls in respect of shares of the company held for more
than 6 months, have been in arrear.
6. A person disqualified by the court to be appointed as director,
on grounds of fraud or misfeasance.
.
 DUTIES OF DIRECTORS
(1)Fiduciary Duties
-Exercise power Honestly and bona fide for the benefit of
company
-Do not place in a position in which there is a conflict between
the duties of the company and their personal interests
(2)Duties of care, skill and diligence
- carry out their duties as is reasonably expected of persons of
their knowledge and status
(3)Other duties of Directors
-To attend Board meetings
-Not to delegate functions except to the extend authorized
-To disclose his interest
 REMOVAL OF DIRECTORS
(1)Removal by Shareholders
-by passing an ordinary resolution .
-not applicable to:
(i) Appointed by Central Government
(ii) Holding Office for life on April 1,1952.
(iii) System of 2/3rd proportional representaion.
(2)Removal by Central Government
-recommendation of the Company Law board
(3)Removal by company Law board
 MANAGING DIRECTOR

•Definition

•Appointment

•Number of managing directorship

•Term of office

•Disqualifications of managing director

 MANAGING DIRECTOR

A managing director means a director who is entrusted with substantial powers

of management which would not otherwise be exercisable by him.

The term managing director includes a director occupying the position of a

managing director, by whatever name called.

A managing director shall exercise his powers under the superintendence,

control and direction of its board of directors.

These powers may be conferred upon him by virtue of an agreement with the
company or a resolution passed by the company in the general meeting or by
its board of directors or by virtue 0f its memorandum or Articles Of Association.

A managing director is the whole time director and the chief executive of the
company.
 APPOINTMENT OF MANAGING DIRECTORS

Every public company, or a private company which is the subsidiary of a public company
having a paid up share capital of 5 crores or more shall have a managing director.

Appointments of managing director shall be in accordance with the conditions specified

n Schedule X111.If not, the approval of the central government is required.

Provisions Relating to the APPROVAL OF CENTRAL GOVT:

Every application seeking approval should be made to the central govt within 90 days
rom the date of such appointment.

The central govt shall not grant its approval to the application if:

. The person so appointed is not a fit and or, a proper person and such appointment is
ot in the public interest.

. The terms and conditions of the appointment is not fair and reasonable.

The central govt may approve for a period lesser than the period for which he is actually
appointed.,
 TERM OF OFFICE (sec.317)

• It cannot exceed 5 years at a time.

There is nothing to prohibit the reappointment, extension of term of office

of the managing director.

Sec.317 does not apply to :

A private company, which is not a subsidiary of a public company.

 DISQUALIFICATION OF MANAGING DIRECTORS

The following persons are disqualified for appointment as managing directors

Of a company:

1. A person of unsound mind

2. An un discharged insolvent.

3. A person who is, or has at any time suspended, payment to his creditors , or
makes , or has at any time made, composition with them.: or

4. A person who is , or has at any time been convicted by a court of an offence

involving moral turpitude
 THE COMPANY SECRETARY
DEFINITION

Sec 2(45) as modified by Companies

(Amendment) Act , 1988 defines a Company Secretary as “
Secretary means a person who is a member of the Company
Secretaries of India , and includes any other individual
possessing the prescribed qualifications, and appointed to
perform the duties which may be performed by a Secretary
under this Act and any other ministerial and administrative
duties.”
 GENERAL LEGAL POSITION

1. As a servant of the company

2. As an agent of the company
3. As an officer of the company
 DUTIES OF THE COMPANY SECRETARY

•Duties towards the company

•Duties towards the directors
•Duties to the whole- time managerial authority
•Duties to the share holders and the public
•Duties towards the office and the staff
•Other duties
 Duties towards the company

•Statutory declaration (Sec 149 (1)(d))

•Certificate of commencement of business (Sec 149(1)(d))
•Annual Returns (Sec 161(1))
•Balance Sheet ,Profit and loss Account (Sec 215(1)(ii)
•Statutory Duties
Example
•Filing the returns as to allotment (Sec 75)
•Filing the annual return (Sec 159-160)
• Maintain statutory and statistical books
 Duties towards Directors

•To ensure that actions of directors are in compliance with company’s

memorandum and articles
•To deal with correspondence
•To issue notices
•To maintain all important records
•To draft directors report
 Duties towards whole time managerial authority

• To organize and control the head office of the company.

• To draft contracts.
• To act as liaison officer.
• To keep effective contacts.
• To keep effective contacts
• To keep title deeds
• To submit statutory returns
 Duties to the share holders and the public

• To do necessary work relating to shares and debentures

• To deal with all correspondence
• To issue notices and agendas
• To keep the proceedings of all meetings

Social responsibilities
• As a public servant

Duties towards office and the staff

• As an executive head at registered office
 Other duties

• To represent the company

• To act in the best interest of the company
• To maintain secrecy of confidential matters
• To perform his duties honestly and diligently
 Duties of a
Company Secretary….
• To superintend, direct and control office work
at the Registered office.
• To do all such acts as authorised by the
directors.
• Issue testimonials to employees on behalf of
the company.
• Sign proceedings of company meetings and
other such meetings, on behalf of the
company, not requiring a common seal.
 Liabilities of a
Company Secretary….
• Failure to send copies of MOA, etc to members
within 7 days of requirement.
• Failure to file with the Registrar, a return of
allotments of shares within 30 days after allotment.
• Failure to maintain register of members with
prescribed particulars.
• Default in holding the statutory meetings and filing
the statutory report.
• Default in holding the AGM.
 Qualifications….

The companies Rules, 1988, provides that every

company having a paid-up capital of Rs. 25 Lakhs or
more, must have a whole-time Company Secretary.;
and that the qualifications which a person must posses
in order to be eligible for the appointment as whole-
time Company Secretary, shall be as follows:
If the Company’s Paid-up Share
Capital is above Rs. 25 Lakhs…….

The person should have obtained the membership of the Institute

of Company Secretaries of India,New Delhi.
If the Company’s Paid-up Capital is
below Rs. 25 Lakhs…..
Should have one or more of the following:
• He/She should have obtained the membership of the Institute
of Company Secretaries of India, New Delhi.
• Passed the intermediate examination conducted by the ICSI,
New Delhi.
• Post-graduate degree in commerce of Corporate Secretaryship.
• Degree in Law
• Membership of the Institute of Chartered Accountants of India
or Institute of Cost & Works Accountants of India.
 Dismissal
Is there any special law governing the dismissal of the
company secretary?
No…… But Why Not?
A Company Secretary is a mere servant of the company.
His suspension and dismissal, are governed by the normal
laws applicable between an employer and an employee.
Exceptions to Dismissal………
If appointed for a fixed term, he cannot be dismissed, unless
guilty of. of misconduct, incompetence, or willful disobedience.