DIRECTORS

1
 DEFINITION OF DIRECTOR
• A co. is an artificial person, it cannot act by itself. It must
therefore , act through human beings who are called
directors. The directors of a co. are collectively known as
‘board of directors’..Section 2(34) of companies Act 2013
defines a ‘director’ to mean a director appointed
to the Board of a company.
• Director is a person elected by the shareholders to
manage the affairs of a co.
 No. of directors
• Every public co. must have at least 3 directors and every
private co. must have atleast 2 directors. The act has fixed
15 as max. no. which can be increased by following the
procedure.
 General provisions relating to appointment of
directors
• Every director shall be appointed by the company in general
meeting.

• Director Identification Number is compulsory for appointment of

director of a company .

• Every person proposed to be appointed as a director shall furnish

his Director Identification Number and a declaration that he is
not disqualified to become a director under the Act.
 Appointment of directors
• First directors appointed by the promoters
• Subsequently directors appointed in AGM
• Appointment of directors by the central govt.
• Appointment of directors by third parties
• Resident director
• Women Director
• Independent Director
 Contd…
Appointment of Directors By BOD in few cases:
•Additional directors
•Filling of casual vacancy by board
•Alternate director
 Case-let
• PQR Limited is a family-owned company with three
directors. One of the directors, Mr. F, has recently passed
away. The Articles of Association state that the remaining
directors can appoint a new director to fill the vacancy,
but they must obtain the unanimous consent of the other
directors. The two remaining directors cannot agree on a
new appointment and decide to leave the position vacant
until they can reach a consensus or find a suitable
candidate.
 Retirement of Directors
• Retirement by Rotation
• Age Limit For directors
• Retirement by resignation
• Retirement by removal
 EXAMPLE OF RETIREMENT OF
DIRECTOR
• Suppose there are total 15 directors in a public(unlisted company), 4 of which are
independent, 7 of them are executive and 4 are non executive and non
independent.

• So 11*2/3 will be 7.333. It will be rounded off to next number 8. 8 directors are
retiring by rotation. Out of these 8 directors 1/3rd are liable to retire in every
AGM. 1/3rd of 8 is 2.666. So 3 directors shall retire at every AGM. Directors can
be appointed by shareholders by majority.

• For calculating 2/3rd independent directors are not included in the calculation
•
 Case let: The Absentee Director
• A director of a company was frequently absent from board
meetings and failed to respond to emails and calls from
other board members. This director also rarely
contributed any insights or ideas during meetings. What
steps can the board take to address this situation?
 Contd..
• The board can first try to understand why the director is
frequently absent and unresponsive. It may be due to
personal or professional reasons, or the director may feel
disengaged or disinterested in the company. If the issue
persists, the board can consider removing the director
from the board and finding a replacement who is more
committed and engaged.
 Case let
• XYZ Limited is a publicly-traded company with a board of
six directors. One of the directors, Ms. A, recently
resigned due to personal reasons. The board needs to
appoint a new director to fill the vacancy. The company's
Articles of Association state that the remaining directors
can appoint a new director to fill a casual vacancy. The
board decides to appoint Mr. B, who has extensive
experience in the same industry.
 Women Director- 149
Such class or classes of companies as may be prescribed in
Companies (Appointment and Qualification of Directors)
Rules, 2014, shall have at least one woman director.

(i) every listed company;

(ii) every other public company having :-
(a) paid–up share capital of one hundred crore rupees or more;
or
(b) turnover of three hundred crore rupees or more
 Case let: Board Diversity
• A board of directors of a tech startup comprises only male
members. The CEO wants to add a woman to the board to
improve diversity, but there are no suitable candidates
with the required skills and experience. Should the CEO
appoint a woman with less experience to improve
diversity or wait until a suitable candidate is found?
Appointment of Independent director

• Section 149(4) requires that every listed public

company to have at least one third of the total number
of directors as independent director
• Other public companies:
1. Paid up capital of 10 crore or more
2. Turn-over of 100 crore or more
3. Public deposits like debentures etc. more than 50 crore
 Who is independent Director?
• An independent director in relation to a company, means a director other
than a managing director or a whole time director or a nominee director-
• Who is in the opinion of the board is a person of integrity and possesses
relevant expertise and experience.
• Who is or was not a promoter of a company or its subsidiary or associate
company.
• None of whose relative has or had pecuniary relationship or transaction with
the company.
• Who possesses such other qualifications as may be prescribed
 Case let
• Arundhati Bhattacharya is an independent director on the
board of Wipro Limited, a leading global information
technology, consulting, and business process services
company. She was appointed to the board in January
2019.Bhattacharya is a highly respected business leader in
India, having served as the Chairman of the State Bank of
India (SBI) from 2013 to 2017.
 Contd..
• During her tenure at SBI, Bhattacharya led a successful
digital transformation of the bank, improved its financial
performance, and introduced several new customer-
centric initiatives. As an independent director of Wipro,
Bhattacharya brings her extensive experience in the
financial services industry and her expertise in digital
transformation and customer-centricity to the board.
 Contd…
• Her appointment is also significant because it reflects
Wipro's commitment to diversity and inclusion, as
Bhattacharya is one of the few women serving on the
board of a major Indian company. Since joining the
board, Bhattacharya has played a key role in shaping
Wipro's strategy, particularly in the areas of digital
transformation and sustainability.
 Contd…
• She has also provided valuable insights and guidance to
the company's management team on regulatory and
compliance issues. In addition to her role at Wipro,
Bhattacharya serves on the boards of several other
companies, including Reliance Industries Limited,
Piramal etc.
 Resident Director
For the first time the companies act 2013 has introduced
the concept of resident director. Section 149 provides that
every company shall have at least one director who stayed
in India for a total period of not less than one hundred
and eighty two days in the previous financial year.
 Powers of Directors
• Subject to the provisions of the act, the board of directors
of a co. shall be entitled to exercise all such powers and to
do all such acts and things as the co. is authorised to
exercise and do. However they cannot do anything which
the articles, memorandum and the act require to be done
by the shareholders in general meeting.
 Specific Powers of the Board
• Power to decide dividend w.o asking the shareholders
• To make calls on share
• To borrow money otherwise than on debentures
• To invest the funds of the co.
• To make loans
• To fill up casual vacancy in the office of directors
• Power to give permission for contracts.
 POSITION OF DIRECTORS
 directors as agents
 directors as trustees
 directors as managing partners
 Disqualification of Directors
• Section 164 of Companies Act 2013 provides that a person
shall not be eligible for appointment as a director of a
company if –
• If a person is adjudged person of unsound mind
• He is an undischarged insolvent
• He has been convicted and sentenced to not less than 6
months imprisonment for an offence
• He has been disqualified by the court being the fraudulent
person in the promotion
 Duties of Directors

• Duty of reasonable care and skill

• Duty of good faith and to disclose conflict of interest
• Duty to attend board meetings
• Duty to act within their powers and within the scope of
co’s memorandum
• Duty to act in the best interest of the co.
 Case let: Conflict of Interest
• As a director of a publicly listed company, John is also the
owner of a private firm that supplies raw materials to the
company. The private firm charges a higher price for the
raw materials than the prevailing market price.
• Should John disclose this conflict of interest to the board
and step down as a director?
Thank You