Company Management

7/18/2019 Company Management

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COMPANYCOMPANY

MANAGEMENTMANAGEMENT

1



Director DefnedDirector Defned

• Director includes any person occupyingthe position of director, by whatever namecalled.

• Only individuals can be director.• Every public company shall have at least

three directors every private company atleast two directors.

• Increase in number of directors to besanctioned by Central Government if totalexceeds twelve !ec."#$%

2



APPOINTMENT OFAPPOINTMENT OF

DIRECTORSDIRECTORS• &irst directors named in articles.

• Directors appointed by the company.

• 'etirement by rotation.

• (ppointment of directors by directors.

• (ppointment of directors by third parties.

• (ppointment by proportional

representation.• (ppointment of directors by Central

Government.

3



POSITION OF DIRECTORSPOSITION OF DIRECTORS

• Directors as agents.

• Directors as employees.

•

Directors as o)cers.• Directors as trustees.

* +rustees of the company’s moneyand property.

* +rustees of the powers entrusted tothem.

4



DISQUALIFICATION OFDISQUALIFICATION OF

DIRECTORSDIRECTORS

• ( person of unsound mind

• (n undischarged insolvent.

• ( person who has applied to bead-udicated as an insolvent and hisapplication is pending.

• ( person who has been convicted byCourt of any oence involving moralturpitude for six months and a periodof /ve years as not elapsed.

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• ( person whose calls where in

arrears for more than six months.• ( person who is dis0uali/ed by court

u1s."23.

•( person who is already a director ofa public company which has not/led annual returns1accounts forthree consecutive years or failed to

repay deposits, redeemeddebentures or pay dividend for oneyear or more.

6



VACATION OF OFFICE ANDVACATION OF OFFICE AND

REMOVAL OF DIRECTORSREMOVAL OF DIRECTORS• 4acation of O)ce !ec "53%6

– &ails to obtain 0uali/cation shares within "months of his appointment or ceases to

hold thereafter. – (d-udged to be of unsound mind.

– (pplies to be ad-udged as an insolvent

–

(d-udged as insolvent – Convicted by court for any oence

involving moral turpitude for a period notless than 7 months

– 8as calls in arrears for more than 7 months7



– (bsents himself from 3 consecutive boardmeetings or for 3 months whichever is longer

without leave of absence – 8e or his /rm or any private company of which

he is a director accepts loan or any guarantee orsecurity without central government approval

– &ails to ma9e disclosure of his disinterest in anycontract

– :ecomes dis0uali/ed by an order of court on theground of conviction of an oence in promotion,formation or management or found guilty offraud or misfeasance in relation to winding up

– 8e is removed by the company by ordinary

resolution – Ceases to hold o)ce or employment in the

holding company

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• Remov! o" Director#Remov! o" Director#

– :y share holders !ec "5;%

– :y central government !ec 355: to

355E% – 'emoval by company law board !ec

;2"%

9



MANAGERIALREMUNERATION

• Overall maximum managerial remunerationnot to exceed <<= of net pro/ts of thecompany!ec.<$5%

• 'ules for payment of remuneration todirectors.

• !hall be determined in accordance with theprovisions of !ec.<$5 and 32$, either by the

articles or by a resolutions passed by thecompany in general meeting.

• >on executive director may receivedremuneration by way of fee for each meeting.

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• ( whole time director or a managingdirector may be paid either by way of

monthly salary or at a percentage of the netpro/ts of the company or by both the ways.

• !hall not exceed #= for one director or <2=if more than one of the net pro/ts withoutCentral Government approval.

• ( part time director may be paidremuneration by way of periodical paymentswith approval of central government or byway of commission if authori?ed by a special

resolution which shall be in force for amaximum period of /ve years.

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• +he remuneration to part time

directors shall not exceed <= of thenet pro/ts, if the company has amanaging director or whole timedirector and 3= of the pro/t in any

other case.

• +he above rules shall not apply to a

private company unless it is asubsidiary of a public company.

12



MEETINGS OFDIRECTORS

• >umber of meetings four in a year andonce in three months.

• >otice of meetings to be given in writing

to every director for the time being in Indiaat his usual address.

• @uorum for meeting to be <13 of the totalstrength or two directors whichever ishigher.

• @uorum to be uninterested directors.

13



PO$ERS OF DIRECTORS

• General powers of the :oard !ec."$<%6

<. Entitle to exercise all powers and to doall such acts and things as the company

is authorised to do.". 'estrictions6 !hall not do any act which

is to be done by the company in generalmeeting and shall exercise its powerssub-ect to the provisions of companyAsact or Bemorandum.

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• owers to be exercised only at :oardmeetings !ec."$"%6

<. +o ma9e calls on share holders in respectof money unpaid on their shares.

". Issue debentures.

3. :orrow moneys otherwise than ondebentures public deposits, etc.%

;. Invest the funds of the company and

#. Ba9e loans.

+he board may, by a resolution, delicatethe last three powers to a committee ofdirectors or the manager or any otherprincipal o)cer sub-ect to speci/c limits.

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• owers to be exercised with the approvalof the company in general

meeting!ec."$3%in case of publiccompany or a subsidiary of publiccompany%6

<. +o sell, lease or otherwise dispose of thewhole, or substantially whole, of the

underta9ing of the company.". +o remit or give time for repayment of any

debt due to the company by a directorexcept in case of a ban9ing company.

3. +o invest excluding trust securities% theamount to compensation received inrespect of compulsory ac0uisition of anyunderta9ing or property of the company.

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;. +o borrow moneys in excess of paid up

capital and free resource.#. Excluding temporary loans raised from

ban9s.

7. +o contribute to charitable or other

funds not relating to the business ofthe company in excess of 's.#2,2221in any /nancial year.

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DUTIES OF DIRECTORS

• &iduciary duties6

<. Exercise the powers honestly andbona/de for the bene/t of the company

as a whole.". >ot place themselves in position in which

there is a conict of interest.

3. Bust not ma9e any secret pro/t out oftheir position.

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• Duties of care, s9ill and diligence6<. +o carry out their duties with reasonable

care and exercise such degree of s9illand diligence as is reasonably expectedof persons of their 9nowledge andstatus. >ot bound to bring any special

0uali/cations to their o)ce.". !tandard of care depends upon type andnature of wor9, division of powersbetween directors and other o)cers,general usage and customs and whether

directors wor9 freely or remuneratively.3. Case law in re6 City E0uitable &ire

Insurance co. ltd.

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• Other duties6

<. +o attend board meetings not todelicate functions except to the extentauthorised by the (ct or (rticles of thecompany.

". +o disclose his interest.

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LIA%ILITIES OFDIRECTORS

• iability to third parties6

<. Fhen prospectus not containing theparticulars re0uired by the Companies (ct

or which contains materialmisrepresentation.

". On the failure to repay application money.

3. On irregular allotment of shares.

;. On dishonour of bills, che0ues etc. whichare signed without mentioning thecompany’s name.

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• iability to the Company6

<. ltra vires acts.". +o negligence

3. :reach of trust

;. Bisfeasance

• iability for breach of statutory duties

• iability for acts of his codirectors.

22



MANAGING DIRECTOR

• Is a director who is entrusted withsubstantial powers of management andincludes a director who occupies the

position of Banaging Director, by whatevername called.

• Certain companies to appoint Banaging orwhole time Director or a Banager

compulsorily.• (ppoint sub-ect to conditions speci/ed in

!chedule HIII.

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• rior approval of Central Government

unless appointment is in accordancewith !chedule HIII.

• Dis0uali/cations of Banaging Director!ec."7%.

• >o.of Banaging Directorships not toexceed two without CentralGovernment’s permission.

• +erm of o)ce not to exceed /ve yearsat a time in case of public limitedcompany.

24



$INDING UP&

• Finding up or li0uidation of a company isthe last stage of its life. It means aproceeding by which a company isdissolved.

• Mode# o" 'indin( )*+,

<. Finding up by the court, i.e., compulsorywinding up Jsecs ;33;53K.

". 4oluntary winding up by members or bycreditors Jsecs ;5;#"<K.

3. Finding up sub-ect to !upervision of Court

. 25



$INDING UP %Y T-ECOURT

• Gro)nd# "or com*)!#or. 'indin( )* /#ec0112&

<. !pecial resolution of the company.

". Default in delivering the statutory report tothe 'egistrar or in holding the statutorymeeting.

3. &ailure to commence, or suspension of,business.

;. 'eduction in membership.

#. Inability to pay its debts.

7. Lust and e0uitable.

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• Fhen the management is carried on in

such a way that the minority isdisregarded or oppressed.

• Fhere there is a deadloc9 in themanagement of the company.

• Fhere public interest is li9ely to bepre-udiced.

• Fhere the company was formed for

fraudulent and illegal business.• Fhere the company is a mere bubble

and does not carry on any business orhas no property.

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3UST AND EQUITA%LE

• Fhen substratum of a company is gone.!ubstratum of a company disappears6

<. Fhen the very basis for the survival of thecompany is gone.

". Fhen the main ob-ect of the company hassubstantially failed or becomeimpracticable.

3. Fhen the company is carrying on itsbusiness at a loss and there is no reasonable

hope that pro/t can be made.;. Fhen the existing on probable assets of the

company are insu)cient to meet its existingliabilities.

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• Company is unable to pay itsdebts when6

<. Demand for payment neglected.". Decreed debt unsatis/ed.

3. Commercial insolvency.

29



PETITION /SEC&0142

• etition by the company.

• etition by any creditor or creditors.

• etition by any contributory orcontributories.

• etition by all or any of the priorparties whether together or

separately.• etition by registrar.

• etition by the Central Government.

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CONSEQUENCES OF$INDING UP ORDER

• Intimation to O)cial i0uidator and'egistrar.

• Copy of winding order to be /led with the

'egistrar.• Order for winding up deemed to be notice

of discharge.

• !uits stayed.

• ower of the Court.• Eect of winding up order.

• O)cial i0uidator to be li0uidator.

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DUTIES OF LIQUIDATOR

• +o conduct the proceedings in winding up.• +o submit reliminary report and

(dditional report.

• +o ta9e custody of company’s property.

• +o exercise and control of li0uidators ofpowers.

• +o summon meeting of creditors andcontributories.

• +o ta9e directions from the court.• +o 9eep proper boo9s.

• +o get accounts audited.

•

+o /le report pending li0uidation. 32



PO$ERS OF LIQUIDATOR

• owers exercisable with the sanction of theCourt.

<. +o institute or defend suits in the name ofand on behalf of the company.

". +o carry on the business of the company forbene/cial winding up.

3. +o sell properties and actionable claims.

;. +o raise money on the securities of thecompany’s assets.

#. +o do all such other things as may benecessary.

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• owers exercisable without the sanction ofthe Court.

<. +o do all acts and execute documentsunder company’s seal.

". +o inspect records and returns of thecompany.

3. +o prove, ran9 and claim in the insolvencyof any contributory.

;. +o draw, accept, ma9e an endorse any billof exchange, promissory note etc.

#. +o ta9e out, in his o)cial name, letters ofadministration to any deceasedcontributory.

7. +o appoint an agent.

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. Duty of li0uidator to call creditorsmeeting in case of insolvency.

5. Duty to call General meeting atthe end of each year.

$. &inal meeting and dissolution.<2.rovisions as to annual and /nal

meeting incase of insolvency.

35



GENERAL PO$ERS OFCOURT

• !tay of winding up proceedings.

• +o settlement of list of contributories.

• ayment of debts due by contributory.• ower to ma9e calls.

• (d-ustment of rights of contributories.

• Delivery of property.• Exclusion of creditors.

• Order as to costs.

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•

!ummoning of persons suspectedof having property of the company.

• ublic examination.

• (rrest of absconding contributory.

• Beeting of creditors orcontributories.

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VOLUNTARY $INDING UP/Sec#&050 to 6782

• Mem9er#’ vo!)ntr. 'indin( )*&

<. Declaration of solvency.

". assing a special resolution.

3. (ppointment and remuneration ofli0uidators.

;. :oards power to cease on appointment ofa li0uidator.

#. ower to /ll vacancy in o)ce of li0uidator.7. >otice of appointment of li0uidator to be

given to registrar.

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–Creditor#’ vo!)ntr. 'indin(

)*.<.Beeting of creditors.

".>otice of resolution to be given

to 'egistrar.3.(ppointment of li0uidator.

;.(ppointment of committee of

inspection.#.i0uidators remuneration.

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7.:oards power to cease on appointmentof li0uidator.

.ower to /ll vacancy in o)ce of

li0uidator.5.ower of li0uidator to accept shares,

etc.

$.Duty of li0uidator to call meeting at theend of each year.

<2.&inal meeting and dissolution.

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CONSEQUENCES OF



CONSEQUENCES OF$INDING UP

• (s to shareholder1members.

• (s to creditors.

<. Fhere the company is solvent

". Fhere the company is insolvent3. !ecured and unsecured creditor

;. referential payment

•

(s to servants and o)cers• (s to proceedings against the company

• (s to cause

41



OT-ER POINTS

• Commencement of winding up

• owers of Court

•

!tatement of aairs• Committee of inspection

• Dissolution of company

• Contributory• Defunct company

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CORPORATE



CORPORATEGOVERNANCE.

• “Corporate governance is aboutmaintaining an appropriate balance ofaccountability between three 9ey players6the corporation’s owners, the directorswhom the owners elect, and the managerswhom the directors select. (ccountabilityre0uires not only good transparency, butalso an eective means to ta9e action for

poor performance or bad decisions.” Chairperson Bary..!chapiro !EC,

!(.

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• Clause ;$ of isting (greement toIndian stoc9 exchanges came into

eect from 3<st December "22# withob-ect of improving corporategovernance in listed companies.

• It ensure commitment to values, ethicalconduct of business, transparency,statutory compliance, disclosures andeective decision ma9ing.

• It is about promoting corporatefairness, transparency andaccountability – Good :usiness.

44



COMPOSITION OF

%OARD&• #2= of the :oard should becomprised of non executive directors.

• (t least <13rd should be comprised of

independent directors wherechairman is a non executive director.

• (t least ½ of the board should be

comprised of independent directorswhere chairman is an executivedirector.

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• Independent director is a non executivedirector who a% does not have any material

pecuniary relationship or transaction withthe company. b% not related to promotersor management etc.

• >on executive directors’ including

independent directors’ fees1compensationshall have prior approval of share holders ingeneral meetings.

• +he board shall meet at least four times a

year with a maximum gap of four months.• ( director shall not be a member in morethan <2 committees or chairman of morethan /ve.

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• +he board shall lay down a code ofconduct for all board members andsenior management of thecompany.

• +he board and senior managementshall a)rm compliance with thecode on annual basis.

47



AUDIT COMMITTEE

• ( 0uali/ed and independent auditcommittee shall be set up.

• +he audit committee shall have minimumthree directors as members.

• "13rd of the members of audit committeeshall be independent directors.

• (ll members shall be /nancially literate

and at least one member shall haveaccounting or related /nancialmanagement exercise.

• +he chairman shall be an in dependent

director who shall be present at the (GB.48



• +he /nance director, head of

internal audit and a representativeof the statutory auditor maybepresent as invitees.

• +he company secretary shall act assecretary to the committee.

• +he committee should meet atleast four times in a year.

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• +he audit committee shall havepowers which include 6

<. investigation of any activitywithin its terms of reference.

". +o see9 information from any

employee.3. +o obtain outside legal or other

professional advice.

;. +o secure attendance of outsiderswith relevant expertise, ifconsidered necessary.

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• 'ole of audit committee.

• 'eview of information by auditcommittee.

51



DISCLOSURES.

• :asis of related party transactions.• Disclosure of accounting treatment.• :oard disclosures – ris9 management.•

roceeds from public issues, right issues,etc.• 'emuneration of directors.• Banagement discussion and analysis

report.

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• !hare 8olders.

• !hare holders’ Grievance Committee withthe Chairmanship of non executive

director.• CEO1C&O certi/cation.

• 'eport on Corporate Governance.

•Certi/cate of compliance.

53

NON MANDATORY



NON MANDATORYREQUIREMENTS

• 'emuneration committee.

• 8alf yearly declaration of /nancialperformance to each share holder.

• +raining of :oard members.

• Bechanism for evaluating nonexecutive board members.

• Fhistle blower policy.

54



T-E FACTORIES ACT:

;405

55



• +he act provides for wor9ingconditions in a factory in order to

ensure health, safety and welfareof wor9men.

• &actory means any premises

including the precincts thereof 6<. <2 or more wor9ers are wor9ing orwere wor9ing in a manufacturingprocess during the preceding <"

months with aid of power.". "2 or more without aid of power.

56



• Banufacturing process is de/nedby sec "9%.

• For9er as per sec "l% means aperson employed directly orthrough any agency a

manufacturing process.• Occupier as per sec "n% means a

person who has ultimate control

over the aairs of the country.

57

APPROVAL LICENSING AND



APPROVAL: LICENSING ANDREGISTRATION OF FACTORIES

• !tate government empowered undersec 7 to ma9e rules for licensing etc.

• (pplication for permission to besubmitted to the Chief Inspector alongwith certi/ed plans and speci/cationfor factory.

• >otice by occupier Jsec K.

• General duties of the occupier Jsec (K

58



-EALT-/#ec# ;;to782

• Cleanliness 6

<. &actory to be 9ept clean and freefrom eMuvia and dirt.

". Eective means of drainage.

3. se of disinfectants.

•Disposal of waste and eMuents

• 4entilation and temperature.

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• Dust and fume.

•(rti/cial humidi/cation.

• Overcrowding.

• ighting

• Drin9ing water• atrines and urinals

• !pittoons

60



SAFETY /#ec#&7; to 0;2

• &encing of machinerydangerouspart of every machinery to besecurely fenced.

• For9 on near machinery in motion.<. Examination of machinery in motion

by a trained adult male wor9er only.

". 'estriction on women and youngpersons.

61



• Employment of young persons ondangerous machines.

<. 'estriction on young persons to

wor9 on dangerous machines.

". Bachines dangerous for youngpersons to be speci/ed by !tate

Government.

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• !tri9ing gear and devices for cutting opower.

• !elf acting machines. +raversing part not

allowed to run within a distance of ;# cmsfrom any /xed structure.

• Casing of new machinery to preventdanger.

• rohibition of employment of women andchildren near cottonopeners.

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• 8oists and lifts.

• ifting machines, chains, ropes andlifting tac9les.

• 'evolving machinery.

• +o have notice of safe wor9ing speedand speeds not to be exceeded.

• ressure plant.

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• &loors, stairs and means of access.• its, sumps and openings in oors etc. to

be securely covered or fenced.

• rohibition on lifting or carrying ofexcessive weights. Baximum weights tobe lifted or carried to be prescribed.

• rotection of eyes.

• recaution against dangerous fumes.rohibition on entry in to any chamber,tan9, pipe etc. where any gas,fume etc. ispresent.

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• recautions regarding use ofportable electric light.

• recautions against explosives or

inammable dust, gas etc.Beasures to prevent explosions onignition of gas, fumes etc.

• recautions in case of /re.

Beasures to prevent /re and itsspread. &amiliarity with means ofescape.

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• ower to re0uire speci/cations ofdefective parts or tests of stability.

• !afety of building and machinery.

• Baintenance of building.

• !afety o)cers.

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THANK YOU

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Company Management