1
2
INDIAN COMPANIES ACT, 1956 With Respect to DIRECTORS
DIRECTORSDIRECTORS
INDIAN COMPANIES ACT, 1956INDIAN COMPANIES ACT, 1956
3
SUNIL PANDEY
AKHIL SARVAIYA
ARUN SINGH
SHRIJESH NAIR
AMIT SHAH
SANJOG DEVRUKHKAR
Presented by :
NAME OF THE STUDENT ROLL NUMBER
MFM SEM – I (2008-11)
INTRODUCTIONINTRODUCTION
INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956
TYPES OF COMPANIESTYPES OF COMPANIES
INTRODUCTION TO THE TERM ‘DIRECTORS’INTRODUCTION TO THE TERM ‘DIRECTORS’
APPOINTMENT APPOINTMENT OF DIRECTORSOF DIRECTORS
REMOVAL / RETIRMENT OF DIRECTORSREMOVAL / RETIRMENT OF DIRECTORS
RIGHTS AND DUTIES RIGHTS AND DUTIES OF DIRECTORSOF DIRECTORS
ROLE OF DIRECTORSROLE OF DIRECTORS
MANAGING DIRECTORS AND ADDITIONAL DIRECTORSMANAGING DIRECTORS AND ADDITIONAL DIRECTORS
4
5
INTRODUCTION TO A COMPANY &INDIAN COMPANIES ACT, 1956
MANAGEMENT OF A COMPANYMANAGEMENT OF A COMPANY
6
A company functions through the medium of Board of Directors. A company functions through the medium of Board of Directors.
However, certain powers have been reserved to be exercised by However, certain powers have been reserved to be exercised by
shareholders in general body meetings. Section 291 of the shareholders in general body meetings. Section 291 of the
Companies Act, 1956 confers general power on the Board of Companies Act, 1956 confers general power on the Board of
Directors. It provides: “Subject to the provisions of the Act, the Board Directors. It provides: “Subject to the provisions of the Act, the Board
of Directors of a company shall be entitled to exercise all such of Directors of a company shall be entitled to exercise all such
powers, and to do all such acts and things, as the company is powers, and to do all such acts and things, as the company is
authorized to exercise and do. authorized to exercise and do.
DIRECTORSDIRECTORS
The company carries on its business through individuals called The company carries on its business through individuals called
directors.directors.
Collectively they are called Board of DirectorsCollectively they are called Board of Directors
No body corporate, association or firm can be appointed as a director of No body corporate, association or firm can be appointed as a director of
a company, and only an individual can be appointeda company, and only an individual can be appointed7
CONSTITUTIONCONSTITUTION
Every Public Company must have at least Every Public Company must have at least 33 directorsdirectors
A Public Company having A paid up capital of Rs. 5 crore or more and A Public Company having A paid up capital of Rs. 5 crore or more and
One thousand or more shareholders Can elect a director by small One thousand or more shareholders Can elect a director by small
shareholders.shareholders.
A private company must have at least A private company must have at least 2 directors2 directors
Subscribers of the memorandum who are individuals, are Subscribers of the memorandum who are individuals, are
deemed to be the directors of the company, until the directors deemed to be the directors of the company, until the directors
are duly appointed in accordance with the Act.are duly appointed in accordance with the Act.
Directors are appointed in general meeting, in board meeting, by central Directors are appointed in general meeting, in board meeting, by central
government, by proportional representation or a person can stand for government, by proportional representation or a person can stand for
directorship, if eligible. directorship, if eligible.
8(Continued…)
A company can have a maximum number of A company can have a maximum number of 12 directors12 directors and to and to increase this number, the approval of Central Government is required.increase this number, the approval of Central Government is required.
The board of directors can appoint Additional Directors, by passing a The board of directors can appoint Additional Directors, by passing a resolution, if such a power exists in the articles.resolution, if such a power exists in the articles.
If any vacancy arises in office of any director then subject to the If any vacancy arises in office of any director then subject to the articles, the board of directors can fill the vacancy at a meeting of the articles, the board of directors can fill the vacancy at a meeting of the board.board.
One single resolution can appoint one director only and two or more.One single resolution can appoint one director only and two or more.
A company, at a general meeting may, by ordinary A company, at a general meeting may, by ordinary resolution, increase or reduce the number of its directors resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles.within the limits fixed in that behalf by its articles.
9
CONSTITUTIONCONSTITUTION(…Continued)
10
APPOINTMENT OF DIRECTORAPPOINTMENT OF DIRECTOR
He himself or some member intending to propose that person as a He himself or some member intending to propose that person as a
director.director.
Gives a sign notice in writing to company.Gives a sign notice in writing to company.
Signifying that persons for the office of directorSignifying that persons for the office of director
Along with a deposit of Rs. 500/- which is refundable subject to Along with a deposit of Rs. 500/- which is refundable subject to
appointment as a directorappointment as a director
11
Any Person Can Be Eligible For Appointment To The Office Of Any Person Can Be Eligible For Appointment To The Office Of Director At Any Annual General Meeting, IfDirector At Any Annual General Meeting, If
RETIREMENT OF DIRECTORSRETIREMENT OF DIRECTORS
The directors to retire by rotation at every AGM are those who have been
longest in office since their last appointment.
REMOVAL OF DIRECTORSREMOVAL OF DIRECTORS
Removal Of Directors Is Conferred Upon Shareholders, Removal Of Directors Is Conferred Upon Shareholders,
Central Government And Company Law BoardCentral Government And Company Law Board
A company may, by ordinary resolution, remove a director (not being a A company may, by ordinary resolution, remove a director (not being a
director appointed by the Central Government in pursuance of section director appointed by the Central Government in pursuance of section
408) before the expiry of his period of office. This provision shall not 408) before the expiry of his period of office. This provision shall not
apply where the company has availed itself of the option given to it of apply where the company has availed itself of the option given to it of
proportional representation on the Board of Directors to appoint not less proportional representation on the Board of Directors to appoint not less
than two-thirds of the total number of directors according to the principle than two-thirds of the total number of directors according to the principle
of proportional representation.of proportional representation.
Special notice shall be required of any resolution to remove a director, Special notice shall be required of any resolution to remove a director,
or to appoint somebody instead of a director so removed at the meeting or to appoint somebody instead of a director so removed at the meeting
at which he is removed.at which he is removed.12
VACATION OF OFFICE BY DIRECTORSVACATION OF OFFICE BY DIRECTORS
The directorship of a director automatically ceases if,The directorship of a director automatically ceases if,
He fails to obtain qualification sharesHe fails to obtain qualification shares
He fails to pay any call in respect of sharesHe fails to pay any call in respect of shares
He absents himself from 3 consecutive meetings of the He absents himself from 3 consecutive meetings of the
board of directors, or from all meetings of the board for a board of directors, or from all meetings of the board for a
continuous period of 3 months, whichever is longer, without continuous period of 3 months, whichever is longer, without
obtaining leave of absence from the boardobtaining leave of absence from the board
He is removed by the shareholders by resolution passed in a He is removed by the shareholders by resolution passed in a
general meetinggeneral meeting
A company can remove a director even before the expiry of his A company can remove a director even before the expiry of his
period of officeperiod of office13
DISQUALIFICATION OF DIRECTORSDISQUALIFICATION OF DIRECTORS
A person shall not be capable of being appointed director of a A person shall not be capable of being appointed director of a
company, if,company, if,
he has been found to be of unsound mind by a Court of competent he has been found to be of unsound mind by a Court of competent
jurisdiction and the finding is in force jurisdiction and the finding is in force
he is an undercharged insolvent he is an undercharged insolvent
he has applied to be adjudicated as an insolvent and his application he has applied to be adjudicated as an insolvent and his application
is pending is pending
he has been convicted by a Court of any offence involving moral he has been convicted by a Court of any offence involving moral
turpitude and sentenced in respect thereof to imprisonment for not turpitude and sentenced in respect thereof to imprisonment for not
less than six months, and a period of five years has not elapsed less than six months, and a period of five years has not elapsed
from the date of expiry of the sentence from the date of expiry of the sentence 14
QUALIFICATION SHARESQUALIFICATION SHARES
They are the minimum number of shares a person must own, They are the minimum number of shares a person must own,
as provided in the articles of the company, in order to qualify as provided in the articles of the company, in order to qualify
to become a director of the company. Qualification shares to become a director of the company. Qualification shares
must be acquired by a director within 2 months of his must be acquired by a director within 2 months of his
appointment. The articles cannot require a director to acquire appointment. The articles cannot require a director to acquire
qualification shares within a shorter period. The face value of qualification shares within a shorter period. The face value of
the qualification shares cannot exceed five thousand rupees, or the qualification shares cannot exceed five thousand rupees, or
if the face value of one share is more than five thousand if the face value of one share is more than five thousand
rupees, then the qualification share will be one qualification rupees, then the qualification share will be one qualification
share.share.
A director is required to hold certain shares as qualification A director is required to hold certain shares as qualification
shares if such requirement is here in the Articles of Association shares if such requirement is here in the Articles of Association
of the company.of the company. 15
WHOLE WHOLE TIME TIME
DIRECTORDIRECTOR
Every company, having a paid-up capital of Rs. 5 Every company, having a paid-up capital of Rs. 5
crore or more must have a whole-time director.crore or more must have a whole-time director.
A WHOLE TIME DIRECTOR is one who entirely looks A WHOLE TIME DIRECTOR is one who entirely looks
into the affairs of a company.into the affairs of a company.
At a time a single whole time director can act as a At a time a single whole time director can act as a
director for not more than 20 Companies.director for not more than 20 Companies.
A person shall not act as director of a company A person shall not act as director of a company
unless he has, by himself or by his agent unless he has, by himself or by his agent
authorized in writing, signed and filed with the authorized in writing, signed and filed with the
Registrar, consent in writing to act as such Registrar, consent in writing to act as such
director within 30 days of his appointment. This director within 30 days of his appointment. This
provision shall not apply to a private company provision shall not apply to a private company
unless it is a subsidiary of a public companyunless it is a subsidiary of a public company
16
.
ADDITIONAL DIRECTORSADDITIONAL DIRECTORS
The Board of directors may appoint additional directors if such power The Board of directors may appoint additional directors if such power
is conferred on it by the articles of the company. Such additional is conferred on it by the articles of the company. Such additional
directors shall hold office only up to the date of the next annual general directors shall hold office only up to the date of the next annual general
meeting of the companymeeting of the company
The Board of directors of a company may, if so authorized by its The Board of directors of a company may, if so authorized by its
articles or by a resolution passed by the company in general meeting, articles or by a resolution passed by the company in general meeting,
appoint an alternate director to act for a director during his absence for appoint an alternate director to act for a director during his absence for
a period of not less than three months from the State in which a period of not less than three months from the State in which
meetings of the Board are ordinarily held.meetings of the Board are ordinarily held.
17
REMUNERATION OF DIRECTORSREMUNERATION OF DIRECTORS
Directors Remuneration The overall maximum remuneration payable to directors and its managers in one financial year
Not more than 11% of the net profits of the company for that financial year
If a company has only one director
Not more than 5% of the net profits
If a company has more than one director
Not more than 10% of the net profits for all of them together
The director is not a whole time director
Not more than 1% of the net profits
18
Except with the previous consent of the company accorded by a
special resolution:-
No director of a company can hold any office or place of profit in
that company
No partner or relative of such a director (i.e. a director holding an
office or place of profit in the company), no firm in which such a
director or relative is a partner, no private company of which such a
director is a director or member, and no director, or manger of such
a private company can hold any office or place of profit carrying
monthly remuneration in excess of the prescribed amount (Rs.
10000/-).
19
DIRECTOR CANNOT TO HOLD OFFICE OR PLACE OF PROFIT:
LOANS TO DIRECTORSLOANS TO DIRECTORS
A company provides loan to its director (for a guarantee or security) A company provides loan to its director (for a guarantee or security)
or the related parties, with proper approval from Central Government. or the related parties, with proper approval from Central Government.
This is to ensure that the Board Of Directors of a public company This is to ensure that the Board Of Directors of a public company
does not misuse the funds of the company for the benefit of its does not misuse the funds of the company for the benefit of its
directors.directors.
20
INTERESTS OF A DIRECTOR INTERESTS OF A DIRECTOR
When any company enters into contracts relating to the business of When any company enters into contracts relating to the business of
the company with the directors, the consent of the board of directors the company with the directors, the consent of the board of directors
is required by way of resolution.is required by way of resolution.
Every director of a company has to disclose the nature of his concern Every director of a company has to disclose the nature of his concern
or interest at a meeting of the board of directors.or interest at a meeting of the board of directors.
Finally a decision will be taken by the BOARD OF DIRECTORS.Finally a decision will be taken by the BOARD OF DIRECTORS.
Every Director shall disclose the nature of his concern or interest in a Every Director shall disclose the nature of his concern or interest in a
contract or arrangement at the meeting of the Board. Disclosure is contract or arrangement at the meeting of the Board. Disclosure is
not required where any of the Directors of one company or two or not required where any of the Directors of one company or two or
more of them together hold 2% or less than 2% of paid up share more of them together hold 2% or less than 2% of paid up share
capital of the companycapital of the company21
SPECIAL AUTHORITIESSPECIAL AUTHORITIES
Directors can exercise certain powers only at the meetings of the board Directors can exercise certain powers only at the meetings of the board
related to some significant matters which need deliberationsrelated to some significant matters which need deliberations
and discussions. They are:and discussions. They are:
Make Calls on shareholders in respect of money unpaid on their sharesMake Calls on shareholders in respect of money unpaid on their shares
Issue debenturesIssue debentures
Borrow moneys otherwise than on debenturesBorrow moneys otherwise than on debentures
Invest the funds of the companyInvest the funds of the company
Make loansMake loans
22
RESTRICTIONS & LAIBILITIES ON RESTRICTIONS & LAIBILITIES ON BOARD OF DIRECTORSBOARD OF DIRECTORS
Dispose of any Undertaking of the companyDispose of any Undertaking of the company
Remit or to give time for the repayment of, any debt due by a Remit or to give time for the repayment of, any debt due by a
directordirector
Invest, otherwise than in trust securities, the amount of Invest, otherwise than in trust securities, the amount of
compensation received by the company in respect of the compensation received by the company in respect of the
compulsory acquisitioncompulsory acquisition
Borrow moneys in excess of aggregate of the paid-up capital of Borrow moneys in excess of aggregate of the paid-up capital of
the company & its free reservesthe company & its free reserves
Contribute to charitable and other funds not directly relating to Contribute to charitable and other funds not directly relating to
the business of the company or the welfare of its employeesthe business of the company or the welfare of its employees23
BIBLIOGRAPHYBIBLIOGRAPHY
Legal Aspects of Banking Operations By MacmilanLegal Aspects of Banking Operations By Macmilan
Business Law for Management by K.R. BoolchandaniBusiness Law for Management by K.R. Boolchandani
Indian Companies Act, 1956Indian Companies Act, 1956
Company Law by Company Law by Singh and AvatarSingh and Avatar
Company Law and Practice, Taxmann, New DelhiCompany Law and Practice, Taxmann, New Delhi
A Guide to the Companies Act, Wadhwa and Company, NagpurA Guide to the Companies Act, Wadhwa and Company, Nagpur
www.google.comwww.google.com
24
25
Thank
You!