2. Who is the DIRECTOR??Who is the DIRECTOR??
Acc. To the Sec.2(13) of INDIAN COMPNIES ACT 1956,
”Director includes any person occupying the position of the
director by whatever name called”
Director may be defined as an individual who directs ,
controls or manages the affairs of the company.
The directors of the company collectively are referred to as
the “board of directors” or “board”
3. QualificationQualification
No educational or other qualifications are required in order to
become director of the company whether public or private.
Similarly, the Companies act 1956 does not prescribe any
requirement as to age limit for becoming a director.
The only condition is as per section 253 No body corporate, firms or
associates can become a director. Only Individual can be a
Director of a company because the office of a director is office of
responsibility, accontability and position of trust.
Section 274 negatively stipulates the eligibility requirement for
becoming a director by providing certain disqualifications.
4. Number of DirectorsNumber of Directors
As per section 252 every public company shall have 3 directors and
every other company shall have at least 2 directors.
Maximum no. of directors in case of private company shall be as
specified by the articles. It could be 7 or 8 or even 20 or
25.Central Govt. approval not required in case of any increase in
number.
The act does not prescribe any maximum number of directors for
public company also but if the maximum no of directors exceed
12, prior approval of central Govt. would be required.
Thus the approval of central govt will be necessary for the “increase”
in number of directors , and not for the “appointment ”.
5. Appointment of DIRECTORSAppointment of DIRECTORS
The appointment of directors is accordingly regulated by the act.
Directors may be appointed in following ways:-
By the articles as regard first directors [sec. 254]
By the company in general meeting [sec. 255 to257 , 263 , 264]
By the directors [sec. 260 , 262 , 313]
By third parties [sec. 255]
By the principle of proportional representation [sec. 265]
By the central government [sec. 408]
6. By the articles as regard firstBy the articles as regard first
directors section 254directors section 254
The first directors are usually named in the articles. The articles may also
provide that both the number and the names of the first directors shall be
determined in writing by the subscribers of the memorandum.
Where the company has no articles or the articles are silent regarding the
appointment of directors, the subscribers to the memorandum who are
indivisuals shall be deemed to be first director until the directors are
appointed at first annual general meeting.
If all the subscribers to the memorandum happen to be bodies corporate ,
none of the subscribers can be deemed to be directors and the company will
have no directors until the first directors are appointed under section 255.
Where the person named in the list of first directors do not assume the
office , for any reason for example , death, then it is the duty of the
subscribers of the memorandum to hold a meeting for appointment of
directors.
7. Appointment by the companyAppointment by the company
[Section 255 to 257 , 263 , 264][Section 255 to 257 , 263 , 264]
Appointment of subsequent directors is made at every annual general
meeting of the company.
Section 255 provides that not less than two third of the total number of
directors of a public company or a private company must be appointed
by the company in general meeting.
These directors must be subject to the retirement by rotation.
Section 263 prohibites the placing of the composite motion for the election
of two or more directors before the general meeting . The purpose of
prohibition of composite motion is that it will enable shareholders to
accept or reject a perticular individual standing for directorship without
being compelled to accept or reject all of them.
8. Section 264of the companies Act requires every director to give his
concent to the directorship. There are two types of Consents :
1.Concent of the candidate for Directorship to be filed with the company
264(1)
2.Concent to act as director to be filed with the registrar 264(2) .
The consequence of a director continuing to act as such without filing his
concent within the period specified would attract the penalty under
section 629A i.e.Rs. 500 Every day.
Such concent may however be filled after the expiry of the said period on
payment of additional fees as contemplated by section 611(2).
It is further open to the central government u/s 637B to condone the
delay in filling concent.
9. BY THE DIRECTORSBY THE DIRECTORS
The directors are empowered to appoint :-
•Additional directors
•Alternate directors
•Directors filling casual vacancy
10. ADDITIONAL DIRECTORSADDITIONAL DIRECTORS
The board of director may appoint additional directors
from time to time if so authorised by the articles.
The number of directors and additional directors must
not exceed the maximum strength fixed for the board
by the articles.
The additional directors shall hold office only upto the
date of next annual general meeting.
11. ALTERNATE DIRECTORSALTERNATE DIRECTORS
The board of directors may appoint an alternate
director if authorized
-By the articles
-By a resolution of the company at general meeting
An alternate director acts in the place of a director
who is absent for more than three months from the
state in which board meetings are held.
He must vacate the office on the return of the
original director.
12. CASUAL VACANCYCASUAL VACANCY
Where the office of any director appointed by the company in general meeting
is vacated before the expiry of his term the director may fill up the vacancy at
the meeting of board.
Any vacancy other than one caused by retirement of a director by rotation is a
casual vacancy.
Such a vacancy may occur by reason of death , resignation , bankruptcy , or
disqualification.
The director so appointed will hold office till the end of the term of the
director in whose place he is appointed.
13. APPOINTMENT BY THIRDAPPOINTMENT BY THIRD
PARTIESPARTIES
[Section 255][Section 255]
Section 255 permits that one third of the total number of directors of a
public company or a private company which is subsidiary of a public
company to be appointed by parties other than share holders on a non-
rotational basis.
The articles may give right to debenture holders , financial corporations or
banking companies who have advanced loans to the company to nominate
directors on the board of company.
The number of directors so nominated should not exceed one third of the
total strength of the board.
They are not liable to retire by rotation.
14. APPOINTMENT BYAPPOINTMENT BY
PROPORTIONALPROPORTIONAL
REPRESENTATIONREPRESENTATION
Directors of the company are generally appointed by a simple majority of
shareholders and a substantial minority cannot succeed in in placing even a
single director on the board.
Section 265 intends to protect the interests of minority shareholders by
giving them an opportunity to place their nominees on the board.
The articles of the company may provide that the appointment of not less
than 2/3 of the total number of directors of the public company shall be
according to the principle of proportional representation.
15. APPOINTMENT BY SMALLAPPOINTMENT BY SMALL
SHAREHOLDERSSHAREHOLDERS
[ Section 252 ][ Section 252 ]
A small shareholders means a shareholder holding shares nominal
value of Rs.20,000 or less he may be a holder of equity share or
preference share or both.
Appointment of Small Shareholder director is not mandatory as per
sec 252 of the Companies Act 1956
Applicability :
The Provisions relating to appointment of a small shareholder
Dirctor apply to a company only if all the following conditions are
satisfied:
(a) The Company is Public Company
(b) The Paid Up Capital of Company is Rs. 5 crore or more’
( c) The number of Small Shareholders in such a company is 1000 or
more
16. APPOINTMENT BYAPPOINTMENT BY
CENTRAL GOVERNMENTCENTRAL GOVERNMENT
The central government has the power under section 408 to
appoint directors on an order passed by the tribunal (earlier
company law board) to effectively safeguard the interest of the
company or its shareholders or the public interest to prevent
mismanagement.
Such directors shall hold office for a period not exceeding three
years on any one occasion.
17. Managing Director:Managing Director:
Managing Director means a director who :
a. By Virtue of an agreement with the company or
b. By resolution passed by the company
c. By Resolution passed by its Board of Directors
d. By virtue of its MOA or AOA
Is entrusted with the substantial powers of management which would not
otherwise exercisable by him, and includes a director occupying the position
of managing director , by whatever name called.
Provided further that a managing director of a company shall exercise his power
subject to control & directions of its Board of Directors.
Whole Time Director:Whole Time Director:
whole time director is not defined by the companies act. As per section
269,”Whole time director includes a director in whole time employment of a
company.
The Department of Company Affairs Clearified that an whole time employee
appointed as a director will be a whole time director only if substantial
powers of management is vested with him.
18. Manager :Manager :
Manager means an individual who subject to the control & direction of boardManager means an individual who subject to the control & direction of board
of directors has the management of the whole or substantlly the whole ofof directors has the management of the whole or substantlly the whole of
the affairs of the company. And includes the director or the any otherthe affairs of the company. And includes the director or the any other
person occupying the position of manager, by whatever name called,andperson occupying the position of manager, by whatever name called,and
whether under a contract of service or not.whether under a contract of service or not.
A manager may or may not be a director of a company.A manager may or may not be a director of a company.
Company cannot have simultaneously two managers .Company cannot have simultaneously two managers .
Acompany cannot at a same time employ a managing Director and aAcompany cannot at a same time employ a managing Director and a
manager. However a company can simultaneously a manager an da wholemanager. However a company can simultaneously a manager an da whole
time director .time director .
Only An individual can be appointed as a manager. No firm or bodyOnly An individual can be appointed as a manager. No firm or body
corporate can be appointed as a manager.corporate can be appointed as a manager.
