UNIT 3 MANAGERIAL PERSONNEL
Directors- Legal Position- Appointment, Removal, Rights, Duties And Powers -Qualification-
Women Directors- Independent Directors- Director Identification Number- Other Key
Managerial Personnel- Related Party Transactions.
MEANING
A director includes any person occupying the position of director by whatever name
called. Only an individual can be appointed a director.
POSITION OF DIRECTORS
1. Directors as agents
When the directors enter into contract with third parties sign documents for and on
behalf of the company etc, they act as the agent of the company. They bind the company be
their acts.
2. Directors as Trustees
They are in the position of trustees, when they manage the assets and properties of the
company. Similarly when they exercise the powers entrusted to them they are in the same
position. It means that they should safeguard the interest of the company and should never
abuse the powers for promoting their personal ends.
3. Directors as Officers
Directors also act as officers of the company. When they have to manage the affairs of the
company, they are in the position to Chief Executive Officers. Thus the directors combine in
themselves the roles of agents, trustees and officers.
QUALIFICATION OF DIRECTORS
1. Only individuals can be appointed as directors of the company.
2. They must have contractual capacity
3. They must possess qualification shares, if laid down in the Articles. In such a case the
qualification must be acquired within two months of their appointment as directors. The
nominal value of qualification share should not exceed Rs.5,000 or one share where its
nominal value exceeds Rs.5,000.
DISQUALIFICATION OF DIRECTORS
The following persons are disqualified for appointment as directors of a company;
1. A person of unsound mind
2. An undischarged insolvent
3. Any person who has applied for being adjudged an insolvent
4. Any person who had been sentenced with imprisonment for an offence involving moral
turpitude for a period exceeding 6 months and a period of 5 years has not elapsed since
, the date of expiry of the sentence
5. A person who has not paid the call money and the calls in arrear are outstanding for
more than 6 months
6. Any person disqualified by a court for appointment as director for having committed
fraud in management
APPOINTMENT OF DIRECTORS
First directors are usually named in the Articles if the Articles are silent, the signatories
to the memorandum shall be deemed to be the first directors of the company.
a. Appointment of Directors by the Company
Subsequent directors are elected by shareholders at the AGM. If a company adopts the
principle of retirement by rotation, one-third of the directors must retire by rotation. The retiring
directors are eligible for reappointment.
b. Appointment by Board of Directors
The Board can appoint additional directors. They can fill up casual vacancy caused by
death, resignations, etc. they can also appoint alternate director. If empowered by Articles, the
Board may appoint an alternate director during his absence for a period of the less than 3
months from the date in which meetings of the Board are ordinarily held.
c. Appointment by Third Parties
If authorized by the Articles, third parties such as vendor of the business, banking or
financial institutions which have advanced loans to the companies, can appoint their nominees
on the Board.
d. Appointment by Central Government
The Central Government can also appoint directors on an order passed by the Company
Law Board or on the application of not less than 100 members of the company or of members
holding 10% of the total voting power.
NUMBER OF DIRECTORSHIP
A person can hold office as director in not more than 15 companies at the same time.
In calculating the number of directorships, the directorship of independent private limited
companies, non-profit associations, and alternate directorships excluded.
Every public company must have at least 3 directors and every private company must
have at least 2 directors.
REMOVAL OF DIRECTORS
A director of a company can be removed from office by the company by an ordinary
resolution before the expiry of his term, when such a director has acted in fraudulent manner
or abused his fiduciary position.
The Central Government can remove a director under certain circumstances.
The Company Law Tribunal may also order for removal of a director where an
application has been made to it on charges of oppression and mismanagement of the company
, affairs.
VACATION OF OFFICE
A director must vacate his office in the following circumstances;
i. When he is found to be of unsound mind by a competent court
ii. If he is adjudged an insolvent
iii. If he fails to obtain his qualification shares within the prescribed time or ceases to
hold at any time thereafter
iv. If he is convicted of an offence involving moral turpitude and sentenced to
imprisonment for not less than 6 months
v. If he fails to pay any call money within 6 months
vi. If he absents himself from three consecutive Board meetings or from all meetings
of the Board for a continuous period of three months whichever is longer without
obtaining leave of absence from the Board
vii. If he becomes disqualified by an order of the Court
viii. If he fails to disclose to the Board his interest in any contract entered into by the
company.
POWER OF DIRECTORS
According to sec.292, the powers are mentioned below;
1. General Powers
The board of directors of a company is entitled to exercise all such powers and to do all
such acts and things as the company is authorized to do. However the Board shall not do any
act which is to be done by the company in general meeting.
2. Statutory Powers
By means of resolutions passed at the Board meetings, the following powers can be
exercised by the directors.
i. To make calls
ii. To issue debentures
iii. To borrow money otherwise than on debentures
iv. To make loans
3. Other powers to be exercised at Board Meetings
i. To fill up casual vacancy in the office of directors
ii. To appoint additional directors, if authorized by the articles
iii. To appoint an alternate director if authorized by the articles
iv. To accord sanction to contracts in which any director or his relative is interested
v. To recommend a certain rate of dividend to be declared at the annual general
Directors- Legal Position- Appointment, Removal, Rights, Duties And Powers -Qualification-
Women Directors- Independent Directors- Director Identification Number- Other Key
Managerial Personnel- Related Party Transactions.
MEANING
A director includes any person occupying the position of director by whatever name
called. Only an individual can be appointed a director.
POSITION OF DIRECTORS
1. Directors as agents
When the directors enter into contract with third parties sign documents for and on
behalf of the company etc, they act as the agent of the company. They bind the company be
their acts.
2. Directors as Trustees
They are in the position of trustees, when they manage the assets and properties of the
company. Similarly when they exercise the powers entrusted to them they are in the same
position. It means that they should safeguard the interest of the company and should never
abuse the powers for promoting their personal ends.
3. Directors as Officers
Directors also act as officers of the company. When they have to manage the affairs of the
company, they are in the position to Chief Executive Officers. Thus the directors combine in
themselves the roles of agents, trustees and officers.
QUALIFICATION OF DIRECTORS
1. Only individuals can be appointed as directors of the company.
2. They must have contractual capacity
3. They must possess qualification shares, if laid down in the Articles. In such a case the
qualification must be acquired within two months of their appointment as directors. The
nominal value of qualification share should not exceed Rs.5,000 or one share where its
nominal value exceeds Rs.5,000.
DISQUALIFICATION OF DIRECTORS
The following persons are disqualified for appointment as directors of a company;
1. A person of unsound mind
2. An undischarged insolvent
3. Any person who has applied for being adjudged an insolvent
4. Any person who had been sentenced with imprisonment for an offence involving moral
turpitude for a period exceeding 6 months and a period of 5 years has not elapsed since
, the date of expiry of the sentence
5. A person who has not paid the call money and the calls in arrear are outstanding for
more than 6 months
6. Any person disqualified by a court for appointment as director for having committed
fraud in management
APPOINTMENT OF DIRECTORS
First directors are usually named in the Articles if the Articles are silent, the signatories
to the memorandum shall be deemed to be the first directors of the company.
a. Appointment of Directors by the Company
Subsequent directors are elected by shareholders at the AGM. If a company adopts the
principle of retirement by rotation, one-third of the directors must retire by rotation. The retiring
directors are eligible for reappointment.
b. Appointment by Board of Directors
The Board can appoint additional directors. They can fill up casual vacancy caused by
death, resignations, etc. they can also appoint alternate director. If empowered by Articles, the
Board may appoint an alternate director during his absence for a period of the less than 3
months from the date in which meetings of the Board are ordinarily held.
c. Appointment by Third Parties
If authorized by the Articles, third parties such as vendor of the business, banking or
financial institutions which have advanced loans to the companies, can appoint their nominees
on the Board.
d. Appointment by Central Government
The Central Government can also appoint directors on an order passed by the Company
Law Board or on the application of not less than 100 members of the company or of members
holding 10% of the total voting power.
NUMBER OF DIRECTORSHIP
A person can hold office as director in not more than 15 companies at the same time.
In calculating the number of directorships, the directorship of independent private limited
companies, non-profit associations, and alternate directorships excluded.
Every public company must have at least 3 directors and every private company must
have at least 2 directors.
REMOVAL OF DIRECTORS
A director of a company can be removed from office by the company by an ordinary
resolution before the expiry of his term, when such a director has acted in fraudulent manner
or abused his fiduciary position.
The Central Government can remove a director under certain circumstances.
The Company Law Tribunal may also order for removal of a director where an
application has been made to it on charges of oppression and mismanagement of the company
, affairs.
VACATION OF OFFICE
A director must vacate his office in the following circumstances;
i. When he is found to be of unsound mind by a competent court
ii. If he is adjudged an insolvent
iii. If he fails to obtain his qualification shares within the prescribed time or ceases to
hold at any time thereafter
iv. If he is convicted of an offence involving moral turpitude and sentenced to
imprisonment for not less than 6 months
v. If he fails to pay any call money within 6 months
vi. If he absents himself from three consecutive Board meetings or from all meetings
of the Board for a continuous period of three months whichever is longer without
obtaining leave of absence from the Board
vii. If he becomes disqualified by an order of the Court
viii. If he fails to disclose to the Board his interest in any contract entered into by the
company.
POWER OF DIRECTORS
According to sec.292, the powers are mentioned below;
1. General Powers
The board of directors of a company is entitled to exercise all such powers and to do all
such acts and things as the company is authorized to do. However the Board shall not do any
act which is to be done by the company in general meeting.
2. Statutory Powers
By means of resolutions passed at the Board meetings, the following powers can be
exercised by the directors.
i. To make calls
ii. To issue debentures
iii. To borrow money otherwise than on debentures
iv. To make loans
3. Other powers to be exercised at Board Meetings
i. To fill up casual vacancy in the office of directors
ii. To appoint additional directors, if authorized by the articles
iii. To appoint an alternate director if authorized by the articles
iv. To accord sanction to contracts in which any director or his relative is interested
v. To recommend a certain rate of dividend to be declared at the annual general
