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Director of a Company

Points covered:

Director
Appointment Power Duties Responsibilities Liabilities
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Introduction:
Shareholders own limited companies

but they don't run them. That job is given to the directors. For a Public limited company there should be a minimum of 3 directors [sec.252(1)] All Private limited companies must have at least 2 directors[Sec.252(2)]
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

CONTINUED
The director, or directors, must

manage the company's affairs in accordance with its articles of association and the law. The directors of a company collectively are referred to in this Act as the " Board of directors " or " Board ".
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Restriction as number of Directorship:


A person cannot be a Director for more than

20 companies.(Sec.275) In case if a person who holds the directorships of 20 companies and is appointed in another company, he has to vacate in one of the company within 15 days of his appointment.

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Appointment of Director
By articles as first director

Sec.254 By the company in General Meeting Sec.255 to 257,263,264 By the director By third parties Sec.255 By the principle of proportional representation Sec.265 By the Central Government Sec.408
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

By the company in General Meeting Sec.255 to 257,263,264


The directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and

subject to any regulations in the articles of the company, also be appointed by the company in general meeting.

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Appointment of Director by the company in General Meeting(Sec.255 to 257,263,264)


Director must be appointed by the company in General Meeting(Sec.255) A special or ordinary resolution is required for

appointment or re-appointment(sec.256) If a new director is to be appointed, a notice by him or some member intending to propose him in writing should be given to the company at least 14 days before the meeting
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Cont
The company must inform the members at least 7 days before the meeting (Sec.257) Appointment of Directors of a public company ,must be done individually by separate ordinary resolution(Sec.263) Every person proposed as a candidate for the office of a Director must sign and file with the company his consent in writing to act as a Director if appointed(Sec.264)

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Appointment underSec.265 & 408


The appointment must be made once in 3

years and interim casual vacancies must be filled in the manner provided in the Articles(Sec.265) If the Company Law Board specify as being necessary to effectively safeguard the interest of the company, its shareholders or the public(Sec.408)

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Powers
General powers of the Board->Sec.291:

The BOD of a company is entitled to exercise all powers and to do all acts and things which the company is authorized to exercise and do. Powers to be exercised only at meeting-> Sec.292: Following powers must exercise on behalf of the company by means of resolutons passed at the board:-

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Powers to be exercised only at meeting-> Sec.292:

make calls on shares issue debentures borrow money invest the funds of the company make loans

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

duties:
Directors occupy a key position in the

management and administration of a company. Their duties are usually regulated by the Articles of the company His duties are classified into 3 types

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Cont
The general duties are as follows:-

(iii)Other duties.

(i)Fiduciary Duties

(ii)Duties of care, skill and diligence &

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Duties General Duties


Fiduciary Duties:

It is basically identical with those of any person in a Fiduciary position. They must exercise their powers a. Honestly, b. In the interest of the company and shareholder. They should not place themselves in any conflict between their duties of the company and their personal interests.
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Duties General Duties


Duties of care, skill and diligence :

The standard of care, skill and diligence would ,however, vary with->type and nature of work; ->division of power between directors and other officers; ->general usages and customs of that type of business; and ->whether directors work gratuitously or remuneratively.
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Duties General Duties


Other duties:
1. To attend Board meetings, 2. Not to delegate his functions except to the

extent authorized by the Act or the constitution of the company, and 3. To disclose his interest.

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Liabilities of directors
Liability to third parties,

Liability to the company


Liability for breach of statutory duties Liability for acts of his co-directors

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

I.

Liability to third parties

Under the Act:

Liability of Director to the third parties may arise in connection with the issue of prospectus which does not contain the particulars required by the Act, or which contains material misrepresentations. They may also incur such liabilitya. where they fail to repay application money if minimum subscription has not been subscribed[Sec.69(5)]
by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

Removal of Directors:
1. Shareholders
2. Central Govt

Sec 284
Sec 388-B to 388-E Sec 402

3. Removal by Company Law Board

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand

References:
Indian Companies Act,1956 N.D.Kapoor , Sultan Chand & Sons

by:-Sudeep Kumar,Dhoulath Khan,Manjunath,Siddesh,Dayanand