COMPANY

MANAGEMENT

Director Defined
Director includes any person occupying the

position of director, by whatever name called.

Only individuals can be director.
Every public company shall have at least
three directors every private company at least
two directors.
Increase in number of directors to be
sanctioned by Central Government if total
exceeds twelve (Sec.259)

APPOINTMENT OF
DIRECTORS
First directors named in articles.
Directors appointed by the company.
Retirement by rotation.
Appointment of directors by directors.
Appointment of directors by third parties.
Appointment by proportional representation.
Appointment of directors by Central

Government.

POSITION OF DIRECTORS
Directors as agents.
Directors as employees.
Directors as officers.
Directors as trustees.
Trustees of the companys money and

property.
Trustees of the powers entrusted to
them.

DISQUALIFICATION OF
DIRECTORS
A person of unsound mind
An un-discharged insolvent.
A person who has applied to be

adjudicated as an insolvent and his

application is pending.
A person who has been convicted by
Court of any offence involving moral
turpitude for six months and a period of
five years as not elapsed.

 A person whose calls where in arrears

for more than six months.

A person who is disqualified by court
u/s.203.
A person who is already a director of a
public company which has not filed
annual returns/accounts for three
consecutive years or failed to repay
deposits, redeemed debentures or pay
dividend for one year or more.

VACATION OF OFFICE AND

REMOVAL
OF(Sec
DIRECTORS
Vacation
of Office
283): Fails

to obtain qualification shares within 2

months of his appointment or ceases to hold
thereafter.
Adjudged to be of unsound mind.
Applies to be adjudged as an insolvent
Adjudged as insolvent
Convicted by court for any offence involving
moral turpitude for a period not less than 6
months
Has calls in arrears for more than 6 months

Absents himself from 3 consecutive board meetings

or for 3 months whichever is longer without leave of
absence
He or his firm or any private company of which he is
a director accepts loan or any guarantee or security
without central government approval
Fails to make disclosure of his disinterest in any
contract
Becomes disqualified by an order of court on the
ground of conviction of an offence in promotion,
formation or management or found guilty of fraud or
misfeasance in relation to winding up
He is removed by the company by ordinary resolution
Ceases to hold office or employment in the holding
company

 Removal of Directors
By

share holders (Sec 284)

By central government (Sec 388-B to
388-E)
Removal by company law board (Sec
402)

MANAGERIAL
REMUNERATION
Overall maximum managerial remuneration

not to exceed 11% of net profits of the

company(Sec.198)
Rules for payment of remuneration to directors.
Shall be determined in accordance with the
provisions of Sec.198 and 309, either by the
articles or by a resolutions passed by the
company in general meeting.
Non executive director may received
remuneration by way of fee for each meeting.

 A whole time director or a managing director

may be paid either by way of monthly salary

or at a percentage of the net profits of the
company or by both the ways.
Shall not exceed 5% for one director or 10%
if more than one of the net profits without
Central Government approval.
A part time director may be paid
remuneration by way of periodical payments
with approval of central government or by
way of commission if authorized by a
special resolution which shall be in force for
a maximum period of five years.

 The remuneration to part time directors

shall not exceed 1% of the net profits, if the

company has a managing director or whole
time director and 3% of the profit in any
other case.
The above rules shall not apply to a private

company unless it is a subsidiary of a public

company.

MEETINGS OF DIRECTORS
Number of meetings four in a year and once

in three months.
Notice of meetings to be given in writing to
every director for the time being in India at his
usual address.
Quorum for meeting to be 1/3 of the total
strength or two directors whichever is higher.
Quorum to be uninterested directors.

POWERS OF DIRECTORS

1.

2.

General powers of the Board (Sec.291):

Entitle to exercise all powers and to do all
such acts and things as the company is
authorised to do.
Restrictions:- Shall not do any act which is
to be done by the company in general
meeting and shall exercise its powers
subject to the provisions of company's act or
Memorandum.


1.
2.
3.
4.
5.

Powers to be exercised only at Board

meetings (Sec.292):
To make calls on share holders in respect
of money unpaid on their shares.
Issue debentures.
Borrow moneys otherwise than on
debentures (public deposits, etc.)
Invest the funds of the company and
Make loans.
The board may, by a resolution, delicate
the last three powers to a committee of
directors or the manager or any other
principal officer subject to specific limits.

1.

2.

3.

Powers to be exercised with the approval of

the company in general meeting(Sec.293)-(in
case of public company or a subsidiary of
public company):
To sell, lease or otherwise dispose of the
whole, or substantially whole, of the
undertaking of the company.
To remit or give time for repayment of any debt
due to the company by a director except in
case of a banking company.
To invest (excluding trust securities) the
amount to compensation received in respect of
compulsory acquisition of any undertaking or
property of the company.

4.
5.
6.

To borrow moneys in excess of paid up

capital and free resource.
Excluding temporary loans raised from
banks.
To contribute to charitable or other funds not
relating to the business of the company in
excess of Rs.50,000/- in any financial year.

DUTIES OF DIRECTORS

1.
2.
3.

Fiduciary duties:
Exercise the powers honestly and bonafide
for the benefit of the company as a whole.
Not place themselves in position in which
there is a conflict of interest.
Must not make any secret profit out of their
position.


1.

2.

3.

Duties of care, skill and diligence:

To carry out their duties with reasonable care
and exercise such degree of skill and diligence
as is reasonably expected of persons of their
knowledge and status. Not bound to bring any
special qualifications to their office.
Standard of care depends upon type and
nature of work, division of powers between
directors and other officers, general usage and
customs and whether directors work freely or
remuneratively.
Case law in re: City Equitable Fire Insurance
co. ltd.


1.

2.

Other duties:
To attend board meetings not to delicate
functions except to the extent authorised by
the Act or Articles of the company.
To disclose his interest.

LIABILITIES OF DIRECTORS

1.

2.
3.
4.

Liability to third parties:

When prospectus not containing the
particulars required by the Companies Act or
which contains material misrepresentation.
On the failure to repay application money.
On irregular allotment of shares.
On dishonour of bills, cheques etc. which are
signed without mentioning the companys
name.

4.

Liability to the Company:

Ultra vires acts.
To negligence
Breach of trust
Misfeasance

Liability for breach of statutory duties

Liability for acts of his co-directors.

1.
2.
3.

MANAGING DIRECTOR
Is a director who is entrusted with substantial

powers of management and includes a

director who occupies the position of
Managing Director, by whatever name called.
Certain companies to appoint Managing or
whole time Director or a Manager
compulsorily.
Appoint subject to conditions specified in
Schedule XIII.

 Prior approval of Central Government unless

appointment is in accordance with Schedule

XIII.
Disqualifications of Managing Director
(Sec.267).
No.of Managing Directorships not to exceed
two without Central Governments
permission.
Term of office not to exceed five years at a
time in case of public limited company.

WINDING UP.

1.
2.
3.

Winding up or liquidation of a company is the

last stage of its life. It means a proceeding by
which a company is dissolved.
Modes of winding up:Winding up by the court, i.e., compulsory
winding up [secs 433-483].
Voluntary winding up by members or by
creditors [secs 484-521].
Winding up subject to Supervision of Court

WINDING UP BY THE
COURT

1.
2.
3.
4.
5.
6.

Grounds for compulsory winding up [sec

433].
Special resolution of the company.
Default in delivering the statutory report to the
Registrar or in holding the statutory meeting.
Failure to commence, or suspension of,
business.
Reduction in membership.
Inability to pay its debts.
Just and equitable.

When the management is carried on in such

a way that the minority is disregarded or
oppressed.
Where there is a deadlock in the
management of the company.
Where public interest is likely to be
prejudiced.
Where the company was formed for
fraudulent and illegal business.
Where the company is a mere bubble and
does not carry on any business or has no
property.

JUST AND EQUITABLE

1.
2.
3.

4.

When substratum of a company is gone.

Substratum of a company disappears:
When the very basis for the survival of the company
is gone.
When the main object of the company has
substantially failed or become impracticable.
When the company is carrying on its business at a
loss and there is no reasonable hope that profit can
be made.
When the existing on probable assets of the
company are insufficient to meet its existing
liabilities.

Company is unable to pay its debts

when:1. Demand for payment neglected.
2. Decreed debt unsatisfied.
3. Commercial insolvency.

PETITION [SEC.439]
Petition by the company.
Petition by any creditor or creditors.
Petition by any contributory or

contributories.
Petition by all or any of the prior parties
whether together or separately.
Petition by registrar.
Petition by the Central Government.

CONSEQUENCES OF
WINDING UP ORDER
Intimation to Official Liquidator and Registrar.
Copy of winding order to be filed with the

Registrar.
Order for winding up deemed to be notice of
discharge.
Suits stayed.
Power of the Court.
Effect of winding up order.
Official Liquidator to be liquidator.

DUTIES OF LIQUIDATOR
To conduct the proceedings in winding up.
To submit Preliminary report and Additional

report.
To take custody of companys property.
To exercise and control of liquidators of
powers.
To summon meeting of creditors and
contributories.
To take directions from the court.
To keep proper books.
To get accounts audited.
To file report pending liquidation.

POWERS OF LIQUIDATOR

1.
2.
3.
4.
5.

Powers exercisable with the sanction of the Court.

To institute or defend suits in the name of and on
behalf of the company.
To carry on the business of the company for
beneficial winding up.
To sell properties and actionable claims.
To raise money on the securities of the companys
assets.
To do all such other things as may be necessary.


1.
2.
3.
4.
5.
6.

Powers exercisable without the sanction of

the Court.
To do all acts and execute documents under
companys seal.
To inspect records and returns of the
company.
To prove, rank and claim in the insolvency of
any contributory.
To draw, accept, make an endorse any bill of
exchange, promissory note etc.
To take out, in his official name, letters of
administration to any deceased contributory.
To appoint an agent.

7. Duty of liquidator to call creditors

meeting in case of insolvency.

8. Duty to call General meeting at the
end of each year.
9. Final meeting and dissolution.
10. Provisions as to annual and final
meeting incase of insolvency.

GENERAL POWERS OF
COURT
Stay of winding up proceedings.
To settlement of list of contributories.
Payment of debts due by contributory.
Power to make calls.
Adjustment of rights of contributories.
Delivery of property.
Exclusion of creditors.
Order as to costs.

 Summoning of persons suspected of

having property of the company.

Public examination.
Arrest of absconding contributory.
Meeting of creditors or contributories.

VOLUNTARY WINDING UP
[Secs.484 to 520]

1.
2.
3.
4.
5.
6.

Members voluntary winding up.

Declaration of solvency.
Passing a special resolution.
Appointment and remuneration of liquidators.
Boards power to cease on appointment of a
liquidator.
Power to fill vacancy in office of liquidator.
Notice of appointment of liquidator to be
given to registrar.

 Creditors voluntary
1. Meeting

winding up.

of creditors.
2. Notice of resolution to be given to
Registrar.
3. Appointment of liquidator.
4. Appointment of committee of
inspection.
5. Liquidators remuneration.

6.Boards power to cease on appointment of

liquidator.
7.Power to fill vacancy in office of liquidator.
8.Power of liquidator to accept shares, etc.
9.Duty of liquidator to call meeting at the end
of each year.
10.Final meeting and dissolution.

CONSEQUENCES OF
WINDING UP

1.
2.
3.
4.

As to shareholder/members.
As to creditors.
Where the company is solvent
Where the company is insolvent
Secured and unsecured creditor
Preferential payment
As to servants and officers
As to proceedings against the company
As to cause

OTHER POINTS
Commencement of winding up
Powers of Court
Statement of affairs
Committee of inspection
Dissolution of company
Contributory
Defunct company

CORPORATE
GOVERNANCE.
Corporate governance is about maintaining

an appropriate balance of accountability

between three key players: the corporations
owners, the directors whom the owners elect,
and the managers whom the directors select.
Accountability requires not only good
transparency, but also an effective means to
take action for poor performance or bad
decisions.
- Chairperson Mary.L.Schapiro SEC, USA.

 Clause 49 of Listing Agreement to Indian

stock exchanges came into effect from

31st December 2005 with object of
improving corporate governance in listed
companies.
It ensure commitment to values, ethical
conduct of business, transparency,
statutory compliance, disclosures and
effective decision making.
It is about promoting corporate fairness,
transparency and accountability Good
Business.

COMPOSITION OF BOARD.
50% of the Board should be comprised

of non- executive directors.

At least 1/3rd should be comprised of
independent directors where chairman
is a non- executive director.
At least of the board should be
comprised of independent directors
where chairman is an executive
director.

 Independent director is a non- executive

director who (a) does not have any material

pecuniary relationship or transaction with the
company. (b) not related to promoters or
management etc.
Non- executive directors including
independent directors fees/compensation
shall have prior approval of share holders in
general meetings.
The board shall meet at least four times a
year with a maximum gap of four months.
A director shall not be a member in more
than 10 committees or chairman of more than
five.

 The board shall lay down a code of

conduct for all board members and

senior management of the company.
The board and senior management
shall affirm compliance with the code on
annual basis.

AUDIT COMMITTEE
A qualified and independent audit committee

shall be set up.

The audit committee shall have minimum
three directors as members.
2/3rd of the members of audit committee shall
be independent directors.
All members shall be financially literate and at
least one member shall have accounting or
related financial management exercise.
The chairman shall be an in dependent
director who shall be present at the AGM.

 The finance director, head of internal

audit and a representative of the

statutory auditor maybe present as
invitees.
The company secretary shall act as
secretary to the committee.
The committee should meet at least
four times in a year.


1.
2.
3.
4.

The audit committee shall have

powers which include :investigation of any activity within its
terms of reference.
To seek information from any
employee.
To obtain outside legal or other
professional advice.
To secure attendance of outsiders with
relevant expertise, if considered
necessary.

 Role of audit committee.

Review of information by audit

committee.

DISCLOSURES.
Basis of related party transactions.
Disclosure of accounting treatment.
Board disclosures risk management.
Proceeds from public issues, right issues, etc.
Remuneration of directors.
Management discussion and analysis report.

 Share Holders.
Share holders Grievance Committee with the

Chairmanship of non executive director.

CEO/CFO certification.
Report on Corporate Governance.
Certificate of compliance.

NON MANDATORY
REQUIREMENTS
Remuneration committee.
Half yearly declaration of financial

performance to each share holder.

Training of Board members.
Mechanism for evaluating non
executive board members.
Whistle blower policy.

THE FACTORIES ACT, 1948

The act provides for working

conditions in a factory in order to
ensure health, safety and welfare of
workmen.
Factory means any premises including
the precincts thereof :1. 10 or more workers are working or
were working in a manufacturing
process during the preceding 12
months with aid of power.
2. 20 or more without aid of power.

 Manufacturing process is defined by

sec 2(k).
Worker as per sec 2(l) means a person
employed directly or through any
agency a manufacturing process.
Occupier as per sec 2(n) means a
person who has ultimate control over
the affairs of the country.

APPROVAL, LICENSING AND

REGISTRATION OF
FACTORIES

State government empowered under

sec 6 to make rules for licensing etc.

Application for permission to be
submitted to the Chief Inspector along
with certified plans and specification for
factory.
Notice by occupier [sec 7].
General duties of the occupier [sec 7-A]

HEALTH[secs 11to20]

1.
2.
3.

Cleanliness :Factory to be kept clean and free from

effluvia and dirt.
Effective means of drainage.
Use of disinfectants.
Disposal of waste and effluents
Ventilation and temperature.

 Dust and fume.

Artificial humidification.
Overcrowding.
Lighting
Drinking water
Latrines and urinals
Spittoons

SAFETY [secs.21 to 41]

Fencing of machinery-dangerous part
of every machinery to be securely
fenced.
Work on near machinery in motion.
1. Examination of machinery in motion
by a trained adult male worker only.
2. Restriction on women and young
persons.

Employment of young persons on

dangerous machines.
1. Restriction on young persons to work
on dangerous machines.
2. Machines dangerous for young
persons to be specified by State
Government.

 Striking gear and devices for cutting off

power.
Self acting machines. Traversing part not
allowed to run within a distance of 45 cms
from any fixed structure.
Casing of new machinery to prevent danger.
Prohibition of employment of women and
children near cotton-openers.

 Hoists and lifts.

Lifting machines, chains, ropes and

lifting tackles.
Revolving machinery.
To have notice of safe working speed
and speeds not to be exceeded.
Pressure plant.

 Floors, stairs and means of access.

Pits, sumps and openings in floors etc. to be

securely covered or fenced.

Prohibition on lifting or carrying of excessive
weights. Maximum weights to be lifted or
carried to be prescribed.
Protection of eyes.
Precaution against dangerous fumes.
Prohibition on entry in to any chamber, tank,
pipe etc. where any gas,fume etc. is present.

 Precautions regarding use of portable

electric light.
Precautions against explosives or
inflammable dust, gas etc. Measures to
prevent explosions on ignition of gas,
fumes etc.
Precautions in case of fire. Measures
to prevent fire and its spread.
Familiarity with means of escape.

 Power to require specifications of

defective parts or tests of stability.

Safety of building and machinery.
Maintenance of building.
Safety officers.

THANK YOU