MANAGEMENT AND CONTROL OF COMPANIES - I - INSTITUTION OF DIRECTORS

MANAGEMENT AND CONTROL OF COMPANIES - I

INSTITUTION OF DIRECTORS (Section 2 (13))

Directors, as a body, frame the general policy of the company, direct its affairs, appoints the company officers, ensure that they carry out their duties and recommend to the shareholders regarding distribution of dividend.

        Two types Directors:-

1. Executive or Whole- Directors (Section 269(1))
2. Non – executives or part- time directors.

Only an individual, and not a body corporate, association or firm, shall be appointed as directors – Section 253

Disqualification of Directors – Section 274

A person shall not be capable of being appointed director of a company having :-

1. Unsound Mind.
2. Un- discharged insolvent
3. Applied to be adjudicated as an insolvent and his application is pending.
4. Convicted by a Court
5.  Has not paid any call in respect of the shares
6. Order disqualifying him for appointment as Directors has been passed by Court in pursuance of Section 203
7. Such person is already a director of a public company which has not filed the annual returns

Duty of Statutory Auditor to report on disqualification – Section 227(3) (f)

To report to members of Company whether any director is disqualified and to furnish a certificate each year as to whether on the basis of his examination of the books and records of the Company, any Director of the Company is disqualified for appointment as a director or not.

No person to be a director of more than twenty companies at a time– Section 275

Qualification shares – Section 270

• Each Director must obtain his qualification shares within two months after the appointment of Director
• The nominal value of the qualification shares shall not exceed five thousand rupees or the nominal value of one share where it exceeds five thousand rupees.

Penalty – Section 272

Director shall be punishable with fine which may extend to fifty rupees for every day if acts a Director after the expiry of the said period of two months without holding Qualification Shares.

Section 278 lays down the directorship in the following companies shall be excluded for the purpose of calculation of permissible maximum number of directorship for the purpose of Section 275, 276 and 277

• private company which is neither a subsidiary nor a holding company of a public company
• an unlimited company
• an association not carrying on business for profit or which prohibits the payment of a dividend
• a company in which such person is only an alternate director

Appointment 0f Director

• By subscribers to Memorandum (First Directors) Section 254
• By members in General Meeting Section 255, 256, 257, 265
• By Board of Directors –

                 Additional Directors - Section 260,

                 Filing up of Casual vacancies – Section 262,

                 Alternate Director – Section 313

• By Central Government Section 408, 409

          To prevent the affairs of the Company being in the manner which is oppressive or in the manner which is prejudicial to the interest of the company or public interest.

• By third parties if Article provides – By financial institution or banks or other lenders to represent their interest on the Board.
• By small shareholders if the articles provide Section 252

Removal of Directors

• Removal by Shareholders – Section 284(1)

         Passing an ordinary resolution at a general meeting before the expiry of period of his office.

• Removal by Central Government – Section 338E

• Removal by Tribunal – Section 397

        On letter by any member of a company who complain that the affairs of the company

Penalty for wrongful holding of Company’s Property – Section 630 - Punishable with fine which may extend to one thousand rupees

Vacation of Office of Directors – Section 283

• fails to obtain qualification share within two months of appointment
• found to be of unsound mind
• found to be of unsound mind
• adjudged an insolvent;
• convicted by a Court of any offence involving moral turpitude
• fails to pay any call on shares of the company held by him within six months from the last date fixed for the payment of the call
• absents himself from three consecutive meetings of the Board of directors or all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave.
• disqualified by an order of Court under section 203
• Removal by Shareholders – Section 284

Remuneration to Directors

Directors are not entitled to payment in the absence of express provisions.

Managerial Remuneration – Section 198(4)

The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and manager in respect of any financial year shall not exceed eleven per cent of the net profits of that company.

Remuneration payable by companies having profits – Section 198 and 309

Such remuneration shall not exceed five per cent of the net profits for one such director, and if there is more than one such director, ten per cent for all of them together.

Office or place of profit – Section 314

No Director except with the previous consent of the company accorded by a special resolution,^___

     (a) no director of a company shall hold any office or place of profit, and

     (b) no partner or relative of such a director, 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, managing agent, secretaries, and treasures, or manager of such a private company shall hold any office or place of profit carrying a total monthly remuneration of five hundred rupees or more, except that of managing director, managing agent, secretaries and treasures, manager, legal or technical adviser such sum of five hundred rupees or more except that of managing director or manager, banker or trustee for the holders of debentures of the company,

          (i) under the company; or

          (ii) under any subsidiary of the company