Business Law.docx

BUSINESS LAW 1) What are the characteristics of company and explain the different kinds of company? On the basis of definitions studied above, the following are the characteristics of a company: 1. An Artificial Person Created by Law: A company is a creation of law, and is, sometimes called an artificial person. It does not take birth like natural person but comes into existence through law. But a company enjoys all the rights of a natural person. It has right to enter into contracts and own property. It can sue other and can be sued. But it is an artificial person, so it cannot take oath, cannot be presented in court and it cannot be divorced or married. 2. Separate Legal Entity: A company is an artificial person and has a legal entity quite distinct from its members. Being separate legal entity, it bears its own name and acts under a corporate name; it has a seal of its own; its assets are separate and distinct from those of its members. ADVERTISEMENTS: Its members are its owners but they can be its creditors simultaneously as it has separate legal entity. A shareholder cannot be held liable for the acts of the company even if he holds virtually the entire share capital. The shareholders are not agents of the company and so they cannot bind it by their acts. 3. Perpetual Succession: The life of company is not related with the life of members. Law creates the company and dissolve it. The death, insolvency or transfer of shares of members does not, in any way, affect the existence of a company. According to Tennyson“For men may come, men may go, ADVERTISEMENTS: But I go on forever.” In the case of company it may be said that members may come and members may go but the company goes on. It is a legal person having come into being by law and only law can bring its end and none else.

4. Common Seal: On incorporation a company becomes legal entity with perpetual succession and a common seal. The common seal of the company is of great importance. It acts as the official signature of the company. As the company has no physical form, it cannot sign its name on a contract. The name of the company must be engraved on the common seal. A document not bearing the common seal of the company is not authentic and has no legal importance. 5. Limited Liability: The limited liability is another important feature of the company. If anything goes wrong with the company his risk is only to the extent of the amount of his shares and nothing more. If some amount is uncalled upon a share, he is liable to pay it and not beyond that. The creditors of a company cannot get their claims satisfied beyond the assets of the company. The liability of members of a company ‘limited by guarantee’ is limited to the amount of guarantee. 6. Transferability of Shares: A shareholder can transfer his shares to any person without the consent of other members. Under Articles of Association, a company can put certain restriction on the transfer of shares but it cannot altogether stop it. Private company can put more restrictions on the transferability of shares. 7. Limitation of Work: The field of work of a company is fixed by its charter. The Memorandum of Association. A company cannot do anything beyond the powers defined in it. Its action is, therefore, limited. In order to do the work beyond the memorandum of association, there is a need for its alteration. 8. Voluntary Association for Profits: A company is a voluntary association of persons to earn profits. It is formed for the accomplishment of some public good and whatsoever profit is divided among its shareholders. A company cannot be formed to carry on an activity against the public policy and having no profit motive. 9. Representative Management: The shareholders of company are widely scattered. It is not possible for all the shareholders to take part in the management. They leave their task to the representatives the Board of Directors and the company is managed by Board of Directors. 10. Termination of Existence:

A company is created by law, carries on its affairs according to law and ultimately is affected by law. Generally, the existence of a company is terminated by means of winding up. Kinds of Companies: Companies may be classified into various kinds on the following basis: 1. On the basis of incorporation 2. On the basis of liability 3. On the basis of number of members 4. On the basis of control 5. On the basis of ownership. 1. On the Basis of Incorporation: On the basis of incorporation companies may be classified into the following three categories: (i) By Royal Charter-Chartered Companies: A chartered company is created by the charter or special sanction granted by the Head of the State giving certain exclusive privileges, rights and powers to a distinct body of persons for undertaking commercial activities in specified geographical areas. These rights and privileges are to be enjoyed and the powers are to be used within the terms of the charter. The British East India Company formed in England in 1600 and Dutch East India Company chartered in Holland in 1602 to trade with India and the East and Bank of England (1690) are the examples of such companies. Since the country attained independence these types of companies do not exist in India. (ii) Statutory Company: A statutory company is brought into existence under the Act passed by the legislature of the country or state. Powers, responsibilities, liabilities, objects, scope etc. of such a company are clearly defined under the provisions of the Act which brings it into existence. Usually, such companies are established to run the enterprises of social or national importance. The Reserve Bank of India, the Industrial Finance Corporation of India,

the Life Insurance Corporation of India are some of the examples of statutory companies in India. (iii) Registered Companies: A registered company is a company which is organised by getting it registered with the Registrar of Companies under the provisions of Companies Act of the country concerned. The formation, working and continuity of such a company are governed by relevant provisions of the Companies Act. Most of the companies in the field of industry and commerce are registered companies. In India such companies are registered under the Indian Companies Act, 1956. 2. On the Basis of Liability: On the basis of liability, company may be classified into: (a) Limited liability companies. (i) Companies limited by shares (ii) Companies limited by guarantee (b) Unlimited liability companies. (a) Limited Liability Companies: Where the liability of the members of a company is limited to the extent of the nominal value of shares held by them, such companies are known as Limited liability companies. (i) Companies Limited by Shares: Where the liability of the members of a company is limited by the Memorandum of Association to the amount unpaid on the shares, such a company is called company limited by shares. In case of winding up of the company the members cannot be asked to pay more than the amount unpaid on the shares held by them. A company limited by shares may be a public company or a private company. (ii) Companies Limited by Guarantee: Where the liability of the members of a company is limited by the Memorandum of Association to such an amount as the members undertake to contribute to the assets of the company in the event of its winding up.

Such type of companies are not formed for the purpose of profit but are formed for the promotion of art, science, sports, commerce and for cultural activities. Such companies may or may not have share capital. If it has a share capital, it may be a public company or a private company. (b) Unlimited Liability Companies: Where the liability of members is not limited, such companies are known as unlimited liability companies. Every member of such a company is liable for its debts in proportion to his interest in the company. Such a company can be converted into a limited liability company after passing a special resolution for conversion and applying to the Registrar of Companies for enrolling it as a limited company. 3. On the Basis of Number of Members: On the basis of number of members, a company may be: 1. Private Company and 2. Public Company. 2) What are the essentials of a valid contract? On analysing the contents of Sec. 10. It is revealed that the following are the essentials of a valid contract:1. Offer and acceptance. 2. Legal relationship. ADVERTISEMENTS: 3. Consensus-ad-idem. 4. Competency of parties. 5. Free consent. 6. Lawful consideration. ADVERTISEMENTS: 7. Lawful object.

8. Not declared to be void. 9. Certainty and possibility of performance. 10. Legal formalities. 1. Offer and acceptance: In a contract there must be at least two parties one of them making the offer and the other accepting it. There must thus be an offer by one party and its acceptance by the other. The offer when accepted becomes agreement. 2. Legal relationship: Parties to a contract must intend to constitute legal relationship. It arises when the parties know that if any one of them fails to fulfil his part of the promise, he would be liable for the failure of the contract. If there is no intention to create legal relationship, there is no contract between parties. Agreements of a social or domestic nature which do not contemplate a legal relationship are not contracts. 3. Consensus-ad-idem: The parties to an agreement must have the mutual consent i.e. they must agree upon the same thing and in the same sense. This means that there must be consensus ad idem (i.e. meeting of minds). 4. Competency of parties: The parties to an agreement must be competent to contract. In other words, they must be capable of entering into a contract. According to Sec 11 of the Act, “Every person is competent to contract who is of the age of majority according to the law to which he is subject to and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” Thus, according to Section 11, every person with the exception of the following is competent to enter into a contract:(i) A minor, (ii) A person of unsound mind, and (iii) A person expressly declared disqualified to enter into a contract under any Law. 5. Free consent:

Another essential of a valid contract is the consent of parties, which should be free. Under Sec. 13, “Two or more parties are said to consent, when they agree upon the same thing in the same sense.” Under Sec. 14, the consent is said to be free, when it is not induced by any of the following:- (i) coercion, (ii) misrepresentation, (iii) fraud, (iv) undue influence, or (v) mistake. 6. Lawful consideration: Consideration is known as ‘something in return’. It is also essential for the validity of a contract. A promise to do something or to give something without anything in return would not be enforceable at law and, therefore, would not be valid. Consideration need not be in cash or in kind. A contract without consideration is a ‘wagering contract’ or ‘betting’. Besides, the consideration must also be lawful. 7. Lawful objects: According to Sec. 10, an agreement may become a valid-contract only, if it is for a lawful consideration and lawful object. According to Sec. 23, the following considerations and objects are not lawful:(i) If it is forbidden by law; (ii) If it is against the provisions of any other law; (iii) If it is fraudulent; (iv) If it damages somebody’s person or property; or (v) If it is in the opinion of court, immoral or against the public policy. Thus, any agreement, if it is illegal, immoral, or against the public policy, cannot become a valid contract. 8. Agreement not expressly declared void: An agreement to become a contract should not be an agreement which has been expressly declared void by any law in the country, as it would not be enforceable at law. Under different sections of the Contract Act, 1872, the following agreements have been said to be expressly void, viz :(i) Agreements made with the parties having no contractual capacity, e.g. minor and person of unsound mind (Sec. 11). (ii) Agreements made under a mutual mistake of fact (Sec. 20).

(iii) Agreements with unlawful consideration or object (Sec. 23). (iv) Agreements, whose consideration or object is unlawful in part (Sec. 24). (v) Agreements having no consideration (Sec 25). (vi) Agreements in restraint of marriage (Sec. 26). (vii) Agreements in restraint of trade (Sec. 27). (viii) Agreements in restraint of legal proceedings (Sec. 28). (ix) Agreements, the meaning of which is uncertain (Sec. 29). (x) Agreements by way of wager (Sec. 30). and (xi) Agreements to do impossible acts (Sec. 56). 9. Certainty and possibility of performance: Agreements to form valid contracts must be certain, possible and they should not be uncertain, vague or impossible. An agreement to do something impossible is void under Sec. 56. 10. Legal formalities: The agreement may be oral or in writing. When the agreement is in writing it must comply with all legal formalities as to attestation, registration. If the agreement does not comply with the necessary legal formalities, it cannot be enforced by law. 3) What are the rules and regulation with regard to offer? (1) An offer must be capable of creating legal relations: An offer must be such that when accepted it will result in a valid contract. A mere social invitation cannot be regarded as an offer, because if such an invitation is accepted it will not give rise to any legal relationship. (2) The offer must be distinguished from mere statement of intention: The terms of an offer should be clear so that there is no confusion whether; it is a valid offer or a mere statement of intention. Sometimes, a person declares that he has the intention to do something; this does not amount to an offer. ADVERTISEMENTS:

Such statements merely indicate the intentions that an offer will be made in future or an offer will be invited in future. (3) The offer must be distinguished from an invitation to receive offer: The terms of an offer should be clear so that there is no confusion whether it is a valid offer or an invitations Jo receive offer. Sometimes, a party does not make an offer but simply proposes certain terms and invites the other party to make an offer on proposed terms. (4) An offer may be express or implied: An express offer is made by words of mouth or it is written, while an implied offer means an offer made by conduct. (5) An offer may be general or specific: A specific offer is one which is made to an ascertained person. And a general offer is one which is not made to a specific person, but to the public at large. It may be noted that in case of a general offer, the contract is not made with the entire world.

ADVERTISEMENTS: But it is made only with the person, who having the knowledge of the offer, comes forward and acts according to the conditions of the offer. (6) An offer may be conditional: An offer to be valid may contain a condition and in that case it has to be accepted along with the condition stated therein. However, no offer can contain a term or condition the non compliance of which would amount to acceptance. (7) The terms of an offer must be certain, definite and not vague: The terms of an offer must be definite, clear and certain. If the terms of the offer are vague and uncertain, no contract will come into existence. ADVERTISEMENTS: The reason for the same is that when the offer is vague or uncertain, it cannot be said what exactly the parties intended to do. (8) An offer must be communicated to the other party: It is an important and essential element of a valid offer. The first part of the definition of the offer emphasises this requirement. According to this, the willingness to make offer should be ‘signified’ (i.e. indicated or declared).

In other words, the offer is completed only when it has been communicated to the offeree. It may be noted that until the offer is communicated, it cannot be accepted. Thus, an offer accepted without its knowledge, does not confer any legal rights on the acceptor. (9) The offer must be made with a view to obtain the consent of the offeree: The second part of the definition of offer emphasises the requirement that an offer must be made with a view to obtain the consent of the offeree to the proposed act or abstinence. Thus, when a person is making an offer it means that he is making it with a view to obtain the consent of the offeree. As soon as the offeree accepts it, the offeror is bound by it. 4) What is contract of bailment? A Contract where one party delivers goods to the other upon return basis to fulfil a specific purpose is called bailment contract. It includes two parties namely; bailer and bailee. The person who is delivering the goods is called bailer and the person to whom goods are delivered, is called bailee. 5) What is the law relating to minors? 1. Agreement with or by a minor is void: An agreement with or by a minor is void and inoperative ah initio [Moltri Bihi vs. Dharomdas Chose]. These agreements are considered to be nullity and non-existent in the eyes of law. These cannot be enforced against a minor. 2. Minor can be a promisee or a beneficiary: In competency of a minor to enter into contract means incompetency to bind himself by a contract. There is nothing which debars him from becoming a beneficiary, e.g., a payee [SharafatAli vs. Noor Mohd.], an endorsee or a promisee in a contract. ADVERTISEMENTS: Such contracts can be enforced at his option, but not at the option of the other party. Thus, the law does not regard him as incompetent for accepting a benefit. 3. Minor’s agreement cannot be ratified by him: An agreement by a minor cannot be ratified by him on attaining the age of majority. They term ‘ratification’ may be defined as the act of confirming or approving. The doctrine of no ratification’ implies that an agreement made by a minor (during the period of minority), cannot be confirmed by him on attaining majority.

This is so because minor’s agreement is voidable initio (i.e., void from the very beginning) and, therefore, cannot be made valid by ratification. However, if the minor wants to carry out the agreement, a fresh agreement should be made on attaining majority, it may be noted that a new agreement will also require fresh consideration. ADVERTISEMENTS: The consideration which was given under the earlier agreement (during minority) cannot be taken as consideration for the new agreement (during majority) also as in the case of Nazir Ahmed v. Jiwandas. 4. No estoppel against minor: The term ‘estoppel’ may be defined as prevention of a claim or assertion by law. In other words, when someone makes another person to believe that a particular thing or fact is true, then later on he cannot be allowed to deny the truth of that thing. It will be interesting to know that there is no such estoppel against the minor. In other words, when a minor fraudulently enters into a contract, representing that he is a major, but in reality he is not, then later on he can plead his minority as a defence and cannot be stopped (i.e. prevented) from doing so. 5. No specific performance of the agreements: There can be no specific performance of the agreements, entered into by minors as they are void ab initio. A contract entered into on his behalf by his parent /guardian or the manager of his estate, can be specifically enforced by or against minor provided that the contract is:ADVERTISEMENTS: (a) Within the scope of the authority of the parent /guardian or manager, and (b) For the benefit of the minor. 6. No compensation by minors: If a minor has received any benefit under a void agreement, he cannot be asked to compensate or pay for it. Sec 65, which provides for restitution in case of agreements found to be void, does not apply to a minor. 7. Minor’s property liable for necessaries: Sometimes, a person supplies necessaries to a minor. In such cases, the supplier of necessaries can claim reimbursement from the property of minor. 8. Minor as a partner:

The partnership of partners results from their agreement. A minor, being incompetent to enter into a contract, cannot be a partner in the firm. However, he may be admitted only to the benefits of the firm with the consent of all other partners [Sec 30(1) of the Indian Partnership Act, 1932]. 9. The Minor as an agent: An agent is merely a connecting link, between his principal and third person. Therefore, a minor can be appointed as an agent. But he will not be personally liable for his acts as an agent [Sec. 184]. It may, however, be noted that the principal will be liable to the third persons for the acts of the minor agent which he does in the ordinary course of dealings. 10. Minor as an insolvent: A minor cannot be declared as an insolvent. This is so because all agreements with a minor are absolutely void. Moreover, the minor is not personally liable for any debt incurred during the period of his minority. 11. The minor can execute a negotiable instrument: According to Sec 13(1) of the Negotiable Instruments Act, 1881, the term ‘negotiable instrument’ means and includes a promissory note, a bill of exchange and a cheque. The minor is competent to draw, negotiate or endorse the negotiable instruments. It may, however, be noted that the minor will not incur any personal liability under such instruments. But, the negotiable instruments executed in favour of the minor can be enforced by him. 12. The liability of minor’s parents or guardians: As a matter of fact, the minor’s contracts do not impose any liability on his parents or guardians even if the contracts are for ‘necessaries’. The parents or guardians of the minor may pay money borrowed by him just out of moral obligations. But there is no legal obligation to make such payments. It may, however, be noted that the parents or guardians can be held liable when the minor child is acting as an agent of his parents or guardians. 6) Explain the doctrine of ultravires?

Ultra vires is a Latin phrase meaning "beyond the powers". If an act requires legal authority and it is done with such authority, it is characterised in law as intra vires ("within the powers"). If it is done without such authority, it is ultra vires. Acts that are intra vires may equivalently be termed "valid" and those that are ultra vires "invalid".

7) What is contract notice and doctrine of indoor management? The role of the doctrine of indoor management is opposed to that of the rule of constructive notice. The latter seeks to protect the company against the outsider; the former operates to protect outsiders against the company. The rule of constructive notice is confined to the external position of the company and, therefore, it follows that there is no notice as to how the company’s internal machinery is handled by its officers. If the contract is consistent with the public documents, the person contracting will not be prejudiced by irregularities that may beset the indoor working of the company.

8) What is prospectus?

A prospectus is a document or a publication by, or on behalf of, a corporation containing information on the character, nature, and purpose of an issue of shares, debentures, or other corporate Securities that extends an invitation to the public to purchase the securities. The content of a prospectus is regulated by federal law. It must contain all material facts relating to the company and its operations so that a prospective investor can make an informed decision as to the merit of the investment. A prospectus must be furnished to an investor before any purchase is made.

9) What are the agreements proposed to public policy? Agreements Opposed to Public Policy Certain types of agreements are harmful to Society. Such agreements are called agreements opposed to public policy. Such agreements are declared as Void by Status. The following are the agreements opposed to public policy. Agreements in Restraint of Trade Agreements in Restraint of Marriage Agreements in Restraint of Personal Freedom Agreements in Restraint of Parental Rights Agreements with regard to Compromise of offence Agreements with regard to sale of Public Offices and Titles Agreements with Alien Enemy Agreements based on Bribes Agreements to form Monopoly Agreement to Commit a Crime Agreements to defraud Creditors Agreements to defraud Government

Agreements in Restraint of Trade: The agreements which restrict trade business or Profession are called agreements in restraint of trade. One citizen cannot restrict lawful business of the other. A case on this point is Madhav Vs Raj kumar. A and B enters into a contract according to which B has to close down his business for which he would be paid amount by A. B closes his business but, A fails to pay B the agreed amount. B sues A for recovery and court decides that it is an agreement in restraint of trade and hence void. Agreements in Restraint of Marriage: The agreements which create restriction on marriage are called agreements in restraint of marriage. One person cannot restrict the other from getting married. A case on this point is Lowe Vs Peerless. In this case an agreement gets formed between A and B according to which A should marry B only and B should marry A only. If only one of them breaches the agreement a compensation of $ 2000/- is to be paid. Court decides that the language used in the agreement is creating restriction on marriage and hence void. Agreements in Restraint of Personal Freedom: The agreements which restrict Personal Freedom are opposed to public policy. For example: An agreement to do slavery falls under this group. Related case is Ramasastry Vs Ambela Karen. In this case a contract of loan gets formed between A and B and their Contract Specifies that B has to join as slave at A’s house till Settlement of debt. Court decides that the contract is void. Agreements in Restraint of Parental Rights: The agreements which restrict rights of Parents on their Children are called agreements in restraint of Parental Rights. By Virtue of an agreement, Parents cannot waive up their rights. Such agreements are harmful to Children. A case on this point is Maharaja of Vijayanagar Vs Secretary of State for India. In this case the king entrusts his children to Court of Wards. On that occasion a deed is executed by king according to which he is giving absolute Power on his Children to court of Wards. After Sometimes Court of Wards decides to send those Children to England for higher Studies. Then the king Sues for injunction order restricting Court of Wards from Sending the Children to England. Court issues Such injunction order Saying that by means of an agreements Parental rights cannot be restricted and Court of Wards Cannot gets powers on kings Children. Agreements with regard to Compromise of Offence: The agreements which are outcomes of Compromise with regards to an offence are opposed to public policy. A Case on this point is Venkata Subba Rao Vs Chandanmal. In this A is an Ayurveda doctor and B is a money lender. A Contract of loan gets formed between them according to which A has to pledge his medical instruments with B as Security. But A fills-up a wooden box with bricks etc and pledges the box. It comes under public cheating in accordance with Sec. 420 of IPC. After coming to know about the fraud B wants to file criminal prosecution against A. In the mean while A`s Son-in-law namely C makes a Compromise and executes a deed in support of debt taken by A. There after B sues C for recovery Court decides that the Contract which has got

formed between B and C is agreement with regard to Compromise of offence and hence void. Agreements with regard to sale of Public Offices and Titles: Titles and positions in Government will be given basing on personal talent. That person who has obtained them cannot transfer them to some other person by means of an agreement. A case on this point is Swamynathan Vs Muthu Swamy. In this case a Contract gets formed between A and B according to which A has to transfer his position in govt. to B for certain consideration. It is opposed to Public Policy and hence held to be Void. Agreements with Alien Enemy: Agreements with aliens are Valid so long as there are good relations between two Countries. When War breaks out between the Countries that Contract becomes opposed to public policy and hence void. A case on this point is Metropolitan Water board Vs Dick Kerr And Company. Metropolitan Water board wants to construct a dam and enters into a contract with people who are aliens (other nation engineers). The contract is breached followed by a war in between the two nations. Metropolitan Water board files a case up on breach of contract. But, the case loses its validity since a war broke out in between the two nations. Agreements based on Bribes: When ever there is involvement of Crime or Corruption, Such agreement is said to be opposed to public policy. Related case is Pandyan Vs Roy. In this case there is an agreement between A and B according to which B has to pay Rs.15000 to A and for that A has to arrange for admission of A`s Son to a Medical College. Court decides that their agreement is opposed to Public Policy. Agreements to form Monopoly: Monopoly is Suitable to several unfair trade practices and to exploit public. So an agreement to create monopoly is harmful to Society. Agreement to Commit a Crime: In case where objective of the agreement is to conduct a Crime like murder etc, it becomes opposed to public policy. Agreements to Defraud Creditors: If debtors form an agreement to defraud their Creditors, Such agreement is opposed to public policy. Agreements to Defraud Government: Agreements to evade taxes etc create loss to government they are opposed to public policy.

10) What is meant by legality of lawful object? Lawful Consideration and Lawful Object Section 23 of the Indian Contract Act clearly states that the consideration and/or object of a contract are considered lawful consideration and/or object unless they are specifically forbidden by law of such a nature that they would defeat the purpose of the law

are fraudulent involve injury to any other person or property the courts regard them as immoral are opposed to public policy. 11) Explain share certificate? A share certificate is a written document signed on behalf of a corporation that serves as legal proof of ownership of the number of shares indicated. A share certificate is also referred to as a stock certificate.

12) What is indemnity contract? Indemnity is a contractual obligation of one party (indemnitor) to compensate the loss occurred to the other party (indemnitee) due to the act of the indemnitor or any other party. In contrast, a guarantee is an obligation of one party assuring the other party that guarantor will perform the promise of the third party if it defaults. 13) Duties and rights of bailor and bailee ? 14) Voidable contract? A voidable contract, unlike a void contract, is a valid contract which may be either affirmed or rejected at the option of one of the parties. At most, one party to the contract is bound. The unbound party may repudiate (reject) the contract, at which time the contract becomes void. Typical grounds for a contract being voidable include coercion, undue influence, misrepresentation or fraud. A contract made by a minor is often voidable, but a minor can only avoid a contract during his or her minority status and for a reasonable time after he reaches the age of majority. After a reasonable period of time, the contract is deemed to be ratified and cannot be avoided.[1] Other examples would be real estate contracts, lawyer contracts, etc. 15) Bilateral contract A bilateral contract is a reciprocal arrangement between two parties by which each promises to perform an act in exchange for the other party's act.

16) Consideration

Consideration is an essential element for the formation of a contract. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other's performance, the performance is consideration for the promise, while the promise is consideration for the performance.

17) Appointment of directors? A director may be defined as an individual who directs, controls or manages the affairs of the Company.A director is a person who is appointed to perform the duties and functions of a company in accordance with the provisions of The Company Act, 2013. They are comparatively known as Board of Directors. Every Company shall have a Board of Directors consisting of Individuals as director. They play a very important role in managing the business and other affairs of Company. Appointment of Directors is very crucial for the growth and management of Company.Every Company shall have a Board of Directors consisting Individual as director. Appointment of Directors under Companies Act 2013 Generally, in a public company or a private company subsidiary of a public company, two-thirds of the total numbers of Directors are appointed by the shareholders and the remaining one-third’s appointment is made as per Articles and failing which, shareholders shall appoint the remaining one-third.In a private company, which is not a subsidiary of a public company, the Articles can prescribe the manner of appointment of any or all the Directors. In case the Articles are silent, the Directors must be appointed by the shareholders. The Companies Act also permits the Articles to provide for the appointment of twothirds of the Directors according to the principle of proportional representation, if so adopted by the company in question. Nominee Directors can be appointed by a third party or by the Central Government in the case of oppression or mismanagement. A Minimum Number of Directors Required in Company Minimum two directors in case of Private Limited Company.

Minimum three directors in case of Public Limited Company. In the case of one person Company minimum one director. Maximum 15 directors any Company shall have If Company wants to have more than 15 directors necessary approvals is required under the law. Further, every Company should have one Resident Director (i.e a person who has lived at least 182 days in India in the previous calendar year.) Director’s appointment is covered under section 152 of Companies Act, 2013, along with Rule 8 of the Companies (Appointment and Qualification of Directors) Rules, 2014. Qualifications for Directors The Companies Act does not prescribe any qualifications for Directors of any company. An Indian company may, therefore, in its Articles, stipulated qualifications for Directors. The Companies Act does, however, limit the specified share qualification of Directors which can be prescribed by a public company or a private company that is a subsidiary of a public company, to be five thousand rupees (Rs. 5,000/-). Following documents are required for appointment of a person as Director; Apply for DSC: In India, The appointment of directors can be only done thru the digital signature and so 1st step is to create DSC. Apply for DSC: That’s the mandatory requirement for becoming a director in a Company. A person must have DIN i.e. Director Identification Number which can be obtained online by filing DIR -3 on MCA. Documentation Preparation: A letter in writing stating his consent as Director; A letter in writing to the effect that the person is not disqualified to be appointed as Director as specified under Law; Disclosure of Interest in Other Companies (shareholding pattern); if any, else a NIL disclosure is sufficient. Notice to call Board meeting with Explanatory Statement. Resolution to be passed at the meeting for appointment of a director. Appointment letter to be issued by Company to a director for its appointment. Filing of Form DIR-12: E-form DIR-12 with ROC along with above-mentioned documents such as consent / Approval letter, DIR- 2, and notice and certified copy of a resolution of Meeting. Form to be filed within 30 days. 18) Statutory meeting A statutory meeting is the first meeting of the shareholders of a public limited company which is held only once in the life-time of the company.

The meeting is held to provide an opportunity to the members for discussing all matters relating to the formation of the company. (Sec. 165)