Company Management

Company Management

Directors • A person who has control over the direction, governance, policies or superintendence of affairs of a company • Occupy a pivotal position in the company • Collectively known as board of directors • Only individuals can be directors

Board of directors Supreme policy framing and decision making organ of a company

Deemed/Shadow director Any person in accordance with whose directions or instructions, the board of directors of a company is accustomed to act

Number of directors • Public company minimum 3 maximum 12 • In general meeting by passing an resolution can increase or reduce the number of directors

Appointment of directors • Appointment of first directors: Articles name the first directors if it didn’t subscribers to the memorandum are deemed to be the directors

• Appointment by the General Meeting: 2/3rd of the directors must be appointed in general meeting these Appointment of each director must be voted individually Filing of written consent by director

• Appointment of directors by the Board: Board appoint Additional directors, Alternate directors and Directors to fill casual vacancy • Appointment by third parties : If article permits debenture holders, banking Company ,Financial Corporation which advanced loans can appoint directors Directors such appointed should not exceed 1/3rd

• Appointment by principal of proportional representation: At least two third of selected directors must be appointed by single transferable vote or by cumulative voting Appointment such made is for 3 years

• Appointment by Central Government: Appoint directors on a order passed by the company law board on the basis of the reference by the central government or on the application of not less than 100 member or members holding one tenth of the total voting power Not subject to retirement or holding of Qualifying shares

Restrictions on the appointment of the directors • Only individuals can be appointed as directors • Prohibited to hold directorship of more than 15 companies • Cannot become director if he doesn’t obtain Qualifying shares • If not given written consent

Different positions of directors • Directors as agents • Directors as trustees • Directors as managing partners • Directors as employees

Retirement • At least 2/3rd of directors are subject to retirement by retirement at every Annual General Meeting • Articles may provide for retirement of all directors • Retired directors can be reappointed • If the vacancy caused by retirement is not filled at the AGM or adjourned meeting retired director is automatically re-elected

Powers of Directors 1. General powers: powers listed in the articles 2. Powers which can be exercised only in board’s meeting: • power to make call on shareholders in respect of money unpaid on their shares • Power to issue debentures • The power to borrow moneys • The power to invest company’s funds • The power to take loans

Duties • Duty to exercise their power in good faith and for the benefit of the company as a whole • Duty of care and skill • Duty not to delegate • Duties to disclose interest

Statutory duties • Duty not to allot shares until minimum subscription is raised • Duty to sign annual returns • Duty to send statutory reports to every member of the company • Duty to call AGM every year

• Duty to call extraordinary general meeting • Duty to prepare Profit and loss account and balance sheet and to lay before the company • Duty to take qualification shares • Duty to disclose share holding • Duty to summit a statement of affairs on winding up • Duty to maintain register of members

Remuneration of directors • Determined by the articles or by a resolution passed in a General meeting of the members • It should be sanctioned by the Central Government • Fees for board and committees held before the commencement of the company should be paid in monthly basis for a period of 2 years

• Directors fee for attending a meeting of the board can be increased up to Rs5000 without Govt’s sanction • If a directors give professional service to the company he should be paid for it • The remuneration of the directors is part of the overall managerial remuneration which shouldn't exceed 11% of the net profits or RS 50000 in certain exceptional cases

Removal of directors 1. Removal by shareholders : by passing an ordinary resolution before expiry of this period of office :must give notice to the company 14 days before the meeting 4. Removal by the Central Government: : on an reference to and after an adverse findings against him

: the director can show reasonable cause : removed director cannot hold such position for 5 years 3. Removal by the tribunal : can remove a director for preventing oppression and mismanagement

Compensation for the loss of office shall not be paid • The director resigned his office in view of the reconstruction or amalgamation • The director had office on his own accord • The company is winding up on account of negligence or default by the director • The director has been found guilty of fraud or breach of trust or of gross management • The termination of office has been due to his own instigation

Register of directors – Must keep register of its directors, managing director, manager and secretary containing their particulars – Must send a duplicate copy in the prescribed form of the contents of the register to the Registrar within 30 days of the appointment of the directors – Register of the company must open for inspection to any member of the company without any charge

• A director who, by virtue of an agreement with the company or of a resolution passed by the company in a general meeting or by its board of directors or a provision in the memorandum or articles, is entrusted with substantial powers of management which would otherwise not be exercisable by him and includes a director occupying the position of a managing director

Managing Director

Appointment of MD • Company having a paid up capital of more than Rs5 corer or must have a managing or whole time director • Must be approved by central government

Essential features of a MD • A MD is one of the directors • He is entrusted with substantial powers of management • Any director entrusted with a managerial functions will be a managing director • He acts under the direct provision and control of the Board

Restrictions on the appointment of Managing Director • Term of a MD shall not exceed 5 at a time • He shall not hold the office of MD more than 2 companies • He shall not be appointed without the approval of central Government