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INDIAN COMPANIES ACT, 1956

With Respect to DIRECTORS

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 DIRECTORS
INDIAN COMPANIES ACT, 1956
Presented by : MFM SEM – I (2008-11)

NAME OF THE STUDENT ROLL NUMBER

 SUNIL PANDEY
 AKHIL SARVAIYA
 ARUN SINGH
 SHRIJESH NAIR
 AMIT SHAH
 SANJOG DEVRUKHKAR

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 INTRODUCTION
 INTRODUCTION TO A COMPANY & INDIAN COMPANIES ACT, 1956

 TYPES OF COMPANIES

 INTRODUCTION TO THE TERM ‘DIRECTORS’

 APPOINTMENT OF DIRECTORS

 REMOVAL / RETIRMENT OF DIRECTORS

 RIGHTS AND DUTIES OF DIRECTORS

 ROLE OF DIRECTORS

 MANAGING DIRECTORS AND ADDITIONAL DIRECTORS

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INTRODUCTION TO A COMPANY &
INDIAN COMPANIES ACT, 1956

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 MANAGEMENT OF A COMPANY

A company functions through the medium of Board of Directors.

However, certain powers have been reserved to be exercised by
shareholders in general body meetings. Section 291 of the
Companies Act, 1956 confers general power on the Board of
Directors. It provides: “Subject to the provisions of the Act, the Board
of Directors of a company shall be entitled to exercise all such
powers, and to do all such acts and things, as the company is
authorized to exercise and do. 6
 DIRECTORS

 The company carries on its business through individuals called

directors.
 Collectively they are called Board of Directors
 No body corporate, association or firm can be appointed as a director of
a company, and only an individual can be appointed
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 CONSTITUTION

 Every Public Company must have at least 3 directors

 A Public Company having A paid up capital of Rs. 5 crore or more and
One thousand or more shareholders Can elect a director by small
shareholders.
 A private company must have at least 2 directors
 Subscribers of the memorandum who are individuals, are
deemed to be the directors of the company, until the directors
are duly appointed in accordance with the Act.
 Directors are appointed in general meeting, in board meeting, by central
government, by proportional representation or a person can stand for
directorship, if eligible.
(Continued…) 8
(…Continued) CONSTITUTION

 A company can have a maximum number of 12 directors and to

increase this number, the approval of Central Government is required.

 The board of directors can appoint Additional Directors, by passing a

resolution, if such a power exists in the articles.

 If any vacancy arises in office of any director then subject to the

articles, the board of directors can fill the vacancy at a meeting of the
board.

 One single resolution can appoint one director only and two or more.

 A company, at a general meeting may, by ordinary

resolution, increase or reduce the number of its directors
within the limits fixed in that behalf by its articles.

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 APPOINTMENT OF DIRECTOR
Any Person Can Be Eligible For Appointment To The Office Of
Director At Any Annual General Meeting, If

 He himself or some member intending to propose that person as a

director.
 Gives a sign notice in writing to company.

 Signifying that persons for the office of director

 Along with a deposit of Rs. 500/- which is refundable subject to

appointment as a director

RETIREMENT OF DIRECTORS
The directors to retire by rotation at every AGM are those who have been
longest in office since their last appointment.
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 REMOVAL OF DIRECTORS
Removal Of Directors Is Conferred Upon Shareholders,
Central Government And Company Law Board

 A company may, by ordinary resolution, remove a director (not being a

director appointed by the Central Government in pursuance of section
408) before the expiry of his period of office. This provision shall not
apply where the company has availed itself of the option given to it of
proportional representation on the Board of Directors to appoint not less
than two-thirds of the total number of directors according to the principle
of proportional representation.
 Special notice shall be required of any resolution to remove a director,
or to appoint somebody instead of a director so removed at the meeting
at which he is removed.
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 VACATION OF OFFICE BY DIRECTORS
 The directorship of a director automatically ceases if,
 He fails to obtain qualification shares
 He fails to pay any call in respect of shares
 He absents himself from 3 consecutive meetings of the board
of directors, or from all meetings of the board for a
continuous period of 3 months, whichever is longer, without
obtaining leave of absence from the board
 He is removed by the shareholders by resolution passed in a
general meeting
 A company can remove a director even before the expiry of his
period of office
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 DISQUALIFICATION OF DIRECTORS

A person shall not be capable of being appointed director of a

company, if,
 he has been found to be of unsound mind by a Court of competent
jurisdiction and the finding is in force
 he is an undercharged insolvent
 he has applied to be adjudicated as an insolvent and his application
is pending
 he has been convicted by a Court of any offence involving moral
turpitude and sentenced in respect thereof to imprisonment for not
less than six months, and a period of five years has not elapsed
from the date of expiry of the sentence
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 QUALIFICATION SHARES
 They are the minimum number of shares a person must
own, as provided in the articles of the company, in order to
qualify to become a director of the company. Qualification
shares must be acquired by a director within 2 months of his
appointment. The articles cannot require a director to
acquire qualification shares within a shorter period. The face
value of the qualification shares cannot exceed five
thousand rupees, or if the face value of one share is more
than five thousand rupees, then the qualification share will
be one qualification share.
 A director is required to hold certain shares as qualification
shares if such requirement is here in the Articles of
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 WHOLE  Every company, having a paid-up capital of Rs. 5

TIME crore or more must have a whole-time director.

DIRECTOR  A WHOLE TIME DIRECTOR is one who entirely

looks into the affairs of a company.
 At a time a single whole time director can act as a
director for not more than 20 Companies.
.
 A person shall not act as director of a
company unless he has, by himself or by his
agent authorized in writing, signed and filed
with the Registrar, consent in writing to act
as such director within 30 days of his
appointment. This provision shall not apply
to a private company unless it is a subsidiary
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 ADDITIONAL DIRECTORS

 The Board of directors may appoint additional directors if such power is

conferred on it by the articles of the company. Such additional directors
shall hold office only up to the date of the next annual general meeting
of the company
 The Board of directors of a company may, if so authorized by its
articles or by a resolution passed by the company in general meeting,
appoint an alternate director to act for a director during his absence for
a period of not less than three months from the State in which
meetings of the Board are ordinarily held.

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 REMUNERATION OF DIRECTORS
Directors
 The overall maximum
remuneration payable to directors
and its managers in one financial
year
 If a company has only one director
 If a company has more than one
director
 The director is not a whole time
director
Remuneration
 Not more than 11% of the net
profits of the company for that
financial year
 Not more than 5% of the net
profits
 Not more than 10% of the net
profits for all of them together
 Not more than 1% of the net
profits
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 DIRECTOR CANNOT TO HOLD OFFICE OR
PLACE OF PROFIT:

Except with the previous consent of the company accorded by

a special resolution:-
 No director of a company can hold any office or place of
profit in that company
 No partner or relative of such a director (i.e. a director
holding an office or place of profit in the company), 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, or manger of such a private company can hold
any office or place of profit carrying monthly remuneration in
excess of the prescribed amount (Rs. 10000/-). 19
 LOANS TO DIRECTORS

A company provides loan to its director (for a guarantee or security)

or the related parties, with proper approval from Central Government.
This is to ensure that the Board Of Directors of a public company
does not misuse the funds of the company for the benefit of its
directors.

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 INTERESTS OF A DIRECTOR
 When any company enters into contracts relating to the business of
the company with the directors, the consent of the board of directors
is required by way of resolution.
 Every director of a company has to disclose the nature of his concern
or interest at a meeting of the board of directors.
 Finally a decision will be taken by the BOARD OF DIRECTORS.
 Every Director shall disclose the nature of his concern or interest in a
contract or arrangement at the meeting of the Board. Disclosure is
not required where any of the Directors of one company or two or
more of them together hold 2% or less than 2% of paid up share
capital of the company
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 SPECIAL AUTHORITIES

Directors can exercise certain powers only at the meetings of the board
related to some significant matters which need deliberations

and discussions. They are:

 Make Calls on shareholders in respect of money unpaid on their shares
 Issue debentures
 Borrow moneys otherwise than on debentures
 Invest the funds of the company
 Make loans

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 RESTRICTIONS & LAIBILITIES ON
BOARD OF DIRECTORS
 Dispose of any Undertaking of the company
 Remit or to give time for the repayment of, any debt due by a
director
 Invest, otherwise than in trust securities, the amount of
compensation received by the company in respect of the
compulsory acquisition
 Borrow moneys in excess of aggregate of the paid-up capital of
the company & its free reserves
 Contribute to charitable and other funds not directly relating to
the business of the company or the welfare of its employees
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 BIBLIOGRAPHY

 Legal Aspects of Banking Operations By Macmilan

 Business Law for Management by K.R. Boolchandani
 Indian Companies Act, 1956
 Company Law by Singh and Avatar
 Company Law and Practice, Taxmann, New Delhi
 A Guide to the Companies Act, Wadhwa and Company, Nagpur
 www.google.com
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Than
k
You!

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