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IILM(BS) , Kolkata
AGENDA
Directors
Definition
Position of Directors
Qualifications of Directors
Number of Directors
Appointment of Directors
Restrictions on appointment of directors ( Sec.266 )
Numbers of Directorships ( Sec.275 , 277 to 279 )
Vacation of office and removal of Directors
Loans to Directors ( sec.295 )
Meetings of Directors ( Sec.285 to 288 )
Powers of Directors
Political Contributions (sec.293-A )
Duties of Directors
Contracts in which Directors are interested
Liabilities of Directors
Validity of acts of Directors ( Sec.290 )
Disabilities of Directors
Who is the Director of a Company ?
A Company in the eyes of law is an artificial person.It has no physical existence.It has
neither soul nor a body of its own.A Company never act in its own person.
The Directors are the brain of the company . Only individuals can be directors
( Sec. 253 )
Newly inserted proviso to selection 253 makes it obligatory for companies to
ensure that the Directors have been allocated Director Identification Number(DIN) as
required under newly inserted section 266B of the act.
It is very difficult to pinpoint the exact legal position of the Directors in a company.We
may now consider the position of the directors from all this point of view –
Directors as Officers.
Directors as Employees.
Directors as Trustees
What is the Qualifications of a Director?
A Director must be :-
an individual
Competent to contract
Hold a share qualification, if so required by the articles.
1. signed and field with the Register a consent in writing to act as such
Director , and has
2. (a) signed the Memorandum for his qualification shares, if any ; or
(b) taken his qualification shares, if any, from the company and paid or
agreed to pay for them;
or.
i. signed and field with the register an undertaking in writing to take from
the company his qualification shares, if any, and pay for them; or
ii. made and field with the Register an affidavit to the effect that his
qualification shares are registered in his name.
3. Quorum for meetings (Sec.287)… The quorum for a meeting of the Board shall
be 1/3rd of its total strength , or 2 Directors, whichever is higher.
Want of quorum (Sec.288)…. If a meeting of the Board can’t be held for want
of quorum, it shall automatically stand adjourned till the same day in the next week, at
the same time and place unless the Articles provide otherwise.
Powers of Directors
General powers of the Board (Sec.291)… The Board of Directors of a company is
entitled to exercise all such powers and do all such acts and things as the company is
authorized to exercise and do.
Powers to be exercised at board meetings (Sec.292)… the power to –
a. make call on shareholders in respect of money unpaid on their shares.
b. issue debentures.
c. borrow moneys otherwise than on debentures.
d. invest the funds of the company.
e. make loans.
Sec.292 does not in any manner affected the right of the company in
general meeting to impose restrictions and conditions on the exercise by
the Board of any of the powers specified in sec.292.
Powers to be exercised with the approval of company in general meetings
(Sec.293)
Political Contributions (Sec.293-A) … With the view to permitting the corporate
sector to play a legitimate role within the defined norms in the functioning of our
democracy, Sec.293-A Allows companies to make contributions to political parties or
for political purposes to any person, directly or indirectly, out off their profit..
Duties of Directors
There are certain duties of a general nature of the following type :-
2. Duties of care, skill and diligence ;- Directors should carry out their
duties with reasonable care and exercise such degree of skill and diligence as is
Other duties
reasonably of Directors…..
expected Theknowledge
of person of their other duties
andofstatus.
a directors are…..
I. to attend Board meetings..
II. not to delegate his functions except to the extent authorized by the Act.
III. to disclose his interest.
This duties have been discussed at appropriate places..
Contracts in which Directors are interested
A Director stands in a fiduciary position towards the company . Therefore, if he has
any personal interest in contract entered into with the company, he must disclose it.
The principle behind a director’s duty of disclose is that he is “ precluded from dealing
on behalf of the company with himself and from entering into engagements in which
he has a personal interest conflicting , or which possibly may conflict, with the interest
of those whom he is by fiduciary duty bound to protect.”
[ North West Transportation Co. vs. Beatty(1887) 12 App. Cas.589]
a. Ultra vires acts… Directors are personally liable to the company in respect of ultra vires
act.
b. Negligence… a Director may incur liability for the negligence in the exercise of the duty.
c. Breach of trust… Directors are liable to the company for any loss resulting from Breach
of trust.
d. Misfeasance… In case of misfeasance proceedings Directors may apply for relief under
Sec.633.
3) Liability for breach of statutory duties…
4) Liability for acts of his co-directors…
Disabilities of Directors
In order to protect the interest of a company and its shareholders. The Companies Act has
imposed the following disabilities on the Directors :-