DIRECTORS

Section 2(34) of the Companies Act, 2013 defines a director as

– “director” means a director appointed to the Board of a
company.

Minimum Directors Required in Company:-

• i. One Person Company:- One Director.
• ii. Private Limited Company:- Two Directors.
• iii.Public Limited Company:- Three Directors.
• Maximum 15 directors can be appointed in any format of
Company (OPC, Public, Private). Bypassing Special
Resolution Company can increase the number of Directors
beyond 15.
 Types of Directors

• Residential Director:- As per Section 149(3) of

Companies Act,2013 every company shall at one
director who has stayed in India for a total
Period of not less than 182 days in the Previous
calendar year.
• Independent Director:- As per section 149(6) an
independent director in relation to a company,
means a director other than a Managing Director,
Whole Time Director Or Nominee Director.
• Small Shareholders Directors:- A listed
Company may have one director elected by
small shareholders
• Women Director:- As per Section 149 (1) (a)
second proviso requires certain categories of
companies to have At Least One
Woman director on the board.
• Additional Directors: Any Individual can be
appointed as Additional Directors by a
company under section 161(1) of the New
Act.
• Alternate Directors:- As per Section 161(2) A
company May appoint, if the articles confer
such power on company or a resolution is
passed (if an Director is absent from India for
atleast three months).
 MANAGERIAL PERSONNEL
Managing director, whole-time director or manager Section
196
• No company shall appoint or continue the employment of
any person as managing director, whole-time director or
manager who — (a) is below the age of twenty-one years
or has attained the age of seventy years
• (b) is an undischarged insolvent or has at any time been
adjudged as an insolvent;
• (c) has at any time suspended payment to his creditors or
makes, or has at any time made, a composition with them;
or
• (d) has at any time been convicted by a court of an offence
and sentenced for a period of more than six months.
Powers, duties and responsibilities of
the managing director
• 1. As a member of the Board of Directors he participates in
formulating the objectives and policy-making functions of the
Board.
• 2. To execute policies laid down by the Board of Directors.
• 3. He is the liaison officer between the Board of Directors and the
rest of the organisation.
• 4. To interpret and communicate policies of the company to
subordinate employees.
• 5. To review the operations of the company and present to the
Board periodically accounts and statistics showing the progress and
the present position of the company.
• 6. To formulate the employment and compensation plan in
accordance with the accepted policies of the company.
• 7. To appoint high officials of the company.
• 8. To plan the development and expansion of business.
• 9. To organise meetings with department heads.
• 10. To promote high morale among the employees of company by creating a sense
of belonging.
• 11. To maintain contact with the govt., chamber of commerce, trade unions and
community at large.
• 12. To maintain a harmonious relationship between line and staff managers.
• 13. To approve or disapprove development plans submitted by the senior
executives and place before the Board for final approval.
• 14. To establish a system of budgetary control by which the actual performance of
the company may be evaluated against the planned course of action.
• 15. To administer production and sales activities of the company.
• 16. To give due attention to consumer satisfaction which is ensured by the
continued supply of goods and services to the market.
 DUTIES OF DIRECTORS

• Director to act in accordance with AOA.

• A director of a company shall act in good faith in order to promote the
objects of the company for the benefit of its members as a whole, and in
the best interests of the company, its employees, the shareholders, the
community and for the protection of environment.
• A director of a company shall exercise his duties with due and reasonable
care, skill and diligence and shall exercise independent judgment.
• A director of a company shall not involve in a situation in which he may
have a direct or indirect interest that conflicts, or possibly may conflict,
with the interest of the company.
• A director of a company shall not achieve or attempt to achieve any undue
gain or advantage either to himself or to his relatives, partners, or
associates
• A director of a company shall not assign his office and any assignment so
made shall be void.
 Power of Directors
• Power of Board – Allowed without Board Resolution

The Board of Directors of a company is entitled to exercise all such powers, and to do all such acts and things, as the
company is authorised to exercise and do as per the memorandum of association or articles of association or any
other regulations made by the company in a general meeting.

• Power of Board – Allowed by Resolution Passed at Meeting of the Board

The Board of Directors of a company can exercise the following powers on behalf of the company only by means of
resolutions passed at meetings of the Board:
To make calls on shareholders in respect of money unpaid on their shares;
To authorise buy-back of securities under section 68;
To issue securities, including debentures, whether in or outside India;
To borrow monies;
To invest the funds of the company;
To grant loans or give guarantee or provide security in respect of loans;
To approve financial statement and the Board’s report;
To diversify the business of the company;
To approve amalgamation, merger or reconstruction;
• To take over a company or acquire a controlling or substantial stake in
another company;
• To make political contributions;
• To fill a casual vacancy in the Board;
• To enter into a joint venture or technical or financial collaboration or any
collaboration agreement;
• To commence a new business;
• To shift the location of a plant or factory or the registered office;
• To appoint or remove key managerial persons and senior management personnel
one level below the key managerial personnel;
• To appoint internal auditors;
• To adopt a common seal;
• To take note of the disclosure of Director’s interest and shareholding;
• To sell investments held by the company, constituting five percent or more of the
paid-up share capital and free reserves of the investee company;
• To accept public deposits and related matters;
• To approve quarterly, half-yearly and annual financial statements.
 Disqualifications for appointment as
director
• A person shall not be eligible for appointment as a director of a company, if —
• He is of unsound mind and stands so declared by a competent court
• He is an undischarged insolvent
• He has applied to be adjudicated as an insolvent and his application is pending
• He has been convicted and sentenced to imprisonment for atleast 6 months and 5 years from
expiry of sentence have not got over
• He has been convicted and sentenced for a period of 7 years or more
• An order disqualifying him for appointment as a director has been passed by a court or Tribunal and
the order is in force
• He has not paid any calls in respect of any shares of the company held by him & 6 months have
elapsed from the last day fixed for the payment of the call
• He has been convicted of the offence dealing with related party transactions under section 188 at
any time during the last preceding five years
• He has not obtained DIN
• A person who is director of a company which has not filed financial statements or annual returns
for 5 continuous yrs, till expiry of 5 yrs from date of default
• A person who is director of company which has failed to repay deposits, debentures or distribute
dividend for a period of one year, till expiry of 5 years from date of default
• Private Companies can provide for additional disqualifications in their Articles
 LEGAL POSITION OF DIRECTOR

• Directors as Agents :A company as an artificial

person, acts through directors who are elected
representatives of the shareholders and who
execute decision making for the benefit of
shareholders .
• Directors as employees When the director is
appointed as whole time employee of the
company then that particular directors shall be
considered as employee director or whole time
director
• Directors as officers
Director treated as officers of an company.
They are liable to certain penalties if the provisions
of the companies act are not strictly complied
with.
• Director as trustees:
Director is treated as trustees of the company,
money and property: and of the powers
entrusted to and vested in them only as trustee.
 Liability
• Section 173 (Meetings of Board)
• Every officer of the company whose duty is to give
notice under this section and who fails to do so shall be
liable to a penalty of twenty-five thousand rupees.
• Section 207 (Conduct of Inspection and Enquiry)
• If any director or officer of the company disobeys the
direction issued by the Registrar or the inspector under
this section, the director or the officer shall be
punishable with imprisonment which may extend to
one year and with fine which shall not be less than
twenty-five thousand rupees but which may extend to
one lakh rupees.
• Section 274 (Directions for filing statement of
Affairs – Winding Up by Tribunal)
• If any director or officer of the company
contravenes the provisions of this section, the
director or the officer of the company who is in
default shall be punishable with imprisonment
for a term which may extend to six months or
with fine which shall not be less than twenty-five
thousand rupees but which may extend to five
lakh rupees, or with both.
• Section 35 – Civil Liability for mis-statement in prospectus
• Where it is proved that a prospectus has been issued with intent to defraud the
applicants for the securities of a company or any other person or for any
fraudulent purpose, every person concerned shall be personally responsible,
without any limitation of liability, for all or any of the losses or damages that may
have been incurred by any person who subscribed to the securities on the basis of
such prospectus.
• Section 75 – Damages for Fraud
• Where a company fails to repay the deposit or part thereof or any interest thereon
referred to in section 74 within the time specified in sub-section (1) of that section
or such further time as may be allowed by the Tribunal under sub-section (2) of
that section, and it is proved that the deposits had been accepted with intent to
defraud the depositors or for any fraudulent purpose, every officer of the company
who was responsible for the acceptance of such deposit shall, without prejudice to
the provisions contained in subsection (3) of that section and liability under
section 447, be personally responsible, without any limitation of liability, for all or
any of the losses or damages that may have been incurred by the depositors.
• Section 339 – Liability for fraudulent conduct of business
If in the course of the winding up of a company, it appears that any
business of the company has been carried on with intent to defraud
creditors of the company or any other persons or for any fraudulent
purpose, the Tribunal, on the application of the Official Liquidator,
or the Company Liquidator or any creditor or contributory of the
company, may, if it thinks it proper so to do, declare that any
person, who is or has been a director, manager, or officer of the
company or any persons who were knowingly parties to the
carrying on of the business in the manner aforesaid shall be
personally responsible, without any limitation of liability, for all or
any of the debts or other liabilities of the company as the Tribunal
may direct.
• Section 105 (Proxies)
If for the purpose of any meeting of a company,
invitations to appoint as proxy a person or one of
a number of persons specified in the invitations
are issued at the company’s expense to any
member entitled to have a notice of the meeting
sent to him and to vote thereat by proxy, every
officer of the company who knowingly issues the
invitations as aforesaid or wilfully authorises or
permits their issue shall be punishable with fine
which may extend to one lakh rupees.
 Personal Liability

• Directors can be made personally liable if

When the directors enter into contract in their own
name.
When they enter into contracts on behalf of
company but fails to use “LTD. Or PVT LTD.”
When directors exceeds their powers
The BOD should act an agent of company, not of a
single director. Therefore a single director cannot
enter into a contract on behalf of company unless
the BOD authorises.
• Shadow Director:- A person, who is not
appointed to the Board, but on whose directions
the Board is accustomed to act, is liable as a
Director of the company, unless he or she is
giving advice in his or her professional capacity.
• Nominee Directors:- They can be appointed by
certain shareholders, third parties through
contracts, lending public financial institutions or
banks, or by the Central Government in case of
oppression or mismanagement.
• Executive Director : An Executive Director can be
either a Whole-time Director of the company (i.e., one
who devotes his whole time of working hours to the
company and has a significant personal interest in the
company as his source of income), or a Managing
Director (i.e., one who is employed by the company as
such and has substantial powers of management over
the affairs of the company subject to the
superintendence, direction and control of the Board).
• Non-executive Director : a non-executive Director is a
Director who is neither a Whole-time Director nor a
Managing Director
 DUTIES OF DIRECTORS

• Director to act in accordance with AOA.

• A director of a company shall act in good faith in order to promote the
objects of the company for the benefit of its members as a whole, and in
the best interests of the company, its employees, the shareholders, the
community and for the protection of environment.
• A director of a company shall exercise his duties with due and reasonable
care, skill and diligence and shall exercise independent judgment.
• A director of a company shall not involve in a situation in which he may
have a direct or indirect interest that conflicts, or possibly may conflict,
with the interest of the company.
• A director of a company shall not achieve or attempt to achieve any undue
gain or advantage either to himself or to his relatives, partners, or
associates
• A director of a company shall not assign his office and any assignment so
made shall be void.
 Disqualifications for appointment as
director
A person shall not be eligible for appointment as a director of a company, if —
• He is of unsound mind and stands so declared by a competent court
• He is an undischarged insolvent
• He has applied to be adjudicated as an insolvent and his application is pending
• He has been convicted and sentenced to imprisonment for atleast 6 months and 5 years from
expiry of sentence have not got over
• He has been convicted and sentenced for a period of 7 years or more
• An order disqualifying him for appointment as a director has been passed by a court or Tribunal and
the order is in force
• He has not paid any calls in respect of any shares of the company held by him & 6 months have
elapsed from the last day fixed for the payment of the call
• He has been convicted of the offence dealing with related party transactions under section 188 at
any time during the last preceding five years
• He has not obtained DIN
• A person who is director of a company which has not filed financial statements or annual returns
for 5 continuous yrs, till expiry of 5 yrs from date of default
• A person who is director of company which has failed to repay deposits, debentures or distribute
dividend for a period of one year, till expiry of 5 years from date of default
• Private Companies can provide for additional disqualifications in their Articles
 LEGAL POSITION OF DIRECTOR

• Directors as Agents :A company as an artificial

person, acts through directors who are elected
representatives of the shareholders and who
execute decision making for the benefit of
shareholders
• Directors as employeesWhen the director is
appointed as whole time employee of the
company then that particular directors shall be
considered as employee director or whole time
director
• Directors as officers
• Director treated as officers of an company.
• They are liable to certain penalties if the
provisions of the companies act are not strictly
complied with.
• Director as trustees:
• Director is treated as trustees of the company,
money and property: and of the powers
entrusted to and vested in them only as trustee.
 LIABILITY
• Section 339 – Liability for fraudulent conduct
of business
• Section 75 – Damages for Fraud R/W Section
447
• Section 35 – Civil Liability for mis-statement
in prospectus
• Personal Liability
• Directors can be made personally liable if
• When the directors enter into contract in their own
name.
• When they enter into contracts on behalf of company
but fails to use “LTD. Or PVT LTD.”
• When directors exceeds their powers
• The BOD should act an agent of company, not of a
single director. Therefore a single director cannot enter
into a contract on behalf of company unless the BOD
authorises.
• Section 274 (Directions for filing statement of Affairs –
Winding Up by Tribunal)
• If any director or officer of the company contravenes the
provisions of this section, the director or the officer of the
company who is in default shall be punishable with
imprisonment for a term which may extend to six months
or with fine which shall not be less than twenty-five
thousand rupees but which may extend to five lakh rupees,
or with both.
• Section 173 (Meetings of Board)
• Every officer of the company whose duty is to give notice
under this section and who fails to do so shall be liable to a
penalty of twenty-five thousand rupees.
• Section 207 (Conduct of Inspection and Enquiry)
• If any director or officer of the company disobeys
the direction issued by the Registrar or the
inspector under this section, the director or the
officer shall be punishable with imprisonment
which may extend to one year and with fine
which shall not be less than twenty-five thousand
rupees but which may extend to one lakh rupees