(i) Management of Companies Director

7/30/2019 (i) Management of Companies Director

1/11

MANAGEMENT OF COMPANY

A company being a separate legal personalityought to be operated at a distance from its

members (the shareholders). To facilitate this,they (the members) elect and appoint theirrepresentatives directors - who can beentrusted with the responsibility of running thecompany.


2/11

Who is a Director ?

A company is a legal entity and does not have

any physical existence. It can act only through

natural persons to run its affairs. The person,acting on its behalf, is called a Director.

A Director is any person occupying the position

of Director, by whatever name called.They are professional men, hired by the

company to direct its affairs.

2


3/11

More on who is a Director ????

It is not the name by which a person is calledbut by the position he occupies and thefunctions and duties which he discharges that

determines whether in fact he is a Director ornot.

So as long as a person is duly appointed by thecompany to control the company's business and,

authorized by the Articles to contract in thecompany's name and, on its behalf, he functionsas a Director.

3


4/11

WHO CAN BE A DIRECTOR?

Directors are those who perform the directingfunction irrespective of the label attached tothem. Except this obligation, there are no formalacademic or professional qualifications, or an

upper age limit fixed by law for electing orappointing a person as director.

However, only individuals barring minors can bedirectors. No body corporate, association, or firmcan be appointed as a director of a company[Section 253].

Cont..


5/11


Qualification shares . The Act does not impose any sharequalification on directors. However, if the companys articlesso provide, a director must acquire the shares prescribedtherein within two months of assuming office. But thearticles cannot prescribe a nominal value of suchqualification share at more than Rs 5000 or one share, if thenominal value of a share exceeds Rs 5000. [Section 270].

Model articles as per Table A prescribe one share in acompany as qualification share.

The modern trend, however, is not to prescribe anyqualification share in the articles so as to attractprofessionally competent persons to join the Board, as such

professionals may not be willing to become directors, if theyare asked to become shareholders first.

Cont..


6/11


Consequences of not holding qualification

shares. If the director does not acquire suchqualification shares within two months of his

joining office in that capacity , s/he is liable up

to a fine of Rs 5,500 per day till s/he continuesto act as director. Besides, if a person does not

acquire qualification shares within prescribed

time, it will result in vacation of the office ofdirector automatically.


7/11

Disqualification of Directors

The law is very clear on persons who are specifically

disqualified from being appointed as directors.According to it persons declared by courts to beeither of unsound mind, insolvent or awaitingdeclaration to that effect, convicted for moraldepravity and having served a prison term of six

months or more not less than five years ago, aredebarred from being appointed as directors. Inaddition, there are more conditions pertaining totheir performance, which are outlined in Section274(1) of the CompaniesAct.

Cont...


8/11


Accordingly, a person shall not be capable of beingappointed director of a company under the followingcircumstances:

(a) If he has been found to be of unsound mind by a courtof competent jurisdiction and the finding is in force;

(b) If he is an undischarged insolvent;(c) If he has applied to be adjudicated as an insolvent andthe application is pending;

(d) If he has been convicted by a court for any offenceinvolving moral turpitude and sentenced in respect

thereof to imprisonment for not less than six months, and aperiod of five years has not elapsed from the date of expiryof the sentence. Contd.


9/11


(e) If he has not paid any call in respect of shares of the company held by

him, whether alone or jointly with others, and six months haveelapsed from the last day fixed for the payment of the call; or

(f) an order disqualifying him for appointment as director has beenpassed by a court in pursuance of Section 203 and is in force, unless theleave of the court has been obtained for his appointment in pursuanceof that section.

(g) He is a director of a public company that (i) has not filed its annualaccounts for any three consecutive financial years commencing on orafter 1 April, 1999, or (ii) has failed to repay its deposit or interest ondue date, or redeem its debentures on due date or pay dividend, andsuch failure continues for one year or more. Such a person isdisqualified to act as director of any other public company for a period

of five years from the date on which the public company in which he isa director makes default as specified in (i) or (ii) above.

Contd.


10/11

..Disqualification of Directors

Sub-section (2) of Section 274, however, provides that the CentralGovernment may by notification in the Official Gazette, remove

(a) the disqualification incurred by any person in virtue of clause(d) of sub-section (1) (on moral turpitude), either generally or inrelation to any company or companies specified in thenotification; or

(b) the disqualification incurred by any person in virtue of clause

(e) of sub-section (1) pertaining to payment of the call in respect ofshares of the company held by him individually or jointly.

Moreover, Section 274(3) allows a private company to lay its owngrounds for disqualifying a director by stating so in its articles ofassociation in addition to those stated in Section 274(1). In thisregard, Section 274(3) states a private company, which is not a

subsidiary of a public company may, by its own articles, provide thata person shall be disqualified for appointment as a director on anygrounds in addition to those specified in sub-section (1).


11/11

11

Thanks for your attention!
http://www.animationfactory.com/free/nature/flowers_variant_page_dozen_red_roses_expand_vase.html

(i) Management of Companies Director

Documents

Transcript of (i) Management of Companies Director