COMP law 2 module 1-8 Flashcards
defining director under company law
The term ‘director’ is defined under Section 2(34) of the Companies Act, 2013 . It states that a ‘director’, “means a director appointed to the board of a company.”
Imperial Hydropathic Hotel Co. v. Hampson
“Directors are described sometimes as agents, sometimes as trustees and sometimes as managing
partners. But each of these expressions is used not as exhaustive of their powers and responsibilities
but as indicating useful points of view from which they may for the moment and for the particular
purpose be considered
director as agent and trustee?
AGENT= where the directors contract in the name and on behalf of the company it is the company
which is liable for it and not the directors.
However, personal liability can also be incurred under certain circumstances
Contracts in their own name
Useofcompany’s name incorrectly
Sign not clear
TRUSTEE=
oTrustee is someone who is vested with the legal ownership of the assets which he administers
for the benefit of others (stakeholders). There is a fiduciary relationship.
oDirectors are considered as trustees of the company’s assets, and of the powers that vest in
them because they administer those assets and perform duties in the interest of the company
and not for their own personal advantage If they misuse the funds they can be held liable as trustees- Ramaswamy Iyer v. Brahmayya
duty of directors s166
sec 166-
generally 1. duty of good faith
2. duty of care
3. duty not to delegate
according to 166-
a director must act accordign t the Articles of Company
- in good faith and for the best interests of the company, employees, shareholders, etc
3) A director of a company shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.
(4) A director of a company shall not involve in a situation in which he may have a direct or
indirect interest that conflicts.
5. Shall not acheive or attempt to acheive any undue gain or advantage
6. if director contravenes- then he should be liable for fine 1L-5L rupees
apart from s166= other duties as well such as attending board meetings, convene AGM, and EGM)
procedure to get a DIN
Director Identification number -
section 153-156 and 170 as well as some rules in the e companies (Appointment and Qualifications) Rules, 2014 and Fees
rules ,2014.
* for allotment- must make application to the regional rictor in form DIR-3. Application to be verified by Cs, MD, CEO or CFO.
* Must apply under SPICe forms
* CG reply within one month
* Intimate DIN within one month s156
* Company informs ROC abt the DIN within 15 days from director intimation.
* DIR once granted is valid for lifetime
* * DIN helps in keeping a track of all the directorships of a particular director. This cam help in detection
of any offence committed by a director and addressing issue of companies that vanish after raising
funds. It gives power to the investors to make more informed decisions
board of direcots, minimum, max and types of direcots
companies must have BOD and only Individuals may directors(s149)
Min number= Public co. 3, Private co. 2. OPC-1
Maximum number of directors on the Board- 15 (this can be increased by passing a special
resolution
* Maximum number of directorships (including alternate directorships)- 20 companies (maximum
10 public companies)- S. 165
-Provided that the maximum number of public companies in which a person can be appointed as a director shall not exceed ten
- *Ordinary Director
- *Executive Director
- *Managing Director
- *Non-executive Director
- *Independent Director
- *Woman Director
- *Nominee Director
- *Resident Director
- *Small Shareholders Director
- *Alternate Director
- *Additional Director
executive director
“Executive Director”
means a whole-time director as defined in s2(94)
“Whole-time director” includes a director in the whole-time employment of the
company,
-does not exercise “substantial power of management”, but
performs important administrative functions
- They are tasked with handling the day to day affairs of the company while keeping the company goals into consideration
Managing director
*S. 2 (54) “Managing director” - entrusted by aoa or resolution passed in genmeeting with “ssubstantial powers of management “
MD is a director who is the executive head of the company under the superintendence of
the Board
he is a KMP
Aperson cannot be appointed as MD and chairperson at the same time. (unless the articles of
the companyallows so or the company does not carry out multiple businesses)
+ cannot be managing partner of more than one company except for subsidiary at same time. can become a director with the permission of board for other companies
+
Non-executive director
not involved in the day to day
decision making process of the company.
- bring an unbiased and objective outside opinion to the Board.
- planning process and attend the meetings of the Board
- challenge and scrutinize the performance of the executive directors, holding
them to ahigher standard.
independent directors and nominee directors etc are under the ambit of a non executive direcotr
Independent director
s.149
They are external directors appointed with the objective of bringing objective and unbiased
perspective to the Board.-m have no pecuniary interest in the company.
- atleast one third of total directors MUST be independent director s
- every unlisted public company with a paid up share capital of Rs. 10 crore or more,
turnover of Rs. 100 crore or more or aggregate, outstanding loans, debentures and deposits,
exceeding Rs. 50 crore shall appoint** at least 2 independent directors**
resident director and small shareholder director
RESIDENT DIRECTOR- every company shall have one director who stays in India for a total period of 182 days in during
financial year.
Small shareholder director- Small shareholders” means a shareholder holding shares of nominal value of not more than
twenty thousand rupees or such other sum as may be prescribed.
* A listed company may have one director elected by such small shareholders in such manner and
with such terms and conditions as may be prescribed. (S. 151)
disqualifications of a director
section 164 (1)
person shall not be eligible
for appointment as a director of a company, if
1. unsound mind
2. n undischarged insolvent
3. applied to be adjudicated as an insolvent and is pending
4. convicted by a court of any offence, sentenced imprisonment
for not less than six months. However, this disqualification will last only up to five years from the date of expiry of the sentence.
5. an order disqualifying him has been passed by court/tribunal
6. he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years
7. he has not complied with the provisions of sub-section (1) of section 165. Section 165(1) limits the number of directorships to 10 public companies and total companies to 20.
8. failed to file financial statements/annual returns for 3 continous financial years
9.
appt of first director
sec 152-
first direcots usually appt by way given in AOA. if AOA does not explain the same then typically , the subscribers to the memorandum, who are individuals, shall be
deemed to be the first directors of the company until the directors are duly appointed. in case of One Person Company an individual being member shall be
deemed to be its first director until the director or directors are duly appointed
acc to section 154- no apointment without DIN. to be director he MUST have DIN
Consent to act as Director - A person appointed as a director shall not act as a
director unless he gives his consent to hold the office as director.
appt of directors at general meeting
According to section 152(2) every director shall be appointed by the company in general meeting. and at every gen meeting out of the directors 2/3 shall be on a rotational basis for retirement and the replacements for the same shall be appointed unless otherwise expressely provided.
nature of rotation= one third of directors subject to their seniority of office shall retire. if not a multiple of three then the closese possible to it. tfurther if the retirement is between persons who became direcotr on the same day then the number nearest to one third shall retire from office.
deemed reappointment of director
Section 152(7) provides that if the vacancy of the retiring director is not so filled
up and the meeting has not expressly resolved not to fill the vacancy, the meeting
shall stand adjourned till the same day in the next week, at the same time and place,
or if that day is a national holiday, till the next succeeding day which is not a holiday,
at the same time and place.
If at the adjourned meeting also, the vacancy of the retiring director is not filled up
and that meeting also has not expressly resolved not to fill the vacancy, then retired directos stands reappointed uNLESS:
1. resolution for re-appt was put to vote and lost
2. retired director expressed in writing unwillingness to continue
3. not qualified or disqualified for appt
4. special resolution necessary for appt
5. one resolution to fill 2 or more vacancies
6.
appt of another director apart from the retiring director section 160
S. 160 along with Rule 13 of Companies (Appointment and Qualification of
Directors) Rules, 2014 apply.
if any person other than retiring director wishes to stand for directorship then he gotta signify intention to company atleast 14 days before GM and company must relay the intention tothe members atleast 7 days prior to meeting.
info to be given:
1. serving individiaul notice through electronic mode if emails given for communicaton or otherwise in writing
2. by placing notice of such candidature or intention on the website of the company,
individual notice not necessary if
section 162
no motion can be made at the general meeting of a company for the appointment of 2 or more directors by ONE SINGLE resolution unless there is alsready a resolution passed UNANIMOUSLY stating that one resolution for appt of two or more directors is fine. if any resolution is made in contravention to this - it will be void
appointment by board of directors
sec 161-
BOD appoints the followoing:
(i) Additional Directors
(ii) Filling up the Casual Vacancy
(iii) Alternate Directors
(iv) Nominee Director
appt of additional director
Appointment of Additional Director - The articles of a company may confer on its Board of Directors the power to appoint any person as an additional
director at any time.
**BUT **a person who fails to get appointed as a director in
a general meeting cannot be so appointed.
It may thus be noted that without a power given by the Articles, the Board cannot
appoint additional directors. The section applies to all companies, public as well as private.
tenure of additional director:
The person appointed as additional director shall
hold office up to the date of the next annual general meeting or the last date, on
which the annual general meeting should have been held, whichever is earlier.
Powers of Additional Directors - Additional directors will enjoy the same powers
and rights as other directors.
filling up casual vacancy s161(4)
- applies to pvt and public co and only to rotational directors
casual vacancy arises when an offcie has been vacated for reason other than end of tenure or retirement.. like death insolvency etc
this appt is made by BOD
- if the appointed director for filling casual vacancy is approved at the immediate next AGM then he will continue in office till the expiry of the OG term.
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