Director’s Chapter 3 Flashcards
What is required for a person to be appointed as a director?
A person shall be appointed as director only if he has filed his consent to become a director in writing to the company at least 14 days before the election of directors.
Under what conditions can a Court declare the election of directors invalid?
Court may declare election of all directors or any one of them as invalid if a member holding 10% or more voting powers applies to Court within 30 days from the date of election, and it is proved that there has been material irregularity in the holding of the elections.
What happens if a defect is discovered in the appointment of a director?
Such director shall not exercise any right as director from the date of discovery of defect until defect is removed; however, his past acts as director will remain valid.
What can a substantial acquirer do if they obtain the required shareholding?
If a person gets required shareholding to become a director, he may apply to the company to hold a fresh election of directors.
The company shall proceed to hold fresh election within 30 days of request.
What is the restriction on the number of directors during a fresh election?
The number of directors fixed in the preceding election shall not be reduced.
What procedures must a listed company follow to hold a fresh election of directors?
To hold a fresh election, a listed company shall follow procedures specified by the Commission.
What are nominee directors?
Nominee directors are appointed by the government or a body corporate or creditors to represent their interests in a company.
How are nominee directors considered in the calculation of minimum directors?
Nominee directors by government or body corporate are considered for the calculation of minimum number of directors.
What is the term of office for nominee directors?
Nominee directors shall hold office during the pleasure of the nominating body.
Are directors nominated by creditors considered in the minimum number of directors?
No, directors nominated by creditors are NOT considered for the calculation of minimum number of directors.
What is the minimum notice period for changing the number of directors before a general meeting?
A company may change the number of directors to be elected at least 21 days before the date of the general meeting.
Nominee directors by government or body corporate?
1.in addition to elected directors,a company may also have directors nominated by govt or body corporate (if they have made investment in the company) termed as “deemed to have been elected as directors”
2.such directors are considered for the calculation of minimum number of directors and shall hold office during the pleasure of nominating body
Nominee director by creditors?
A company can also have directors nominated by creditors because of contractual arrangements.
Such directors are not considered for the calculation of minimum number of directors
What happens to a director’s office if they become ineligible after appointment?
A director shall ipso facto cease to hold office if they become subject to any ineligibility criteria specified by the Act.
What is one reason a director may cease to hold office?
A director may cease to hold office if they absents themselves from three consecutive board meetings without seeking leave.
Can a director obtain a loan from the company without fulfilling conditions of the Act?
No, a director cannot obtain a loan or guarantee from the company without fulfilling the conditions of the Act.
Is approval required for a director to accept an office of profit?
aprroval is required he or any firm in which he is a partner or private company in which he is director:::: Approval is not required for the office of chief executive or a legal or technical adviser.
What additional grounds can lead to the vacation of a director’s office?
The company may include additional grounds in its articles for vacation of office of director.
What is the difference between ineligibility and ipso facto vacation?
If a director is ineligible, they cannot be appointed as a director of any other company. If a director ipso facto ceases to hold office, they can be appointed as a director of another company.
Who has the power to remove a director?
Directors do not have the power to remove another director; a director can only be removed by passing a resolution in a general meeting through voting.
What is required to remove director elected by members?
An elected director will NOT be removed if the number of votes against the resolution equals or exceeds the least number of votes obtained by any elected director in the last election.
What is required to remove a director appointed as first director, in casual vacancy or unopposed director?
An appointed director will NOT be removed if the number of votes against the resolution equals or exceeds
the total number of ordinary shares of the company multiplied by the number of directors appointed at the AGM divided by number of directors for the time being
Vacation of office by directors?
1.ineligibility criteria specified by act
2.absents three consecutive board meetings without seeking leave of absence
3. He or any firm in which he is a partner or any private co in which he is a director
@@@obtains Loan without fulfilling
@@@accepts office of profit without approval ,,exception
4.company mai include additional grounds
What are the duties of directors?
- Act in accordance with the articles of the company.
- Act in the best interests of the company, its employees, shareholders, and community.
- Perform duties with reasonable care and due diligence.and shall exercise independent judgement
- Disclose any interest in a contract with the company.
*Commission may provide framework for companies to ensure good corporate governance.it will be duty of directors to ensure compliance with this framework
What are directors prohibited from doing?
- Obtaining undue gain for themselves or relatives.(if such undue gain is obtained he shall be liable to repay amount equal to gain to company)
- Involving in conflict of interest with the company.
- Assign his office to any other person.Any such assignment shall be void
*Any negligence,default or breach of duty by a director may be ratified by company through special resolution.Comission may specify restrictions
What powers can directors exercise without general meeting approval?
Directors can exercise powers such as issuing shares, making loans, and approving financial statements without general meeting approval.
What powers can be exercised by board without obtains apporoval in general meeting?
- To issue shares, debentures, or other redeemable capital or borrow money.
- To make loans.(exception:banking companies)
- To make investments.
- To declare interim dividends.
- To approve bonus for employees.
- To incur capital expenditure or dispose of fixed assets exceeding prescribed amounts.
>however a sale or disposal of undertaking will result in closure of business there should be viable alternate business plan approved by board of a listed company - To undertake obligations under leasing contracts exceeding such amounts as may be specified
- To approve a transaction where a director ( or partnership firm in which he is a partner or private company in which he is a director) has an interest.
- To write-off material debtors,inventories,advances and other assets.
- To settle material litigations.
- To take over a company or acquire a controlling stake in another company.
- To appoint and remove the chief executive.
- To fill casual vacancy-of director.
- To approve quarterly f/s and annual f/s
Powers which can be exercised by board after obtaining approval in general meeting?
1.sell or dispose a subsidiary of the company
2.sell,lease or otherwise dispose of the undertaking(venture) or sizeable part of it (i.e 25% or more value of assets in that class) unless it is the company’s business
3.remit or give extension of time for repayment of debt against specified persons
*Authorization of such powers may be specific to to transactions or maybe general.Any such resolution/approval of general meeting shall lapse, if not implemented within 1 year
