Unit 5 Director

7/29/2019 Unit 5 Director

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Unit 5

Company Management & Operations



Introduction

• A company may be defined as “an artificial person recognized by law, with a distinctivename, a common seal, a common capital

comprising transferable shares and having a perpetual succession.”

• In a company there are four key people who areresponsible for managing and administering the

company policy and issues.• These people are Director, Managing Director,

Company Secretary and a Manager.



Director

• As a company in the eyes of law is an artificial person, it can not act on its own. It can actthrough some human agency i.e. Directors.

• In today’s world the role of company managementhas increased. The role of chief authority of thecompany is very essential because it gives thedirection to the functioning of company.

• Among all the management people the director isthe person whose role is very important.

• Director is a person who gives proper direction tocompany.



Definition of a Director

• Director include any person occupying the position of a director, by whatever name he iscalled.

• “A director may be defined as a person havingcontrol over the direction, conduct, managementof the affairs of a company.”

• The important factors to determine whether a person is or not a director is to refer to nature of his duties.

• If he performs the function of a director, he would be termed as a director in the eyes of law, eventhough he may be named differently.



Roles of a director

• As an Agent

• As an Employee

•

As an Officer • As an Trustee



As an Agent

• A company is an artificial person, acts throughdirectors who are elected by representatives of shareholders.

• Directors are agents of a company in the eyes of alaw.

• They act and regulate the relationship andfunctioning of a company of behalf of it.

•

They are personally not liable for contracts whichthey make for the company, provided they actwithin scope of their authority and do not makecontract with personal name.



As an employee

• Although directors are agents of a company,

they are entitled to get benefits and privileges

like an ordinary employee.

• A director can hold salaried office or

employment of a company.

• A director can be in whole time or part time

employment of the company.



As an Officer

• For certain matters under the laws, the

directors are treated as officers of the

company.

• They can hold office till the permissible period

of their working.





Qualification of a director

• A director must

1. Be an individual

2. Be able to complete the contract

3. Hold a share qualification if so required byarticles.

A director must hold specific number of shareknown as qualification of shares. The

qualification of director shall be holding at leastone share in the company.

If a director does not hold any share, he must obtainsuch shares within 2 months of his appointment.



Disqualification of director

• The following persons are disqualified for appointment as director of a company:

1. A person of unsound mind

2. An undischarged insolvent

3. A person who has applied to be adjudicated asan insolvent and his application is pending

4. A person who is disqualified for appointmentas director by an order of the courts in case of fraud in relation to the company.



Appointment of Director

• The following are the ways for theappointment of directors.

1. First director

2. Appointment of director by the company

3. Appointment of director by Board of Director

4. Directors by third party

5. Proportional representation

6. Directors appointed by central government



First director

• The articles of a company usually name the firstdirectors by their respective names

• If the directors are not named in the Articles, thename and number of first directors aredetermined in writing by the subscriber of Memorandum.

• If the first directors are not appointed in theabove manner the subscribers of the

memorandum who are individuals becomedirectors of the company. They shall hold officeuntil directors are duly appointed in the firstAGM.



Appointment of directors by the

company

• Directors must be appointed by theshareholders in general meeting.

• In case of public ltd. company at least 2/3rds of

the total number of directors must beappointed by the company in general meeting.

• The Articles may provide for the retirement of

all the directors at an annual general meeting.• First director will hold office until new director

is appointed.



Appointment of directors by board of

directors(a) Additional directors:Any additional director appointed by board of directors

shall hold office only up to the date of AGM of company.

(b) Casual vacancy:By casual vacancy means any vacancy which occurs by

reason of death, resignation, disqualification or failureof an elected director to accept the office for anyreason other then retirement by rotation.

Such casual vacancy may be filled by the Board of Directors at meeting of Board.

A person appointed in a casual vacancy shall hold officeonly up to the date up to which the director in whose

place he is appointed.



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(c) Alternate director:

An alternate director can be appointed by Board

if it is authorized by resolution passed by the

company in the general meeting.

He shall act for a director called the original

director during his absence for a period of at

least 3 months from the state in which board

meetings are ordinarily held.



Directors by third party

• The articles under certain circumstances give

power to debenture holders or other creditors

e.g. banking company who have advanced

loans to the company.

• The number of directors so appointed shall not

exceed 1/3rd of the total number of directors

and they are not liable to retire by rotation.



Unit 5 Director

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