This article has been written by Ishika rawat , a student studying LLB from Asian law college , Noida. The author is 1st year law student.

INTRODUCTION

A company is an artificial person holding its own legal rights and duties . It has its own legal identity . It perform various day to day operation . According to the companies act 2013 , section 2(34) “director”  means a director appointed to the board of a company .The director is the person who work for determining and implementing the company policy . when the activities of the company are managed by a group of directors , then they are known as board of director. Section 2(10) Define “ board of director” or “board” in relation to a company , which means the collective body of the director of the company . But the management of the company is not just limited to the board of directors but there are many other people who play an important role such as key managerial persons . Section 2(51) of the companies act 2013 define key managerial personnel in relation to a company which means –

1. The chief executive officer or the managerial director or the manager;
2. The company secretary ;
3. The whole time director;
4. The chief financial officer; and 
5. Such other officer as may be prescribed;

DIRECTOR UNDER THE COMPANIES ACT , 2013

• Number of director 

 

According to the companies act  2013,  section 149(1)  define the strength of director which must be there in company :-

{a} minimum number of director 

Pubic company 3

Private company 2

One person company 1

 

{b} maximum number of director

There can be maximum number of 15 director .

There can be more than 15 director after passing the special resolution but such class or classes of companies shall have atleast 1 women director.

Types of directors

There are various kinds of directors in a company:-

1. Resident directors : – section 149(3) of the companies act 2013 states that every company shall have one director who stayed in India for a total period of not less than 100 and 82  days in previous calender.
2.  Independent directors :- section 149(4) of the companies act 2013 states that in the public company shall have atleast of 1/3 of the  total number of directors as independent directors and the central government may prescribe the limit.
3. Small shareholder director :- according to the section 151 of the companies act 2013 , small shareholder director means a shareholder who is holding shares of nominal value of not more than 20 thousand rupees or such other sum as prescribed.
4. Right of other person to stand for directorship :- a person who is not a retiring director is eligible to be appointed as director if he or any member gives  a notice proposing him to be appointed as director .
5. Alternate director :- alternate director shall be appointed as a director for a period of 3 months or more from India of absence.
6. Nominee director :- section 149(7) explanation define the nominee director as director nominee nominated by the financial institution which was as per the law in force or of any agreement or appointed by any government or interested person .

• Independent director

 According to the companies act 2013 , section 149(6) states that independent director is the director who is not a

1. Managing director 
2. Whole time director
3. Nominee director

But the independent director is the :-

1. He/she is a person of integrity and possesses expertise and experience.
2. Who is /was not a promoter or director of the company or its holding , subsidiary or associate company.
3. Who has  or had no pecuniary relationship with the company , or during the 2 immediately preceding or during the current financial year.
4. Whose relatives must not have or had pecuniary relationship with the company or holding , subsidiary or associate company or their promoter or director amounting to 2 per cent or more of its gross turnover or total income of 50 lakh rupees or higher.
5. Who neither himself nor his relatives :- 

1. Hold or has held the position of a key managerial personnel.
2. Is or has been an employee or proprietor or a partner in any of the three financial year immediately preceding to the financial year .
3. Who along with his relatives hold the 2 percent or more of voting power .
4. Who is a chief executive or director of NPO which receive 25 per cent or more of its receipts or who hold 2 per cent or more of the total voting power of the company .

1. Who has qualification prescribed.

 

4   Appointment of director 

Under the section 152 of The companies act 2013 , when no provision of the company articles is mentioned regarding the appointment of director then :- (1) .

1. The subscriber to the memorandum who are individual shall be the first director of the company until the director are duly appointed.
2. In case of the one person company , an individual would be first director until the director are duly appointed in accordance with provision of law.

1. Every director of the company  shall be appointed in general meeting .
2. Must have director identification number under section 154.
3. Every person proposed to be appointed as the director shall furnish his director identification number and a declaration  that he is not disqualified to become a director under the act.
4. Must not act as a director unless he give his consent to hold the office as director and such consent must be filed with the registrar within 30 days of his appointment. But in case of independent director , an explanatory statement along with the fulfillment of the condition is a must.
5.  A . Unless and until the article provide for the retirement of all the director at every general meeting , not less than the 2/3rd of the total number shall :- 

1. Period of office is liable to determination by retirement of director by rotation.
2. Be appointed by the company in general meeting .

B   The remaining director of the company shall be appointed by the company in general meeting .

C  At the first annual general meeting of the public company and at every subsequent annual general meeting , 1/3rd of such director shall retire by rotation or the number must be three or multiple of 3 or the number nearest to 1/3rd shall retire.

D  the director who shall retire by rotation at every general meeting shall be those of the longest in office since their last appointment but they remain between person who become director on the same day shall retire as per agreement between themselves by determining a lot.

E   A general meeting in which director retire , the company may fill the vacancy by appointing the retiring director .

1.  A. If the vacancy has not filled up or the meeting has not resolved then meeting will be adjourned till the same day in the next week or if that day is national holiday ,then till the next succeeding day which is not the holiday.

B  If at the adjourned meeting also the vacancy has not filled up for the director then the retiring director shall be deemed to be reappointed at the adjourned meeting if :- 

• At the current meeting or the previous meeting a resolution for the re appointed of such director has been put to the meeting and lost.

• The retiring director has expressed his unwillingness to be reappointed provided in writing .

• He is not qualified or is disqualified for reappointed .

• A resolution whether special or ordinary for appointment or reappointment by virtue of provision of an act.

• Section 162 is applicable .

DIRECTOR  IDENTIFICATION NUMBER {DIN}

It is a unique number which is alloted by the central government to a person who is either intending to be a director or has been a existing director of a company . according to a section 154 of companies act 2013 , central government make an allotment of the DIN to a person who intend to be director  and hence made an application of the same along with prescribed fees under section 153 .  Certain aspects of the DIN which an individual must keep in mind :-

1. Under section 155 of the companies act , no individual can possess another DIN  if he already had one .
2. Under section 156 of the companies act, an individual must immediately after the allotment of DIN intimate it to the company where he is director within 1 month .
3. Under section 157 of the companies act ,  each and every company must within 15 days of the receipts of the DIN must immediately inform the registrar. Failing to do so will make company liable to pay fine of not less than 25,000 and it may extend to 1, 00,000. And officer of such company will also be liable to pay fine of not less than 25,000 and it may extend to 1,00,000.
4. Under section 158 of the companies act, every individual or company has an obligation to indicate the DIN.
5. Under section 159 of the companies act, every individual or company in case of the violation of section 152 ,155,156 shall be punished with : 1) extend to 6 month of imprisonment  2) liable to pay fine of 50,000 and in case of continuing violation of the same is liable to pay fine of 500 for every day .

•  DUTIES OF DIRECTOR 

There are various duties which the director perform in the day to day operation of the companies:-

If a director violate these provision of this section shall be liable to pay fine of not less than 1 lakh and it may extend to 5 lakh rupees.

• POWER OF THE BOARD

Under section 179 of the companies act 2013, there are certain power which are given to the board of director which are :-

RESTRICTION ON POWER OF BOARD

Under section 180 of the companies act 2013 , the power of the board of director shall be exercised only with the consent of the company by a special resolution :-

1. To :- A) sell

1. Lease
2. Dispose 

Whole of the undertaking or substantial whole of the undertaking or where the company own more than 1 undertaking of the whole or substantial of the undertaking.

1. To invest in trust securities where the compensation amount received from amalgamation or merger.
2. To borrow money  where the borrowed money exceed aggregate of paid up share capital and free reserves  apart from temporary loss of the business.
3. To remit or giving time for repayment 
4. Special resolution mentioned above must also specify the amount to which money will be borrowed by board.
5. Above section must not affect : – 

a} the title of the buyer who buys an property , investment or undertaking in good faith.

b} the sale or lease of property where the company mainly work for selling or leasing.

1. Above section must not reduce its capital except in accordance of the provision of this act.
2. No debt suffered by the company shall be valid unless the lender himself provide that he advanced in good faith  and without knowledge that the limit imposed by that clause  has been exceeded.

• KEY MANAGERIAL PERSON

 Key managerial person plays a very important role in the working of the operation of the company . It is because of their contribution that every company work efficiently and effectively .

 Section 203 of the companies act 2013 provide that every company has certain class of people who work as the whole time key managerial personnel which are :- 

• The chief executive officer or the managerial director or the manager;
• The company secretary ;
• The whole time director;
• The chief financial officer; and 
• And even an individual can both chair person and managing director or chief executive officer at the same time after the commencement of this act unless the article of such company provide or the company has multiple business .

CERTAIN FEATURE OF KMP 

1. KMP must be appointed by resolution which include terms and condition along with remuneration.
2. KMP shall not hold office in more than one company except in subsidiary .
3. If there has been a vacancy in the office of KMP , then such vacancy must be filled within 6 month at the meeting of the board.
4. In case of violation of the provision :- 

1. Company shall be liable to fine of less than 1 lakh and it may extend to 5 lakh
2. Every director or KMP shall be liable to pay fine which may extend to 50,000 and in case of continuing violation shall be liable to pay fine of 1,000 for every day  from such continuing violation day.

• FUNCTION OF COMPANY SECRETARY

Section 205 of the companies act 2013 states that :- 

• APPOINTMENT 

Section 196 of the companies act 2013, states the appointment of the managing director or manager :- 

1. A managing director and a manager cannot be appointed at the same time .
2. Cannot re- appoint the managing director , whole time director or manager for 5 year .
3. No company can appoint or continue the employment as managing director or manager etc who :- 

1. Below age of 21 year  or has attained the age of 70 years.
2. Undischarged insolvent 
3. Suspended payment to its creditor or has made composition with them.
4. Convicted by court or sentenced for imprisonment of the term of 6 month.

1. Subject to the provision of section 197 and schedule 5 , appointment and remuneration payable shall be decided in the next general meeting . And return  shall be filed within 60 days of such appointment with the registrar.
2. If the appointment of the managing director , manager or the whole time director has not approved then act done by them before the approval shall be deemed to be invalid.

• RESTRICTION

 

1} SECTION 192 

This section provide that no company shall enter into such kind of arrangement where :-

1. A  director of the company acquire assets for consideration other than cash.
2. A company acquire assets for consideration other than cash.

Unless the prior resolution has been passed in general meeting . And such resolution shall include the information which may include the value of assets which is calculated by registered valuer .

But such kind of arrangement is voidable in 2 instances :-

A} restitution of any money which in case of the arrangement is no longer possible  and the company has been  indemnified for the loss .

B} right acquired for bona fide for value and without any notice 

 

2} SECTION 194 

It put prohibition on forward dealing in securities of company by director or KMP. It states that neither director nor KMP are allowed to buy or hold followings :-

A} right to call or make delivery within the specified time and specified shares or debentures .

B} right which he may elect to call or make delivery within the specified time and specified shares or debentures .

In case of violation of the provision shall be liable to pay fine which must not less than 1 lakh and it may extend to 5 lakh and is also punishable with imprisonment of 2 years .

And in case if director or the KMP acquire in violation of the provision , then  he would be liable to surrender to company and company shall not register the securities.

 

3}SECTION 195 

This section states that director and the key managing person shall not enter into any insider trading { insider trading means an act of subscribing , buying , selling , dealing or agreeing to subscribe , buy , sell, or deal in any securities by director or KMP } .In case of violation of this section shall be punishable with imprisonment of 5 year and must be payable with fine not less than 5 lakh and it may extend to 25 crore or three time profit out of insider trading .

Aishwarya Says:

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