Company Law -Company Management-director

This ppt contains the topic related to company management. directors of the company. how the directors are appointed , the directors identification number, legal position of the directors, vacation of the office by directors, removal of directors , powers and duties of the directors, who is an independent director, who is called as an women director how they can be appointed and the key managerial skills which a personnel has to be are clearly explained here.

1. Unit 4

2. Director identification number the Director Identification Number (DIN) is a unique identification number allotted to individuals who wish to become directors of companies. The DIN is governed by the Companies Act, 2013, which is the primary legislation regulating company law in India. Here are some key points about DIN under the Companies Act, 2013: Mandatory Requirement : Any individual intending to become a director of a company must obtain a DIN. This applies to both new directors and existing directors seeking to continue their role. Application Process : DIN can be applied for online through the Ministry of Corporate Affairs (MCA) portal. The application requires submitting a form (DIR-3) along with personal identification documents and proof of address.

3. Unique Number : Each DIN is unique to the individual and is used to track their directorial roles and responsibilities across various companies. Regulatory Compliance : Directors are required to ensure that their DIN is active and valid. Failure to maintain a valid DIN can lead to disqualification or penalties under the Companies Act. Changes and Updates : If there are any changes in personal details or if a director resigns or is appointed in a different capacity, it is essential to update the DIN information accordingly.

4. Legal position of director According to Bowen L.J. “ Directors are described sometimes as agents, sometimes as trustees and sometimes as managing partner. But each of these expressions is used not as exhaustive of their power and responsibilities but as indicating useful points of view from which they may for the moment and for particular purpose be considered”

5. Director as agent Agency Relationship: In their capacity as directors, individuals act as agents of the company. This means they have the authority to make decisions and enter into contracts on behalf of the company. The company, being a separate legal entity, relies on its directors to manage its affairs and represent its interests. As an agent directors has to : Act within the scope of his authority Conduct the business with reasonable care and diligence Strictly obey the norms as said in the MOA & AOA Enter into contract on behalf of the company

6. Important points to be noted Directors power are more than that of the agent and independent in certain matters Need not consult the shareholders for all the matters therefore the powers of the directors are discussed in the shareholders meeting They are not personally liable on contracts made behalf of the company and do not enter into the contract in the personal name. To bind the company directors must act in the name of the company but within the scope of the company If the directors enter into the contract which is beyond the powers of him but within the power of the company it can be ratified If the director enter into ultra vires contract neither company nor directors are liable

7. He is liable for breach of implied warranty of authority As an agent a director must be honest and diligence with the conduct of affairs of the company

8. Director as trustees They are being described as the trustees but they are not the trustees They are called so because they perform their duties and powers in a fiduciary position ( behalf of the others) in relation to the company The directors of the company are trustees for the company, and with reference to their power of applying funds of the company and misuse of the power they could be rendered liable as trustees and their death. Duties As the trustees of the company’s money and property As trustees in respect of powers entrusted with them

9. Directors as managing partners They are the elected representative of the shareholders who are vested with the responsibility of the overall management of the affairs of the company on behalf of the shareholders. They are managing partner in one hand and they themselves are the shareholders on the other hand They fill the managing partner post by mutual arrangement between all the shareholders

10. Directors as officers As per sec 2(59) of the company act Officers include any director, manager or key managerial personnel or any person in accordance with whose directions or instructions the board of directors or any of other directors are usually to act

11. Vacation of office by directors Statutory vacation As per sec 167 the office of directors become vacant with the following : If he incurs any of the disqualification specified in sec 164 If the person is absent in all the meeting of board of directors held in the 12 months. If he is said by the court that he has involved in any offense & if imprisoned for 6 months If he fails to directly or indirectly tell his discloser of contract If he becomes disqualified by the order of court A pvt ltd company may by the articles provide for the vacation of office for any other reason in its articles

12. Removal of directors sec 169 It can be done by an ordinary resolution A company can remove the director from his office before the expiry of his period of office But this is not applicable for the director who has appointed by the tribunal under sec 242 or the directors appointed under the sec 163 Notice to be served Special notice shall be required of any resolution to removal of directors (14 days) Notice shall be given to both company and director concerned and inform the members The director shall be entitled to be heard on the resolution at the meeting

13. Powers and duties of the director According of the articles of the company and provisions of the company act the director has all the powers which a company can act The director can act within the scope of the company which is said by the act and articles The shareholder cannot interfere in such scope of authority However, the board cannot exercise any power or any act which is not exercised by the company in the general meeting The powers of the directors cannot be restricted by the shareholders if the shareholders disapprove the decision taken by the board or strongly disapprove they can refuse but they cannot themselves unlawfully seize and possess those powers

14. Exceptions When the director act with their own personal interest and disregard the interest of the company When the directors are unable to unwilling to act When the board has become incompetent(lack of necessary skills)to act It is noticed that individual director has no authority to bind the company unless the articles provides it

15. Statutory provision regarding directors’ powers sec 179 The directors can perform certain powers which is prescribed in the articles which may be as follows : The power to make calls The power to issue debentures The power to invest the funds of the company The power to borrow money otherwise than on debentures The power to make loans

16. Powers exercised by the board at the meeting Section Sec 161 Sec 188 Sec 184 Sec 203 Sec 186 power To fill vacancies in the board To sanction or give consent for certain contracts To receive notice of disclosure of directors interest in any contract or arrangement with the company To appoint as managing director of the person one who already works as manager in another company To make investment in company in the same group

17. Duties of directors A director shall act in the good faith in order to promote the object of the company A director shall act for the benefit of its members as a whole A director shall exercise his duties with due and reasonable care, skill and diligence A director shall not involve in the activity with causes problem to the company Must not make any undue gain if he has done so he is liable to pay an amount equal to gain the company The act done by the director shall not be void

18. Liability of the director The directors should always act within the scope of the company and maintain the goodwill until then they are not personally liable for any of their act But in the certain case they will be made liable which are discussed as under: Liability as shareholders- since the director is also one of the shareholder his liability is limited but if provided in the memorandum they are unlimited Liability of the company : breach of fiduciary duty- every director must act honestly but if they fail to do the duty or if there is any conflict between the personal interest and the company ( if the director acts dishonestly) Ultra vires act- beyond the power Negligence – liable for the damages caused due to his negligence Breach of trust

19. Liable to third party – the directors are liable to third party under following cases For the false statement in the prospectus For acting their own name instead of the company name Breach of limited warranty of the authority ( ultra vires ) Liability has been made unlimited by a provision in the memorandum Fraudulent trading Damages can be claimed Liabilty for the breach of statutory duties Liability for the acts of co directors- the directors shall not be the agent to his co partner and protect him while doing fraud actitivies Criminal liability – crimes – Filling prospectus with untrue statement Issuing prospectus with false statement Fail to return allotment money etc…

20. Independent directors In company law, an independent director is a member of a company's board of directors who does not have any material or financial relationship with the company or its management, other than their director's fee. The role of an independent director is to provide unbiased oversight and ensure that the company's governance practices are fair and transparent. No Material Relationship No Recent Employment No Significant Shareholding Not a Promoter Independent Judgment

21. Women directors the concept of a "women director" refers to a director on the board of a company who is female. Diversity Quotas and Targets : ome countries and regions have established quotas or targets to ensure a certain percentage of board positions are held by women. Regulatory Framework : Many countries and regions have established quotas or targets to ensure a certain percentage of board positions are held by women. Appointments and Policies : Companies are increasingly adopting policies to promote gender diversity and ensure that women are considered for director roles. This includes creating pipelines for women to move into leadership positions and providing mentorship and training