Management of Companies. A study on law

Presentation on Management of companies in Corporate Regulations.

1. Management of companies Julin Jose K

2. Introduction The management and administrative system of a company is vested on the board of directors . They are team of people elected by a company’s shareholders to represent the shareholders interest and ensure that the company’s management acts on their behalf. The Board of Directors appoints the chief executive officer of the company and sets out the overall strategic directions.

3. Board and directors The persons through whom it acts and by whom the business of the company is conducted are known as the directors. The directors of the company are collectively known as the “ Board of Directors” or the “Board”. According to sec 2(51) of the companies act the position of directors is formally included within the definition of “Key Managerial Person”

4. continue.. A public company requires a minimum no of three directors to constitute the Board whereas in private companies the required minimum is two. But in the case of One Person Company it is only one. Every company must have at least one director Resident (ie. stayed in India for at least 182 days in a year). Some prescribed class of company shall have at least one women director. Every listed company shall have at least one third the total number of directors as independent directors.

5. governance It has been defined to refer the structures and processes that are designed to ensure accountability transparency responsiveness rule of laws stability equity and inclusiveness empowerment and broad based participation. Governance oversees management and organisation performance to ensure that the organisation is working in the best interest of the Public.

6. Director According to Sec 2(34) of the Companies Act 2013, a director means a director appointed to the Board of a company . Only an individual can be appointed as a director. Director is a person who directs conducts manages supervise and controls the functions of a company.

7. Qualification of a Director The Articles of the company generally or may provide that a certain number of shares will have to held by each director. Such shares are called qualification shares. If the director do not acquire the required shares within prescribed time, they cease to be the director. As per companies act 1956 the nominal value of the qualification share as fixed by articles must not exceed Rs.5000.

8. Disqualification of a director Unsound mind Undischarged insolvent Applied to be adjudicated as an insolvent and his application is pending. Convicted by court. If an order of disqualification already exist in a court. Not paid any call in respect of shares. Has been convicted during last preceding five years. He has not allotted DIN director identification number.

9. If he is already director of any company and private company Has not filed the annual accounts and annual returns for any continuous three years Has failed to repay deposit or interest on debentures or pay dividend on shares. If he finds convicted or appeal not granted till date in a private company.

10. Legal position of a director (role) In the words of Bowen L J “ Directors are sometimes described as the agents, sometimes trustees, and sometime as managing directors. But each of these expression 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.

11. Director as an agent T he company is not a person. It can act only through directors and the case i sas regards those directors, merely the ordinary case of principal and agent.whenever an agent is liable those directors will be liable. Where the liability would attach to the principal and the principal only, the liability is the liability of the company. But directors are not agents to individual shareholders.

12. Directors as trustees The directors of a company are trustees for the company and with reference to their power of applying funds of the company and of misuse of the power they could be rendered liable as trustees and on their death the cause of action survives against their legal representatives.

13. Directors as managing partners Directors are elected representatives of the shareholders and therefore they are in a position as managing partners.

14. Directors as employees Although directors are agent of the company they are not employees or servant of the company.hence they cannot claim their remuneration as a preferential creditor at the winding up of the company. But where any director besides being a director is lso in the service or employment of the company such as secretary manager or otherwise he will be treated as an employee.and will get a remuneration .

15. Appointment of directors Appointment of First Directors 1. By Articles of the company 2. By the Subscribers to the memorandum of association b) Appointment of subsequent Directors 1. By the Company in General Meeting 2. By the Board of Directors

16. Continue.. 3. By Third Parties 4. By the Principle of proportional representation 5. By the Tribunal

17. Women Director According to rule 3 of the companies act 2014 the following class of companies shall appoint at least one women director. Every listed company Every other public company having as on the last date of latest audited financial statement Paid up share capital of one hundred crore rupees or more or Turnover of three hundred crore rupees or more.

18. Independent director An Independent director in relation to a company means a director other than a managing director or a whole time director or a nominee director. An independent director shall possess appropriate skills , experience , and knowledge in one or more fields of finance, law , management , sales , marketing , administration , research , corporate governance , technical operation or other disciplines related to the company’s business.

19. Number of directorship A person can act as a director including any alternate directorship in companies is limited 20 at the same times. The maximum number of directorship in public company including the directorship of private companies that are either holding or subsidiary of a public company is limited to ten. In case of contravention fine not less than five thousand to twenty five thousand is payable.

20. Retirement of directors Articles may provide regarding this If not, not less than two third of total number of directors of a public company shall be liable to be retired by rotation and eligible to be reappointed at annual general meeting. At the annual general meeting at which a director retires as aforesaid the company may fill up the vacancy by appointing the retiring director or some other person thereto.

21. continue.. If vacancy is not filled up in adjourned meeting also then retiring director shall be deemed to have been re appointed, unless Resolution for re appointment has been put to the meeting and lost. If retiring director expressed his unwillingness to be so re appointed by way of written notice. If he is not qualified or is disqualified for appointment

22. continue… 4. If a resolution whether special or ordinary is required for his appointment or re appointment by virtue of any provisions of this Act 5. If sec 162 is applicable.(appointment of directors to be voted individually)

23. Removal of directors Removal by shareholders Removal by the Tribunal Removal by the central government

24. Vacation of office of directors Incurs any disqualification Absent himself from the meetings of Board of Directors Acts contravention of provisions of sec 184 Fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested Becomes disqualified by an order of a court or the tribunal

25. continue… Convicted by court Removed pursuance of the provisions of the act Having appointed a director by virtue of his holdings.

26. Resignation of director A director may resign from his office by giving a notice in writing to the company within 30 days from the receipt of notice intimate the Registrar in the prescribed form and post the information on its website if any.

27. Right of persons other than retiring director to stand for directorship If any person who is not a retiring director intends himself to be proposed as a director or some member intending to propose him as a director then such person shall give a notice to company at least 14 days before the meeting at its registered office along with a deposit of Rs.100000 or such higher amount as may be prescribed.

28. Director identification number(din) Application for allotment of Director Identification number. Allotment of director identification number. Prohibition to obtain more than one Director Identification Number Director to intimate Director identification Number Company to inform Director Identification Number to Registrar Obligation to indicate Director Identification Number

29. Register of directors and key managerial personnel and their shareholding Every company shall keep at its registered office a register containing the particulars of its directors and key managerial personnel , which shall include the details of securities held by each of them in the company or its holding subsidiary subsidiary of company’s holding company or associate companies.

30. Powers of directors. The directors are usually given wide power of management and they enjoy considerable freedom in the determination of policy of management and conduct of the company’s business.Directors must exercise their powers as a board unless the articles of association of the company provide otherwise.

31. Usual powers To make call Buyback of shares Issue securities including debentures Borrow monies Invest funds of the company Grant loan and guarantee loan Approve financial statement and boards report To diversify the business of the company To approve amalgamation merger and reconstruction To take over Other matters

32. Powers needed to get a sanction To lease sell or dispose of the whole or part of business To remit or allow more time for the payment of any debt due by a director To borrow in excess of the paid up capital and free reserve of the company To invest money received in respect of compensation received by it To donate to charitable society

33. Director statutory duties To verify the truthness of a prospectus to be issued by the company To determine the amount of minimum subscription To see that shares are not allotted until minimum subscription has been submitted To see all application money received is deposited in a scheduled bank To see allocation and return of excess application To purchase and pay for their qualification shares within specified time.

34. continue.. To see proper accounts are maintained To keep register of members To send Registrar notice of conversion of shares into stocks or consolidation or division of shares To conduct annual general meeting and extraordinary meeting To send registrar copies of special and extraordinary resolutions To send registrar and directors and secretary etc notify the change.

35. continue… To see share certificates and share warrants are kept for delivery To keep register of mortgage and charges To give all necessary information and explanation to auditors during the course of audit To submit statement of affairs during the winding up of company.

36. General duties Should act in good faith .Protect the interest of company,employees and shareholders , the community and protection of employees Exercise his duties with due and reasonable care Shall not involved in conflicts Shall not achieve any undue gain or advantage Shall not assign his office Any director violate any rules will be punishable with fine of Rs.100000 to Rs.500000

37. Obligations of director 1 .lay financial documents for approval 2. Ensure there is proper system of working with regard to the laws. 3. Ensure activities are included in Corporate Social Responsibility 4. Director shall disclose his interest in a contract with company 5. Director is prohibited from engaging on forward dealing in securities of the company.

38. continue… 6. Board is responsible for appointment of whole time managerial personnel of a company. 7. Responsible for appointment of first auditor and issuance of notice in connection with holding board meeting and general meeting .

39. Director’s rights Right to access a company’s statutory register , minutes,and accounting records. Entitled to claim reimbursement of all reasonable legitimate expenses incurred on company business. Entitled to get remuneration . N on executive director will normally receive a fee rather than a salary. Right to participate in the strategic management of the company and attend and vote at board meeting

40. continue… 6. Right to receive reasonable notice of meetings 7. Right to remain in office until he resigns or is properly removed 8. Right to hold any number of directorship. 9. Equal rights to attend board meetings and all directors votes have equal weight 10.Power’s may delegate 11.director can insist meeting conducted in reasonably convenient future 12.can take independent professional advice at the expense of the company

41. Liability of directors Liability to outsiders As an Agent Misleading prospectus With regard to allotment 2) liability to the company. Ultra vires acts Breach of fiduciary duty

42. continue.. C. negligence D. Malafide acts 3) criminal liability

43. Restriction on Directors Age limit Number of directorships Assignment of office Disclosure of interest loan

44. Key managerial person According to sec 2(51) of The Companies Act 2013 Key Managerial person in relation to the Company means The Chief Executive Officer or the Managing Director or the Manager The Company Secretary The whole time Director The Chief Financial Officer Such other officer not more than one level below the directors who is in whole time employment Such other as may be prescribed.

45. Managerial remuneration Managerial remuneration is a driving force which entails the top level executives to work for the business. According to sec 197 of the companies Act 2013 the total managerial remuneration payable by a public company to its directors including managing director and whole time director and its manager shall not exceed 11% of the net profit for the financial year.

46. Thank you…