Directors: Appointment, Powers and Duties
“ Director means a director appointed to the Board of a
company.” [Sec.2(34)]
There must be at least 3 directors in a public company and 2
directors in a private company and one director in case of a
One Person Company. [Sec. 149(1)]
Usually a company can have maximum of 15 directors. But it
may appoint more than 15 directors after passing a special
resolution.
The directors collectively are referred to as ‘Board of directors’
or ‘Board’.
Only individuals can be appointed as directors. No body
corporate, association or firm can be appointed as directors of
company.
Woman
Director
Additional Nominee
Director Director
Board of
directors
Alternate Independent
Director Director
Resident
Director
Independent Director-Sec 149
Applicable to Public Co.
Rs. 10 crores
or more paid
up capital
Rs 100
Listed Independent Crores or
Company Director more
turnover
Rs 50 Crores
or more
outstanding
boroowings
3
Resident Director Sec 149(3)
• Mandatory for ALL Companies
• Every company must have a Director who has
stayed in India for a total period of 182 days or
more in previous calendar year.
• Existing Companies, not fulfilling this condition, to
appoint Resident Director at earliest.
Woman director – Public Co. Only
(Sec. 149)
Listed
Company
Public Public
Women
company Company
Director
having capital having
of Rs. 100 turnover of Rs
Crores or 300 Crores or
more more
Additional Directors Sec. 161
• The Board of Directors can appoint any
person as additional director by passing a
resolution.
• A person who fails to get appointed as a
director in a general meeting cannot be
appointed as an additional Director by the
Board of Directors.
Alternate Director Sec. 161
• The Board of Directors may appoint an
alternate for a director during his absence from
India for a period of not less than three months
• An alternate director vacates office when the
original director returns to India
• A person shall not be appointed as alternate
director for more than one person in a
company
Nominee Director Sec. 161
• the Board may appoint any person as a director
nominated by any institution.
• Such appointed nominee director shall not be
treated as an independent director.
• The institution instead of appointing director on
the board can appoint observer on the board.
• Companies law has not defined the role and
liabilities of observer.
Tenure
• Managing Director/Whole Time Director or
Manager can be appointed for a term of five
years at a time. Sec 196(2)
• Additional Director appointed by Board of
Directors shall be appointed till the
conclusion of next AGM. The appointment
of Additional Director should be approved
by members in general meeting. Sec 162
Rotation of Directors
• Unless the articles provide for the
retirement of all directors at every annual
general meeting, not less than two-thirds of
the total number of directors of a public
company shall—
a) be persons whose period of office is liable
to determination by retirement of directors
by rotation; and
b) save as otherwise expressly provided in this
Act, be appointed by the company in
general meeting.
Rotation of Directors….
• At the first annual general meeting of a
public company held next after the date of
the general meeting at which the first
directors are appointed and at every
subsequent annual general meeting, one-
third of the directors for the time being as
are liable to retire by rotation.
• The directors to retire by rotation at every
annual general meeting shall be those who
have been longest in office.
Position of Directors in a Company
• Directors as agents.
• Directors as trustees.
• Directors as managing partners.
• Directors as officers.
• Directors as employees.
• Directors as organ of the company.
Duties/responsibilities of directors
• For the first time, duties of directors have
been specified in the Act.
A director shall:
(i) Act in accordance with the company’s
Articles
(ii) Act in good faith in order to promote
the objects of the company for the benefit
of its members as a whole, and in the best
interests of the company
(iii) Exercise his duties with due and
reasonable care, skill & diligence.
Duties/responsibilities of directors
A director shall not:
• (i) Involve in a situation where he may
have direct or indirect interest
• (ii) Achieve or attempt to achieve any
undue gain or advantage either to himself
or to his relatives
• (iii) Shall not assign his office
Liabilities of Director
• Companies Act, 2013 cast a criminal liability and
civil liability on “officer who is in default” which
includes Executive Director and KMP (Key
Managerial Personnel).
• Definition of Officer in default is as follows:
• “officer who is in default”, for the purpose of any
provision in this Act which enacts that an officer
of the company who is in default shall be liable to
any penalty or punishment by way of
imprisonment, fine or otherwise, means any of
the following officers of a company, namely:—
• (i) whole-time director;
• (ii) key managerial personnel;
• (iii) where there is no key managerial personnel,
such director or directors as specified by the
Board in this behalf and who has or have given
his or their consent in writing to the Board to
such specification, or all the directors, if no
director is so specified;
• iv) any person who, under the immediate
authority of the Board or any key managerial
personnel, is charged with any responsibility
including maintenance, filing or distribution of
accounts or records, authorises, actively
participates in, knowingly permits, or knowingly
fails to take active steps to prevent, any default;
•(v) any person in accordance with whose advice, directions or
instructions the Board of Directors of the company is accustomed to act,
other than a person who gives advice to the Board in a professional
capacity;
•(vi) every director, in respect of a contravention of any of the provisions
of this Act, who is aware of such contravention by virtue of the receipt
by him of any proceedings of the Board or participation in such
proceedings without objecting to the same, or where such
contravention had taken place with his consent or connivance;
•(vii) in respect of the issue or transfer of any shares of a company, the
share transfer agents, registrars and merchant bankers to the issue or
transfer;
Meetings
Board Meeting (Sec. 173) and the Companies
(meetings of Board and its Powers) Rule 2014.
• Minimum 4 meetings in a year. Maximum gap
between two meetings – 120 days.
• Minimum Notice of 7 days for a meeting. No
shorter notice permitted unless independent
director is present, if any [Sec 173]
• Small Companies – At least One meeting in each
half of calendar year. Minimum gap between two
meetings – 90 days [Sec 173]
Board Meeting
• BM Notice may be given by hand
delivery/electronic means.
• Meetings through Video Conferencing permitted.
But proper recording of video conferencing to be
kept.
• Minimum quorum shall be one third of its total
strength or two directors, whichever is higher
Participation by video
conferencing
• The participation of directors in a meeting of
the Board may be either in person or through
video conferencing or other audio visual
means.
• Procedure as per Companies (Meetings of
Board and its Powers) Rules, 2014.
Matter not to be dealt with at
meeting through video
conferencing
• the approval of the annual financial
statements;
• the approval of the Board’s report;
• the approval of the prospectus;
• the Audit Committee Meetings for
consideration of accounts; and
• the approval of the matter relating to
amalgamation, merger, demerger,
acquisition and takeover
Matters to be asked before, during and
after the meeting
Before meeting During meeting After meeting
Notice of the meeting Appointment of Minutes of the
should be sent to all chairman to conduct meeting should be
the directors 7 days the meeting. forwarded to all
prior to the date of directors within 30
Board meeting. Minutes of the previous days for their review.
meeting should be
approved and signed by
Quorum is present Chairman If any resolution which
for the meeting. Or require reporting to
else the meeting interested director in ROC, are passed , then
any contract shall not such compliance
will be adjourned vote for approval
for want of quorum. should be completed.
contract.
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