(i) What do you mean by the director? What is his importance In the.company?
(ii) What is the minimum and maximum number of directors in a company?
(iii) What is the share qualification of a director?
(iv) What is the nature of the acts of a director whose appointment is subsequently found to be defective or invalid?
(v) What precautions the Companies Act provides for ensuring that in case of director, there is no conflict between his duty of the Company and his self-interest?
(vi) Describe the disqualifications, disabling a person from being appointed as director’.
Ans. (i) Definition of Director-The term ‘director’ as defined U/S. 2 (34) of the Act, “director” means a director appointed to the Board of a comp’any. The definition, however, presupposes a lawful occupation of the position, management or superintendence of the affairs of a company.
The person through whom a Company acts are called directors, because a Company cannot act in its person, for it has no person. A Company’s personality is the creation of a legal fiction and it has no material existence. Therefore, it must act through some human agency. The directors are appointed to conduct the business of the Company.
Directors are the selected body of persons on whom lies the responsibility of the management of the Company as well as the business by the company. They are the persons in whom vests the power to make contract and duty to take care of the property.
Section 149(1) of the Company Act 2013 provides Every company shall have a Board of Directors consisting of individuals as directors and shall have—
(a) a minimum number of three directors in the case of a public company, two directors in the cast of a private company, and one director in the case of a One Person Company; and
(b) a maximum of fifteen directors: Provided that a company ma: appoint more than fifteen directors after passing a special resolution:
Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.
(2) Every company existing on or before the date of commencement of this Act shall within one year from such commencement comply with the requirements of the provisions of sub-section (1).
(3) Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.
(4) Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies.
Explanation.—For the purposes of this sub-section, any fraction filigiactl in such one-third number shall be rounded off as one.
(5) Every company existing on or before the date of commencement thin Act shall;within one year from such commencement or from the tie of notification of the rules in this regard as may be applicable, comply lth the requirements of the provisions of sub-section (4).
(6) An independent director in relation to a company, means a director livr than a managing director or a whole-time director or a nominee WI tot, / i who, in the opinion of the Board, is a person of integrity and pow. sses relevant expertise and experience;
(a) who is or was not a promoter of the company or its holding, Ibtilliiitry or associate company;
(b)(i) who is not related to promoters or directors in the company, its Wiling, subsidiary or associate company;
(e) who has or had no pecuniary relationship with the company, its Wiling, subsidiary or associate company, or their promoters, or directors, of ing the two immediately preceding financial years or during the current nitncial year;
(d) none of whose relatives has or had pecuniary relationship or ranttaction with the company, its holding, subsidiary or associate omptty, or their promoters, or directors, amounting to two per cent. or tore of its gross turnover or total income or fifty lakh rupees or such Igher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(e) who, neither himself nor any of his relatives—
(I) holds or has held the position of a key managerial personnel or is r has been employee of the company or its holding, subsidiary or noatociate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(II) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which c Its proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting finn that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;
(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or
(f) who possesses such other qualifications as may be prescribed.
(iv) Nature of the Acts of a Director Whose Appointment is Subsequently Found to be Defective- S. 176 of the Companies Act lays down that acts done by a person as a director shall be valid; notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification, or has been terminated by virtue of any provision contained in the Act, or in the Articles provided that nothing in this section shall be deemed to give validity to an act done by a director after his appointment has been shown to the Company to be invalid, or to have terminated.
(v) Precautions for ensuring that there is no conflict between a Director’s Duty to Company and His Self-interest—The directors enjoy a dual status in the administration of the Company. To some extent, they are trustees of the company, and to a certain extent, they are also its agents. The Directors are persons selected to manage the affairs of the Company for the benefit of the Shareholders. It is an office of trust which. if they undertake, it is their duty to perform fully and entirely. It is the plain duty of the directors, who are trustees for the Company. to deal in all the matters of the Company, and hot with regard to their own particular interest.
(g) Disqualifications of a Director for the Appointment in that Capacity- According to s. 164 a person shall not be capable of being appointed as a director of a Company if —
(i) He has been found to be of unsound mind by a court of competent jurisdiction, and the finding is in force;
(ii) He is an undischarged insolvent;
(iii) He has applied to be adjudicated as an insolvent; and his application is pending;
(iv) He has been convicted by a court in India of any offence; involving moral turpitude in respect whereof he has been sentenced to imprisonment for not less than six months, and a period of five years has not elapsed from the datae of the expiry of Company.
(v) He has not paid any call of share of the Company;
(iv) An order has been passed to disqualify him by a court.