1. Directors

2. Definition of director
Section 2(13) defines a „director‟ as including “any person occupying
the position of director by what ever name called”
Legal position of directors
Companies act makes it obligatory for all the companies to have
directors
The true position of company directors is that of agent and
principal
They have principal and agent relationship
Single director have no authority
If directors contract on behalf of Co. without using the word
Limited / Pvt. Ltd he is personally liable

3. Types of director
Inside director or executive director
Outside director
Professional director
Nominee director
Special director
Independent director
Interested director
Managing director

4. Director Identification Number
(DIN)
Sections 266A to 266G of companies act contain the
provision for DIN
All existing directors and individual intending to
become directors have to obtain DIN with in prescribe
time frame and in manner as prescribed
Central government has prescribed director
identification number rules, 2006, governing director
identification number

5. Who can be a director?
Anyone can become a director, with a few
exceptions:
Anyone disqualified by the company‟s own
Articles of Association (the rules relating to
the running of the company).
An undischarged bankrupt.
Someone disqualified by a court order.
The company‟s auditor

6. Qualification shares
No statutory requirement
Aoa may provide for qualification shares
Q/S should obtain within 2 months from
appointment
Maximum nominal value of shares not to exceed
Rs.5000
Q/S should be bought and not to take in gift

7. Number of directors (sec.252)
Public ltd company shall have at least 3 directors
Every Pvt company shall have at least 2 directors
Maximum No of directors 12 (Sec 259)
>12 central Govt permission is required
Restriction of Number of directorships (sec.278)
Maximum number of directorships 15
 following are excluded from count (Sec 278)
•Directorship in unlimited company
•Directorship in non profit organization

8. Appointment of directors
By subscribes to the memorandum(first directors)
section 254
By members of general meeting section 255,256,257,256
By board of directors section 260,262
• additional directors
•Directors in casual vacancy
•Alternate directors
By central government section 408,409
By third parties if the articles provide
By small shareholders if articles provide

9. Removal of directors
Removal by shareholders
Shareholders may remove by passing ordinary resolution
The following directors cant be removed buy SH
o directors appointed by central govt
oLife time directors appointed prior to 1-4-1956
oAppointed by Financial institutions and banks
Removable by central government
• if director is guilty of fraud misfeasance negligence
• the business is conducted with unsound business
principles

10. Removal by company law board
• it has power to terminate, modify any agreements
between company and director
•Director cant sue for any compensation for loss of
termination of office
•Such person cant serve any company for a period of 5
years

11. Resignation of directors
Companies act does not make express provision for
resignation of a director
A director may resign in a manner according to the
company articles.
If the articles contain no provision regarding the
resignation by a director ,he may resign his office at
any time by giving reasonable notice to the company.

12. Remuneration of directors
Directors are not entitled to remuneration unless
agreement is made
But company can pay them salary or commission or
specified percentage of net profit
Reference to section 198,309to 311 and 387 suggests
director can get managerial remuneration
Sitting fees
It is not a part of remuneration (Section 198 (2))
 it is paid to company which having paid up capital and
reserves of Rs.10 cores or above.
Up to Rs.20000 per meeting

13. Duties of Directors
Statutory duties
Duties to attend board meeting
Duty not to contract without board‟s consent
Duty in connection with general meetings
To disclose receipts transfer of property
To disclose receipt of compensation from transfer of shares
Duties to file declaration of solvency
Fiduciary and general duties
Duty of good faith
Not to make secret profits
Not to be negligent

15. Siddhartha
chitla