Under this article, we are going to explain the meaning of Director as per Companies Act 2013 and also Director's Roles and Responsibilities in a company, Duties of Director, etc.
· Definition:
Director: An appointed or elected member of
the Board of Directors of Company. {Sec 2(34)}
Board of Directors: In relation to a company, means the collective body of
the directors of the company. {Sec 2(10)}
·
Positions held by Directors:
o
Managing Director: Means a director who by virtue of Company or an agreement with the company or a resolution passed in
its general meeting or by its board of Directors is entrusted with the
substantial powers of management of the affairs of the company.
o
Whole Time Director: Includes a director in the whole time
employment of the company.
o
Manager: Means an individual who subject to
the superintendence, control and direction of the Board of Directors, has the
management of the whole or substantially the whole of the affairs of the
company and includes a director or
any other person occupying the position of a manager, by whatever name called.
o
Officer in default: “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:
ü Whole-time director
ü Key managerial personnel
ü 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;
ü 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, authorizes, actively participates in, knowingly permits,
or knowingly fails to take active steps to prevent, any default;
ü 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;
ü 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;
ü 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.
o
Key Managerial Personnel: “key managerial personnel”, in
relation to a company, means—
ü the Chief Executive Officer or the
managing director or the manager;
ü the company secretary
ü Chief Financial Officer
ü Others as may be prescribed
· Types of Directors:
o
Residential Director: Every company shall have at least
one director who has stayed in India for a total period of not less than 182
days in the previous calendar year. {Sec 149(3)}.
o
Independent director: As per section 149(6) an
independent director in relation to a company, means a director other than a
Managing Director, Whole Time Director Or Nominee Director. Companies which
have to appoint Independent Director:- As per Rule 4 of Companies
(Appointment and Qualification of Directors) Rules,2013 the following class of
companies have to appoint at least two independent directors:-
A} Public Companies having Paid-up Share
Capital-Rs.10 Crores or More;
B} Public Companies having Turnover- Rs.100
Crores or More;
C} Public Companies have total outstanding
loans, debenture and deposits of Rs. 50 Crores or More.
Tenure of Director:- an
independent director hold office for a term up to 5 consecutive years,
-Also eligible for
reappointment by passing Special Resolution and also require its reappointment
in Boards Report.
-He shall not hold office
for more than 2 Consecutive terms, but shall not be eligible to appoint after
expiration of 3 Years of ceasing to become an independent director.
Remuneration to Independent Director:- An
independent director shall not be eligible for any stock option as per section
149(9) of Act. But they may receive remuneration by way of fee provided under
section 197(5) of the Act. Sitting fees for Board meeting and other committee
meeting shall not be exceed Rs. 1,00,000 per meeting.
o Small Shareholders Directors:- A
listed Company may have one director elected by small shareholders. May appoint
upon notice of not less than 1000 Shareholders or 1/10th of the total
shareholders, whichever is lower have a small shareholder
director which elected form small shareholder.
o Women Director:- As
per Section 149 (1) (a) second proviso requires certain categories of companies
to have At Least One Woman director on the board. Such
companies are any listed company, and any public company having-
Paid Up Capital of Rs. 100 crore or
more, or Turnover of Rs. 300 crore or more.
o Additional Directors: Subject
to the articles, the Board may appoint any person, other than a person who
fails to get appointed as a director in a general meeting as an additional
director.
o Alternate Directors:- As
per Section 161(2) A company May appoint, if the articles
confer such power on company or a resolution is passed (if an Director
is absent from India for atleast three months).
o Shadow Director:- A
person, who is not appointed to the Board, but on whose directions the Board is
accustomed to act, is liable as a Director of the company, unless he or she is
giving advice in his or her professional capacity.
o Nominee Directors:- They
can be appointed by certain shareholders, third parties through contracts,
lending public financial institutions or banks, or by the Central Government in
case of oppression or mismanagement.
·
Decision making of Directors:
o Board Meeting:
ü First Board
Meeting should be held within 30 days of the Incorporation.
ü A notice
not less than 7 days in writing is required to call a board meeting.
ü Notice of
Board Meeting shall be given to all directors, whether he is in India or
Outside India by hand delivery or by post or by electronic means
ü Director
can participate in the Board meeting through video conferencing or other audio
visual mode as may be prescribed.
ü At least 4
Board meeting should be held each year, with a gap of not more than 120 days
between 2 board meetings.
ü In case of
OPC, small company and dormant company at least 1 Board meeting must be less
than 90 days between 2 board meetings
o Resolution by Circulation:
Resolution by circulation shall be consented by majority of directors present
in India or by majority of them.
o Committee Meeting:
ü Nomination
& remuneration Committee:
For listed & other
prescribed class of Companies and 3 or more non-executive directors out of
which not less than one half shall be independent directors.
ü Stakeholders
Relationship Committee:
For company which consists
of more than 1000 shareholders, debenture holders, deposit-holders and any
other security holders at any time during a financial year.
ü Audit
Committee:
For listed and other
prescribed class of companies and in which 3 or more non-executive directors
out of which not less than ½ shall be independent directors.
ü Corporate
Social Responsibility Committee:
For every Company having net
worth of Rs.500 crore or more, or turnover of Rs.1000 crore or more or net
profit of Rs. 5 crore or more during any financial year.
·
Duties of Director:
o Director to
act in accordance with AOA.
o A director
of a company shall 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, its employees, the shareholders, the community and for the
protection of environment.
o A director
of a company shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.
o A director
of a company shall not involve in a situation in which he may have a direct or
indirect interest that conflicts, or possibly may conflict, with the interest
of the company.
o A director
of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates
o A director
of a company shall not assign his office and any assignment so made shall be
void.
·
Significant provisions related to directors:
o Restrictions for directors:
Prohibition on Forward Dealing in
securities:
No director or Key Managerial Personnel shall buy in the company, or in
its holding, subsidiary or associate company, A right to call for delivery at a
specified price and within specified time.
Prohibition on insider trading of
securities:
No person including the director or key managerial personnel shall enter
into the act of insider trading.
o Loan to directors:
ü No company
whether public or private can give any loan or provide any security or
guarantee in connection with a loan to a Director or any other person in whom
he is interested, except by way of passing a special resolution.
ü The
requirement for permission of Central Government for giving loan to Director.
ü The
exemption given to loan given, guarantee or security provided by any holding
company to its subsidiary has been dispensed with.
o Related Party Transactions:
Apart from existing, new
related party transactions for which Board approval will be required:
ü Selling or
otherwise disposing of, or buying, property of any kind.
ü Leasing of
property of any kind
ü Appointment
of any agents for purchase or sale of goods, materials, services or property
ü Appointment
of any related party to any office or place of profit in the company or its
subsidiary company or associate company.
ü Contract
for underwriting the subscription of securities or derivatives thereof.
·
Disqualification of directors:
A person shall not be eligible for
appointment as a director of a
Company if:
o He is of
unsound mind and stands so declared by a competent court.
o He is an
undischarged insolvent.
o He has
applied to be adjudicated as an insolvent and his application is pending.
o He has
convicted by a court of any offence, whether involving moral turpitude or
otherwise and sentenced in respect thereof to imprisonment for note less than 6
months and a period of 5 years has not elapsed from the date of expiry of the
sentence.
Provided that if a
person has been convicted of any offence and sentenced in respect thereof to
imprisonment for a period of seven years or more, he shall not be eligible to
be appointed as a director in any company.
o An order
disqualifying him for appointment as a director has been passed by a court or
Tribunal and the order is in force.
o He has not
paid any calls in respect of any shares of the company held by him, whether
alone or jointly with others and 6 months have elapsed from the last day fixed
for the payment of calls.
o No person
shall be appointed as a director of a company unless he has allotted a Director
identification Number.
For
more updates, contact CS Neha Seth at csnehaseth@gmail.com or
call us at 9871903449
No comments:
Post a Comment