Unit 5

Company Management & Operations

Introduction
A company may be defined as an artificial person recognized by law, with a distinctive name, a common seal, a common capital comprising transferable shares and having a perpetual succession. In a company there are four key people who are responsible for managing and administering the company policy and issues. These people are Director, Managing Director, Company Secretary and a Manager.

Director
As a company in the eyes of law is an artificial person, it can not act on its own. It can act through some human agency i.e. Directors. In todays world the role of company management has increased. The role of chief authority of the company is very essential because it gives the direction to the functioning of company. Among all the management people the director is the person whose role is very important. Director is a person who gives proper direction to company.

Definition of a Director
Director include any person occupying the position of a director, by whatever name he is called. A director may be defined as a person having control over the direction, conduct, management of the affairs of a company. The important factors to determine whether a person is or not a director is to refer to nature of his duties. If he performs the function of a director, he would be termed as a director in the eyes of law, even though he may be named differently.

Roles of a director
As an Agent As an Employee As an Officer As an Trustee

As an Agent
A company is an artificial person, acts through directors who are elected by representatives of shareholders. Directors are agents of a company in the eyes of a law. They act and regulate the relationship and functioning of a company of behalf of it. They are personally not liable for contracts which they make for the company, provided they act within scope of their authority and do not make contract with personal name.

As an employee
Although directors are agents of a company, they are entitled to get benefits and privileges like an ordinary employee. A director can hold salaried office or employment of a company. A director can be in whole time or part time employment of the company.

As an Officer
For certain matters under the laws, the directors are treated as officers of the company. They can hold office till the permissible period of their working.

As an Trustee
Directors are trustees of 1. The companys money and property 2. Of the powers given by company board to them. The directors are trustees of companys money and property in the sense that they are responsible for all the companys money and property. They are also responsible to return companys money and property if they have improperly paid away or transferred.

Directors are trustee of the powers entrusted to them in the sense that they must exercise their powers honestly and in the interest of the company and the shareholders, and not their own interest.

Qualification of a director
A director must 1. Be an individual 2. Be able to complete the contract 3. Hold a share qualification if so required by articles. A director must hold specific number of share known as qualification of shares. The qualification of director shall be holding at least one share in the company. If a director does not hold any share, he must obtain such shares within 2 months of his appointment.

Disqualification of director
The following persons are disqualified for appointment as director of a company: 1. A person of unsound mind 2. An undischarged insolvent 3. A person who has applied to be adjudicated as an insolvent and his application is pending 4. A person who is disqualified for appointment as director by an order of the courts in case of fraud in relation to the company.

Appointment of Director
The following are the ways for the appointment of directors. 1. First director 2. Appointment of director by the company 3. Appointment of director by Board of Director 4. Directors by third party 5. Proportional representation 6. Directors appointed by central government

First director
The articles of a company usually name the first directors by their respective names If the directors are not named in the Articles, the name and number of first directors are determined in writing by the subscriber of Memorandum. If the first directors are not appointed in the above manner the subscribers of the memorandum who are individuals become directors of the company. They shall hold office until directors are duly appointed in the first AGM.

Appointment of directors by the company

Directors must be appointed by the shareholders in general meeting. In case of public ltd. company at least 2/3rds of the total number of directors must be appointed by the company in general meeting. The Articles may provide for the retirement of all the directors at an annual general meeting. First director will hold office until new director is appointed.

Appointment of directors by board of directors

(a) Additional directors: Any additional director appointed by board of directors shall hold office only up to the date of AGM of company. (b) Casual vacancy: By casual vacancy means any vacancy which occurs by reason of death, resignation, disqualification or failure of an elected director to accept the office for any reason other then retirement by rotation. Such casual vacancy may be filled by the Board of Directors at meeting of Board. A person appointed in a casual vacancy shall hold office only up to the date up to which the director in whose place he is appointed.

Continue.
(c) Alternate director: An alternate director can be appointed by Board if it is authorized by resolution passed by the company in the general meeting. He shall act for a director called the original director during his absence for a period of at least 3 months from the state in which board meetings are ordinarily held.

Directors by third party

The articles under certain circumstances give power to debenture holders or other creditors e.g. banking company who have advanced loans to the company. The number of directors so appointed shall not exceed 1/3rd of the total number of directors and they are not liable to retire by rotation.