Power, function and duties of directors and managing director

Director
A company in terms of law is an artificial person not a physical person. It can therefore perform its actions through its agents or the person nominated by it to perform such actions. The person who act on behalf of a company are called its directors.

Board of directors
According to section 252(3) of the act, the director of a company are collectively referred to as the Board of director or Board of the company. The board of director plans the companys policy, control its management and makes all important decision..

Number of the director

According to section 252 of the companies act every public company, shall have at least 3 directors and every other company shall have at least 2 director.

Qualification of director
The rule governing the appointment of directors of a company are as follow: 1. Qualification shares:
A director must acquire the qualification shares within 2 months of his appointment as a director. The value of qualification shares shall not exceed Rs. 5000. a director may not accept his qualification shares as a gift from any person who has an interest in the company.

 If the article of the company so permit a director of a company may hold his shares jointly with any other person. If after the expiry of the said period of 2 months any person acts as a director of the company when he does not hold the qualification shares he can be punishable with a fine of Rs. 500 per day. The above provision do not apply to a private company which is not a subsidiary of a public company nor do they apply to the director who have been appointed by central government.

2. Written consent: According to sec 266, a person can be appointed the director of a company when:
He has signed and filed with the registrar a consent in writing to act as a director. He has signed the memorandum for shares not being less in number or value than his qualification shares. He has taken his qualification shares from the company and paid. He has made and filed with the registrar an affidavit to the effect that the qualification shares are registered in his name.

3. Only individuals can be Director: No corporate body, association or firm shall be appointed director of a company and only an individual shall be so appointed.

Disqualification of directors
The person has been found to be of unsound mind by a court of competent jurisdiction. The person is an insolvent. The person has been convicted by a court of an offense and sentenced to imprisonment of not less than six months. The person has not made the payment of calls within 6 months after such calls made.

Restriction on the number of the directorship

No person can hold office as a director at one time in more than 15 companies. In calculating the number of companies of which a person may be a director the following companies shall not be included:
A private company which is neither a subsidiary nor a holding company of a public company. An unlimited company. An association not carrying on business for profits or which prohibit the payment of dividend. A company in which such person is only an alternate director.

 According to companies act 1965 now there is no restriction on the age limit of any director. Penalty:
any person who hold office as a director of more than 15 companies shall be punishable with fine which may extend to 50000 rupees in respect of each of those companies after first 15.

Director identification number

Every individual intending to be appointed as director of a company shall make an application for allotment of director identification number to the central government along with the fees prescribed. The central government shall within 1 month from the receipt of the application allot a DIN number to the applicant.

 Every existing director shall within one month of the receipt of DIN, intimate his DIN to the company or all companies wherein he is a director. Every company shall within 1 week of the receipt of intimation furnish DIN of all of its director to the registrar of companies. Every person or company while furnishing any return, information as are required to be furnished under this act shall quote the DIN in such return, information.

 If any individual contravenes any of the provision of those sections, every such individual or director shall be punishable with fine which may extend to Rs.5000.

Appointment of director
A director may be appointer in any of the following ways: 1.By the signatories of memorandum of association:
the first director of a company are appointed by the promoters and their names are mentioned in the articles.

2. By the shareholders in the general meeting:

The tenure of office of the first director is till the first general meeting of the company. The appointment or re-appointment of these directors can only be made, according to the provision of the companys articles, by consensus or voting of the companys shareholders. In case of public company and its subsidiary private company at least 2/3 of the total numbers must retire by rotation. In case of private company all the directors can be permanent.

 At the annual general meeting at which a director retires as aforesaid, the company may fill up vacancy by appointing the retiring director or some other person.

The retiring director shall not be reappointed unless:

A resolution for the reappointment of such director has been put to vote and lost; He is disqualified for appointment;

 the retiring director has by a notice in writing addressed to the company or its BOD express his unwillingness to be so appointed. A special or ordinary resolution Is required for his appointment or reappointment. Appointment by Board of Director: Appointment in case of casual vacancy. Appointment of additional director. Appointment of alternative director.

Appointment by third parties: Banks and other financial institutions. Debenture holders. Vendors. Employees. Appointment by central government: The central government may on application made by 100 members of a company or at least 10 % of its members having the right to vote, appoint as many directors of a company as it may deem fit in the circumstances.

Restriction in respect of appointment

Only individual to be directors. Restrictions in respect of qualification shares. Not being incompetent to hold the office of director. Not being a director of more than 15 companies.