MANAGEMENT OF A COMPANY

By S. Nishanth (310) Shiva Krishna Reddy(312) V. Asha Jyothi(315) Chandra Kanth(321) S. Vinay Kumar(329) Ravi Teja(343)

CONTENTS

Directors: Appointment, Qualification, Disqualifications Managing Director

DIRECTOR

A Director (section-2[13]) refers to any person occupying the position of director, by whatever name the person.

Directors are those who perform the directing function irrespective of the label attached to them.

QUALIFICATION SHARES:

The act does not impose any share qualification on directors. If the director does not acquire qualification shares within two months of his joining office in this capacity, he/she is liable up to a fine of Rs. 5500 per

day till he/she continues to act as director.

APPOINTMENT OF DIRECTORS
Appointment of directors can be done in two ways. They are:
1.

Appointment of first directors

2.

Appointment by the company

Methods of appointment of first director

There are three methods of appointment of first director 1. By naming in the Articles of the company ( under section 266 ) 2. By the subscribers of the Memorandum of the company If the Article empowers the subscribers of the Memorandum to appoint the first director Such appointment is done in accordance with Regulation 64 of Table A of

Schedule I
3. If the Article is silent about the matter then subscribers of the Memorandum of the company who are individuals are deemed to be directors of company,

and they hold office till the directors are appointed in the general meeting
(under section 255 )

Appointment by the Company:

According to section-255 and 256, in a public company or a private company subsidiary of a public company, two-thirds of the total numbers of Directors are appointed by the shareholders and the remaining one-third is appointed in accordance with the manner prescribed in Articles failing which, the remaining one-third of the Directors must be appointed by the shareholders. The Articles of a public company or a private company subsidiary of a public company may

provide for the retirement of all the Directors at every AGM.

Re-appointment of retiring Directors:

When a director retires, he/she can be re-appointed or another person can be appointed as director. The share holders in their general meeting can also resolve that the vacancy may not be filled.

The director will not be deemed to be re-appointed under any of the following
conditions: A resolution for his re-appointment has been specifically lost.

The director expresses his inability to continue as director.

He is not qualified for appointment A specific resolution is required for the appointment of that director

A single resolution for appointing more than one director was passed in earlier
meeting, in contravention of section-263

DISQUALIFICATION OF DIRECTORS

As per Section 274(1), a person shall not be capable of being appointed director of a company under the following circumstances:

If he is of unsound mind If he has applied to be adjudicated as an solvent and the application is pending If he has been convicted by a court for any offence and sentenced to imprisonment for not less than six months and a period of five years

If he has not paid any call in respect of shares of the company held by him and six months have elapsed from the last day fixed for the payment of the call

If there is an order qualifying him for appointment as director has been passed by a court in pursuance of Section 203

POWERS OF A DIRECTOR

General powers General powers of a director are described in section 291 in companies act(1) Directors are not empowered to take action on issues that stipulated to be the purview of the general meeting of the company, or counter to regulations contained in the act or the memorandum in the articles of the company. Company has adopted table A, Regulation 70 provides that the business of the company shall be managed by the directors who may exercise all the powers of the company, with the proviso that this authority is subjected to the PROVISIONS OF THR ACT.

CONTINUED

Powers of Board Meetings: The power to buy back the companys shares under section 77A The power to burrow monies other than on debentures. However a banking company can burrow only from other banking companies or from the reserve bank of India, the State bank of India or any other banks established by or under any act[explanation1 to section 292(1)] Restrictions on powers of board: Sell, lease, or otherwise dispose of the whole or substantially the whole, of the undertaking of the company, or where the company owns more than 1 undertaking, of the whole, or substantially the whole of any such undertaking. Remit or give time for the repayment of any debt due to a director except in the case of renewal or continuous of an advance made by a banking company to its director in the ordinary coarse of business.

MANAGING DIRECTOR
Managing director means a director who is entrusted with substantial powers of management which would not otherwise be exercisable by him. Every public company(including a deemed public company) or a private company having a paid up capital of Rs. 5 crore must have a managing director or whole time director or manager.

MODE OF APPOINTMENT

According to Section 2(26) a managing director may be appointed by virtue of any of the following modes: An agreement with the company or A resolution passed by the company in a general meeting or A resolution passed by the Board of Directors or The Memorandum or Articles of Association The application for approval must be made to Central Government in Form 25 A within 90 days of appointment. According to Section 316 the number of managing directorships cannot exceed two.

DISQUALIFICATIONS OF MANAGING DIRECTOR

Section 267 provides that no company can appoint or employ or continue the appointment or employment of any person as its managing or whole time director who: Is an undischarged insolvent, or has at any time been adjudged an insolvent. Suspends, or has at any time suspended, payment to his creditors or makes, or has at any time made, a composition with them. Is, or has at any time been, convicted by a Court in India of an offence involving moral turpitude.

ROLE AND TERM OF MANAGING DIRECTOR

It is stipulated that a managing director shall be the member secretary of the Board of Directors and shall function concurrently as an executive director or Chief Executive Officer(CEO) of the company. No company can appoint or employ any individual as its managing director for a term exceeding five years at a time. However, a person may be re-appointed or his term of office further extended by further periods not exceeding five years. Such re-appointment or extension cannot be sanctioned earlier than 2 years from the date on which it has come into force.(Section 317)

MANAGER
According to Section 2(24), manager means an individual who has the management of the whole or substantially the whole of the affairs of a company. He is subject to the superintendence, control and direction of the Board of Directors. Manager includes a director or any other person occupying the position of a manager, by whatever name called, and whether under a contract of service or not.

WHO CAN BE A MANAGER?

According to Section 384, only an individual can be appointed as a manager of a company. No company shall employ a firm or body corporate or association as its manager. The section clearly states that no company shall appoint or employ, or continue the appointment or employment of, any person as its manager who: Is an undischarged insolvent, or has, at any time within the preceding 5 years, been adjudged an insolvent or Suspends, or has at any time within the preceding 5 years suspended, payment to his creditors, or makes, or has at any time within the preceding 5 years made, a composition with them. Is, or has at any time within the preceding 5 years been, convicted by a court in India of an offence involving moral turpitude.

COMPARISON BETWEEN MANAGING DIRECTOR AND MANAGER

MANAGING DIRECTOR

MANAGER

A managing director is entrusted with substantial powers of the management. A company may have two managing directors. A managing director must be a director A managing director is appointed by the directors from among themselves and appointed either under an agreement or by a resolution of the Board of general meeting.

A manager has the management of the whole, or substantially the whole of the affairs of a company. A company can have only one manager as he is vested with the management of the whole or substantially the whole of the affairs of the company. A manager may or may not be a director. A manager is usually appointed by the Board of directors.