Additional disqualification of directors of a private corporation – ** A private corporation may, by its articles, provide for appointments as directors in addition to the exclusions mentioned above. A transaction of the directors that is beyond their powers but falls within the powers of the corporation may be ratified by resolution of the corporation or even by acquiescence – Bhajekar v. Shinkar [1934] 4 Case Comp. 434 (Bom.). In Ray Cylinders & Containers v. Hindustan General Industries Ltd, (2001) 103 Comp Case 161 Del, the Court held that directors are representatives of the Institute and not of its individual members, unless that relationship arises from the particular circumstances of the case. Similarly, the authorization granted to bring an action against a company cannot be equated with an authorization against the directors. In York & North Midland Rly Co. v. Hudson, (1853) 61 Beav. 485 The Court held that “directors are persons chosen to direct the affairs of the corporation for the benefit of the shareholders. It is a trusted office which, if they take it, is their duty to accomplish it fully and completely.
In a company, the shareholders are the owners because they contribute capital to the operation of the company. But directors are the person responsible for managing the corporation for the purposes for which it was founded. Only certain decisions of paramount importance are made by the shareholders, while the directors are responsible for the entire day-to-day management of the company. The rule that agents must disclose their personal interests to the client. The same rule applies to administrators. Directors must disclose their personal interests, if any, in each transaction of the Corporation. It should be noted that of the top 100 companies in the United States, 79 have set a mandatory retirement age for non-employee directors. In fact, only 33 of these corporations allow the corporation`s board of directors or board committees to make exceptions to this requirement. Most require directors to retire no later than age 72.
In many cases, employee directors (in some scenarios, with the exception of the CEO) leave the Company`s Board of Directors at the same time as they leave the Board. There are several roles that directors play in a company, which we will discuss in this article. Since a company is an artificial person in the eyes of the law, it has no physical existence. Neither a sole, nor your own body. So there must be an agency of people to control and manage it. The people who do this and form an agency are called a board of directors. They are responsible for the management of the case. The position of directors has always remained complicated in nature. Now that we know that a corporation is essentially directed and controlled by the directors, the next question that arises in our minds is: If the directors run the corporation, who governs and then manages the directors? Is there a law? Who are they responsible for and what legal status do they have in a company? Well, all these questions and their answers are discussed in this article itself.
may appoint two or more directors by a single decision. A business manager is a professional person hired by the company to manage and manage his business. A director is defined in section 2 (34) of the Companies Act 2013 as a person (director) appointed to the board of directors of a company. No artificial person or entity can be selected for the position of director in a company. Only an individual may be appointed as a director of a corporation. Since the Companies Act does not provide a precise definition of the legal position of directors in a corporation, they are called trustees, agents, managing partners, etc. in one situation or another. Therefore, depending on his situation, a director of a company fulfills the following roles: The Companies Act does not require any professional qualification to be appointed as a director. However, if it is mentioned in the company`s AOA, the same must be followed. In addition, the director can only become a shareholder if he wishes to do the same wholeheartedly. In the absence of any statutory provisions, the directors of an independent private company have the right to proceed to removal under Article 284 [now Article 169] (i.e.
by decision of the general body) – S. Labh Singh v. Panaser Mech. Works (P.) Ltd. [1987] 61 Case Comp. 618. As the name suggests, non-executive directors are the exact opposite of executive directors. They are not involved in the day-to-day affairs of the company.
They do not have leadership positions in the organization. But they have an independent voice that can give the board their own perspective. If the directors do not hold a general meeting on time, can they continue until the meeting? – The Delhi High Court held in B.R. Kundra v Motion Pictures Association [1976] 46 Comp. Cases. 339 that directors may not extend their term of office if they do not hold a meeting in a timely manner. Directors who retire on a rotating basis must resign no later than the last day on which a general meeting should have been held. However, retiring directors may be re-elected. If there has been a death of the Director or if he has suddenly resigned from his appointment, the Director ad hoc takes over. The outstanding Board of Directors appoints this individual. Until the original Director takes this place, these ad hoc Directors shall continue to sit in their place.
Directors also play the role of trustee in a company. Because he looks at and manages any work that might be in the interest of the company. A trustee is someone you can trust for the assets of the business. Not only that, a fiduciary would always act in a way that could lead to the growth of the business. In addition, a trustee always exercises certain powers, such as accepting or rejecting transfers, allocating shares, purchasing, etc. Each director fulfills such roles in the company and can therefore be called a trustee. In Dale & Carrington Investment Co. Pvt.
Ltd. v. P.K. Prathapan, (2004) 54 SCL 60-1, the Court held that the fiduciary duty imposed on directors requires them to act in the best faith, diligence, skill and diligence and in the best interests of the corporation they represent. If any person or director of a company fails to comply with any of the provisions of section 152 or section 155, that person or director of the company shall be liable to a penalty of up to fifty thousand rupees and, in the case of persistent default, to an additional penalty, which may be up to five hundred rupees for each day after the first day, where such non-performance persists [Section 159, as amended by the Companies Amendment Act 2019] (a) Any candidate intending to be appointed as a director of an existing company must submit an application electronically to the central government for the allocation of a Director Identification Number (DIN) together with the fees provided for in the Companies Rules (registrars and fees). 2014. However, for proposed directors who have not approved the DIN, the contact information for up to three directors on Form INC-32 (ePIS) and the DIN may be assigned to up to three proposed directors on Form INC-32 (eCIP). The appointment of an additional director is intended to enable companies to use the services of a person who is otherwise qualified to work on the management body and whose presence on the management body is desirable in the interests of the company until the date of the next scheduled general meeting.
This provision is not intended to allow the company to retain one person as an additional director on its management body for an indefinite period by not holding the general meeting. Article 260 [now § 161] must therefore necessarily be read in conjunction with Article 166 [now § 96], which provides that the general meeting shall be held annually and that no more than fifteen months may elapse between the date of a general meeting and the following – P. Natarajan v. Central Government [2004] 51 SCL 76 (Mad.). Each listed company must have at least one third of its total number of directors as an independent director under section 149(4) of the Companies Act 2013. Certain provisions and requirements are set out in Rule 4 of the Corporations (Appointment and Qualification of Directors) Rules, 2014. Companies that fall under this rule must appoint more independent directors. This is due to the composition of the audit committee. Independent directors are not entitled to remuneration. They only receive attendance fees and reimbursement of board meeting fees and profit-related commissions. In order to be able to make an impartial decision, the concept of independent directors was introduced.
Independent directors bring stability and accountability to the onboarding process. However, the requirements relating to the deposit of the amount do not apply in the case of the appointment of an independent director or a director recommended by the Nominating and Compensation Committee, if any, in accordance with subsection (1) of section 178, or a director recommended by the board of directors of the corporation, in the case of a corporation that is not required to form a nominating and compensation committee. Under section 149 of the Companies Act 2013, a maximum of 15 directors may be appointed. Any temporary vacancy of an independent director must be filled by the Board of Directors at the earliest, but no later than immediately at the next meeting of the Board or three months after the date of the vacancy, whichever is later: In Re.
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