Unit - 2 Board of Directors

By Radhika

Who is Director?

Types of Directors

• Director 

• Inside director 

• Outside Director 

• Executive director

• Non-Executive Director

• Shadow director

Definition of Director

• Sec. 2(26) “Managing Director” means

“A director who, by virtue of an agreement with the co. or of a resolution passed by the co. in general meeting or by Board of directors or, by virtue of its memorandum or articles of association, is entrusted with [substantial powers of management] which would not otherwise be exercisable by him, & includes a director occupying the position of a managing director, by whatever name called:”

Cont.

• Provided that,– Power to do administrative acts– Common seal– To draw or endorse any cheque– To draw or endorse any negotiable instruments– To sign any certi. Of share– To direct registration of transfer of share,

Will not be deemed to be included within substantial powers of mgt.

Personality Traits of a Director

1. The Willingness to Do More

2. The Ability to Adapt and Adjust

3. Diligence and Persistence

4. Creativity and Innovation

5. Adept Learning and Researching Skills

6. Keen Observation

7. Competitive Drive

8. Communication Skills

9. Effective Leadership Qualities

10. Kindness and Strong Ethics

Appointment of Director

• First Director by AoA

• By Company

• By Directors

• By Third Parties

• By court of law

• By Central Government

Power of DirectorSection 292(1) of the Companies Act, 1956 provides that the Board

of directors of a company shall exercise the following powers on behalf of the company and it shall do so only by means of resolution passed at meeting of the Board:

(a) the power to make calls on shareholders in respect of money unpaid on their shares;

(aa) the power to authorize the buy-back referred to in the first provision to clause

(b) the power to issue debentures;

(c) the power to borrow moneys otherwise than on debentures;

(d) the power to invest funds of the company; and

(e) the power to make loan.

DUTIES of Directors1. To file return of allotment

2. Not to issue irredeemable preference share after 20 Years

3. To disclose interest

4. To disclose receipt from transfer of property

5. To disclose receipt of compensation from transferee of shares

6. Duty to attend Board meetings

7. To convene statutory, Annual General meeting (AGM) and also extraordinary general meetings

8. To prepare and place at the AGM along with the balance sheet and profit & loss account a report on the company’s affairs including the report of the Board of Directors

Cont.9. To authenticate and approve annual financial statement

10. To appoint first auditor of the company

11. To appoint cost auditor of the company

12. To make a declaration of solvency in the case of Members. voluntary winding up

• General Duties:

LIABILITES of Director

1. Liability to the company– Breach of fiduciary duty:– Ultra vires acts:

– Negligence:– Mala fide acts:

1. Liability for breach of statutory duties

2. Liability for acts of co-directors

3. Criminal liability

Legal Position of Director

• Director as an Agent

• Director as Managing officer

• Director as a Trustee

• Director as an Employee

• Director as Whole Time Director or Managing Director