Define a director of a company and explain the provisions of the

Define a director of a company and explain the provisions of the Companies Act, 2013 regarding the appointment of director of a company.

Explain the provisions and procedure as laid down in the Companies Act, 2013 for removal of company directors.

Describe the different provisions of the company law as to appointment and removal of company directors.

Ans.

MEANING AND DEFINITION OF DIRECTOR

A director is one person who is responsible for directing, governing or controlling the policy or management of a company.

According to Section 2(34) of the Companies Act, 2013, “Director means a director appointed to the Board of a company.

Directors are collectively called as ‘Board of Directors’. More precisely we say that if company is the body their directors are the brain of company and the company can do his acts only through them.

Directors are described as:

(i) Agents: The company carried out through directors and there is a relationship of principal and agent between the company and directors. They must conduct the business with reasonable care and diligence within th6 limits given in Memorandum and Articles of Association. I

(ii) Managing Partners: The directors are elected representatives of the shareholders and therefore they are in the position of managing partners.

(iii) Trustees: It is the duty of the directors who are trustees for the company to deal in all matters of business with which the company is concerned for the benefit of the company and not with regard to their own particular interests.

APPOINTMENT OF DIRECTORS

Only individuals can be appointed as directors. If an individual competent to contract and who holds minimum qualification thus may be appointed as directors of a company.

Directors may be appointed in following ways:

1. First directors (or subscribers to the Memorandum)

2. Appointment by shareholders in general meeting.

3. Appointment of directors by the Board.

Above can be described as under-

(1) Appointment of First Directors: The first directors of a company are appointed by the subscribers to the memorandum and their names are mentioned in the articles.

If the articles neither contain the names of the first directors nor make any provision for appointing them, the subscribers to the memorandum, who are individuals shall be deemed to the first directors.

(2) Appointment by Shareholders in General Meeting: Only 1/3 of the total directors can be permanently appointed. The rest 2/3 of the directors shall be rotational directors i.e. liable to retire by rotation and shall be appointed by the shareholders in general meeting. Out of rotational directors. 1/3 will retire every year in rotation.

No provision in this respect is given with regard to the companies which is not a public company or which is not a private company or which is not a subsidiary of public company.

The retiring directors shall be eligible for re-election. The vacancies thus created must be filled up at the same meeting but if the company fails to do this the meeting shall be deemed to have seen adjourned for a week. If at this next meeting also the places are not filled up, the retiring directors shall be deemed to have been re-elected automatically unless.

(a) If it resolved not to fill the vacancy; or (b) a resolution for his re election is lost, or (c) he has expressed in writing his unwillingness to continue, or. (d) he had incurred a disqualifications.

(3) Appointment of Directors by the Board: In following circumstances the Board of Directors may appoint directors:

(i) Casual Vacancies: If due to death or resignation the office of a director fall vacant the same may be filled by the Board of directors in the manner given in the Articles.

(ii) Additional Directors: The Board of Directors can also appoint additional director as per the regulations given in Articles but for a term, to the date of next annual general meeting.

(iii) Alternate Directors: The Articles may empower the Board to appoint an alternate director during the absence of a director for more than three months.

(4) Appointment of Directors by the Central Government: To safeguard the interests of the company or its shareholders, or the public the Central Government may appoint.

REMOVAL OF DIRECTORS

The following authorities may remove a director from his office-

1. By the company, and

2. By the Tribunal.

Above can be discussed as under –

(1) Removal of Directors by the Company – Section 169 of the Companies Act, 2013 says that a company may be a special notice and by ordinary resolution remove a director (not being appointed by the Tribunal under Section 242). A reasonable opportunity of being heard shall be provided.

Following are the exceptions of this section –

(i) It does not apply if a director appointed by the Central Government.

(ii) If a director is holding office for life in a private company.

(iii) If a company has opted to elect 2/3rd of its directors by the proportional representation system.

The provisions of Section 169, equally apply to all companies whether public or private.

(2) Removal by the National Company Law Tribunal (NCLT) – If NCLT is convinced of corruption and mismanagement, on the part of any director, it may terminate set aside or modify any agreement.

Any person so removed is not eligible for the directorship or managerial post for a period of 5 years. But this condition can be exempted with the approval of the Central Government.