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SUDHIR KOCHHAR CLASSES- COMPANY LAW-DIRECTORS

Concept of DirectorA company in the eyes of the law is an artificial person. It has nophysical existence. It has neither soul nor a body of its own. As such, itcannot act in its own person.The directors are the brain of a company. They occupy a pivotal

position in the structure of the company. They are in fact themainspring of the company.

1. What do you mean by Director?

Ans: Definition

Section 2(13) of the Companies Act, 1956, Director includes any personoccupying the position of director, by whatever name called. The important factor todetermine whether a person is or not a director is to refer to the nature of the officeand its duties. Thus a director may be defined as a person having control over thedirection, conduct, management or superintendence of the affairs of the company.

This definition is based purely on the functions of director. Accordingly, a person is adirector if he performs the normal functions of a company director. The Act providesno further guidance on this score.

There are 2 types of directors: full tie directors and part time directors. Fulltime directors are full time employees of the company and are variously designatedas managing director, whole-time directors, executive director, technical director.Etc. Part Time Directors who are professionals, for their livelihood, do not dependone company; but serve on the Board of Directors of a large number of companies.

Only individuals can be directors- No body corporate,association or firm can be appointed director of a company.

Only an individual can be so appointed. Section-253

The supreme executive authority controlling the management and affairs of acompany vests in the team of directors of the company, collectively known as itsBoard of Directors. Although the Board comprises individual directors, yet the actionsand deeds of directors individually functioning cannot bind the company, unless aparticular director has been specifically authorised by a Board resolution to dischargecertain responsibilities on behalf of the company.Despite the importance of the office of director in a company, the Companies Act,1956 does not contain an exhaustive definition of the term director.Section 2(13) of the Act contains an inclusive definition of the term director includesany person occupying the position of director, by whatever name called.

In view of the foregoing, the term directors may be defined as individuals who,collectively as a team, known as the Board of Directors of the company, direct,control and manage the business and affairs of the company. A director is a personappointed to perform the duties and functions of director of a company in accordancewith the provisions of the Companies Act, 1956. A person may be a deemed director,if he occupies the position of director of a company, irrespective of his designation.

COMPANY LAW-PROFESSIONAL STUDIES, ICSI, ICAI, ICWA, MBA. 1

7/29/2019 Company Law Directors

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SUDHIR KOCHHAR CLASSES- COMPANY LAW-DIRECTORS

Maximum/Minimum Number of Directors in a Company

Section 252 Minimum No. of directors

PUBLIC COMPANY

Company Having share Capital 5 crores and atleast 1000small shareholders (SS)- Atleast 3 Directors and one of thedirectors may be representative of small shareholder.

Others- Atleast 3 Directors

OTHER COMPANIES (Including Private Companies)

Atleast 2 Directors

Every public company is required to have a minimum of three directors.Every other company is required to have at least two directors

Small shareholders may elect one among themselves to be smallshareholders directors in such manner as may be prescribed.

Small shareholders means shareholder holding shares the nominalvalue of which do not exceed Rs.20,000.

As per Section 581O of the Act, every Producer company must have at leastfive directors and not more than fifteen directors. However where an interState Co-operative Society is incorporated as Producer company, suchcompany may have more than fifteen directors for a period of one year fromthe date of its incorporation as Producer company.

2. State the provisions of the companies Act, 1956 relatingto the minimum and maximum number of directors that acompany can have. How can the number of Directors maybe increased or reduced?

Ans:

The maximum number of directors of a public company are provided in its articles of association. Inorder to increase or reduce the number of its directors, the company is required to pass an ordinaryresolution in general meeting but such increase must be within the limits fixed in that behalf by itsarticles (Section 258).

Any increase in the number of directors beyond twelve requires approval of the Central

Government. If the Central Government does not approve the increase, such increase beyondtwelve shall not have any effect (Section 259).

COMPANY LAW-PROFESSIONAL STUDIES, ICSI, ICAI, ICWA, MBA. 2