Directors

By Soma Giri

DEFINTION OF DIRECTOR
The supreme executive authority in the control of a company resides in persons known as board of directors. Section 253 of the act provides that only an individual, and not a body corporate, association or firm, shall be appointed as director Section 2(13) defines a director as including any person occupying the position of director by what ever name called Also be defined as a person having control over the direction, conduct, management or superintendence of affairs of a company

TYPES OF DIRECTORS
Inside Directors Outside Directors Professional Directors Nominee Directors Special Directors or Executive Directors Independent Directors Interested Directors Managing Directors

Inside Director
An inside director is a member of the Board of Directors of a corporation who is also a member of the corporation's management, almost always a corporate officer For example, a Chief Executive Officer who is also Chairman of the Board would be considered an inside director A Chief Financial Officer, Executive Vice President, or other corporate executive who is a member of the board is also an inside director Inside directors commonly enjoy seats on boards because they own equity in the company

Outside Director
A non-executive director (NED, also NXD) or outside director is a member of the board of directors of a company who does not form part of the executive management team He or she is not an employee of the company or affiliated with it in any other way They are differentiated from inside directors, who are members of the board who also serve or previously served as executive managers of the company

Nominee Director
Person who acts as a non-executive director on the board of directors of a firm, on behalf of another person or firm such as an bank, investor, or lender Also, a resident in a tax haven who lends his or her name to a non-resident as a trustee on the board of an offshore firm in that haven Typically there is no shareholding requirement for the nominee director but, if the by laws of a firm impose a share qualification, he or she must obtain them within the specified period Some jurisdictions allow a firm to be named as a nominee director of another firm. Also called straw man

Executive Director
An executive director is the senior manager of an organization, company, or corporation The position is comparable to a chief executive officer (CEO) or managing director. An executive director is remunerated for his work The role of the Executive Director is to design, develop and implement strategic plans for their organization in a costeffective and time-efficient manner

OBJECTIVE
To establish guidelines to be used by nominating

committees in selecting the most to the Board

Qualified persons to nominate as candidates for election

DIRECTOR INDENTIFICATION NUMBER (DIN)

to 266G of Companies Act contain the provisions for DIN

As such, all the existing directors and individuals intending to

become directors have to obtain DIN within the prescribed time frame and in the manner as prescribed
Central Govt. has prescribed Director Identification Number

Rules, 2006, governing Director Identification Number

QUALIFICATIONS OF DIRECTORS
The companies Act , 1956 do not lay down any qualifications for a person to be appointed as a director of a company Must be willing to attend regular and special meetings of the Board national, state and other meetings of organizations Shall not use, or cause to be used, his position as Director to further any political ambitions

Shall not have been found guilty of a felony offence within the last five years Shall not have had a judgement ordered against him or her in a civil claim based on fraud, theft, misrepresentation
Directors are individually, and collectively as a board, responsible for the fiduciary and legal implications of Board decisions

Directors must avoid conflicts of interest, observe high standards of integrity and ethics, and maintain the confidentiality and security of board deliberations
Directors are expected to be diligent in preparing for and attending board meetings, contribute positively to board discussions and work in harmony with other board members

DISQUALIFICATIONS OF DIRECTORS
SECTION 274 LAY DOWN: A person shall not be capable of being appointed director of a company, if A person found by the court to be of unsound mind, An un-discharged insolvent; A person who has applied to be adjudicated as an insolvent and his application is pending;

A person who has not paid any call in respect of the shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last fixed for the payment of the call; A person who has been disqualified by the court under sec 203,which empowers the court restrain fraudulent persons from managing the companies, A person who is already a director of a public company, under certain circumstances specified under sec 203.

Appointment of Directors

First Directors Appointment of directors by company. Appointment of directors by directors. Appointment of directors by third parties. Appointment of proportional representation. Appointment of directors by central government.

Removal of Directors
Share holders. Central Government. Removal by company law board.

Who are Independent Directors (nikitha)

Is part from receiving directors remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its senior management or its holding company, its subsidiaries and associated companies; is not related to promoters or management at the board level or at one level below the has not been an executive of the company in the immediately preceding three financial years; Is not a partner or an executive of the statutory audit firm or the internal audit firm that is associated with the company, and has not been a partner or an executive of any such firm for the last three years.

 This

will also apply to legal firm(s) and consulting firm(s) that have a material association with the entity
company. This should include lessor-lessee type relationships also; and

Is not a supplier, service provider or customer of the

Is

not a substantial shareholder of the company, i.e. owning two percent or more of the block of voting shares.

Roles of Board of Directors

Responsibilities of Directors
Ensure Effective Organizational Planning

Ensure Adequate Resources

NUMBER OF DIRECTORS
According to Section 252 of the Companies Act, 1956 every public company shall have at least three directors. Every private company shall have at least two directors . Articles of Association of companies usually provide for the minimum and maximum number of directors for its board. Section 258 of the Act lays down that a company in general meeting may by ordinary resolution, increase or reduce the number of its directors within the limits fixed in that behalf of articles

Thank You