Lecture 1 - Introduction To Directors and Company Administration

Introduction to Directors and
Company Administration
Lecture 1
Teaching Seminar | Corporate Law
Meaning of “Director”
• Section 2(34) of the Act prescribed that “director” means a director
appointed to the Board of a company.
• Section 2(10) of the Companies Act, 2013 defined that “Board of
Directors” or “Board”, in relation to a company, means the collective body
of the directors of the company.
• As per Section 149 of the Companies Act, 2013, the Board of Directors of
every company shall consist of individual only. Thus, no body corporate,
association or firm shall be appointed as director.
Nature of Directorship
• Director as a Trustee of the Company’s Assets
• Director as an Employee of the Company
• Director as an Agent of the Company
• Director as a Managing Partner
• In the words of Bowen, LJ: “Directors are described sometimes as agents, sometimes
as trustees and sometimes as partners. But each of these expressions is used not as
exhaustive of their powers and responsibilities but as indicating useful points of view
from which they may for the moment and for the particular purpose to be
considered”.
Who may be appointed as Director?
• Section 149 of the Companies Act provides that only an individual can be appointed as a
Director.
• Thus, no body corporate, association or firm may be appointed as director of the company.
• The Companies Act, 2013 further does not prescribe any academic or professional
qualifications for directors.
• There is no share qualification imposed by the Act either. Unless the Articles of the Company
specifically provide for the same, a director need not be a shareholder unless he wishes to be
so voluntarily.
• Section 149(3): Every company shall have at least one director who has stayed in India for a
total period of not less than 182 days in the previous calendar year.
Director Identification Number (DIN)
• DIN is a unique Identification Number allotted to an individual who is appointed as a director of a company,
upon making an application in form DIR-3 pursuant to section 153 & 154 of the Companies Act, 2013.
• 153. Application for allotment of Director Identification Number.— Every individual intending to be appointed
as director of a company shall make an application for allotment of Director Identification Number to the
Central Government in such form and manner and along with such fees as may be prescribed.
• 154. Allotment of Director Identification Number.— The Central Government shall, within one month from the
receipt of the application under section 153, allot a Director Identification Number to an applicant in such
manner as may be prescribed.
• Further, Companies (Appointment and Qualification of Directors) Amendment Rules, 2018 lay down further
specifications regarding DIN.
Minimum and Maximum Number of
Directors
• 149. Company to have Board of Directors.— (1) Every company shall have
a Board of Directors consisting of individuals as directors and shall have—
(a) a minimum number of three directors in the case of a public company,
two directors in the case of a private company, and one director in the
case of a One Person Company; and (b) a maximum of fifteen directors:
• Provided that a company may appoint more than fifteen directors after
passing a special resolution: Provided further that such class or classes of
companies as may be prescribed, shall have at least one woman director
Number of Directorship under Section 165
• Maximum number of directorships, including any alternate directorship, a
person can hold is 20.
• The maximum number of public companies in which a person can be
appointed as a director shall not exceed ten.
• For the purpose of counting such directorship in public company,
directorship in private companies that are either holding or subsidiary of a
public company shall be included.
Appointment of Directors
• Section 152(2) provides that every director shall be appointed by the company in general meeting
except for where the Act provides otherwise.
• Section 152(6) provides that unless articles provide for the retirement of all directors at every
annual general meeting, not less than two-thirds of the total number of directors of a public
company shall: (i) be persons whose period of office is liable to determination by retirement of
directors by rotation; and (ii) be appointed by company in general; meeting except where otherwise
expressly provided in this Act.
• Manner of Rotation: Section 152(6)(c) states that “At the first annual general meeting of a public
company held next after the date of the general meeting at which the first directors are appointed in
accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of
such of the directors for the time being as are liable to retire by rotation, or if their number is
neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.”
Deemed re-appointment of a retiring director
• At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing either the retiring
director or a person other than the retiring director.
• Section 152(7) of the Act: (a) If the vacancy of the retiring director is not so filled-up and the meeting has not expressly resolved not to fill the
vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a national holiday,
till the next succeeding day which is not a holiday, at the same time and place.
• (b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to
fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless--
• (i) at that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost;
• (ii) the retiring director has, by a notice in writing addressed to the company or its Board of directors, expressed his unwillingness to be so re-
appointed;
• (iii) he is not qualified or is disqualified for appointment;
• (iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by virtue of any provisions of this Act; or
• (v) section 162 is applicable to the case.
• Explanation.--For the purposes of this section and section 160, the expression "retiring director" means a director retiring by rotation.
Appointment of a Director other than a
Retiring Director
• Section 160 of the Companies Act 2013 read along with Rule 13 of Companies
(Appointment and Qualification of Directors) Rules, 2014 lay down the procedure
of appointment of a person other than a retiring director.
• If any person, other than a retiring director wishes to stand for directorship or any
member proposes a person for directorship, he must signify his intention to do so
by giving 14 day’s notice to company before general meeting and the company
must inform the members at least seven days before the general meeting.
• The information shall be given: (1) by serving individual notice to members (2) by
placing notice of such candidature or intention on website of the company.

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