DIRECTORS OF A COMPANY. — SPCC STD 12 Commerce — Question

1. Introduction : Generally shareholders appoint directors by conducting election in their Annual General Meeting company is very large entity hence various type of directors are required for its management and administration.

2. Types of Directors :

There are following types of Directors in a company: (1) Independent Director (2) Managing Director (3) Nominee Director (4) Additional Director (5) Alternative Director (6) Director’s appointed before completion of term on Directors vacant position. (7) Directors elected by small shareholders (8) Female Director.

[1] Independent Directors : Following provisions are made in companies Act-2013.
(1) In every company at least 1/3 directors of the company will be independent directors.
(2) Central Government may decide a minimum number of independent directors for a specified public company.
(3) The independent director means a person who is not a managing Director or full time director or a nominee director.
(4) Independent director is appointed from a data bank. Such type of data bank can be maintained by anybody which contains names, addresses and qualification of persons who are eligible and willing to work as an independent director.
(5) Institute or Association as may be notified by central government, a company has to select the name from this data bank.
(6) The company should take proper care at the time of selection and his appointment should be approved in the gerneral meeting.
(7) The term of an independent director is for five years.
(8) The independent director can be reappointed, but for this special resolution should be passed in the company.
(9) It should be specified in a report of Board of Directors with reason that why the reappointment is essential.
(1O)Any independent director would not be appointed for more than two terms.
(11)Independent director can be appointed after the gap of three years but during this three years he should not be connected directly or indirectly with any matters pf the company. Following matters should be considered while appointing Independent Directors:
(1) A person appointed as an independent director by Board of Directors should be experienced, skillful and an expert in his field.
(2) Such a person should not be a promoter of the company or its subsidiary companies.
(3) Such a person should not be a relative of any promoters or Directors.
(4) He should not have any economical or financial relation with company or its subsidiary company or with its directors or promoters in the last two financial years.
(5) He should not have any relation with the Key Managerial Personnel for three years before his appointment as an independent Director.

[2] Managing Directors : Company form is the largest among all other form of business organization. Members of the Board of Directors are spread over in different cities of the country So, they are not able to do day to day management of the company. To manage daily routine work of the company a director is appointed who is called Managing Director or full time director or Manager. Managing Director is also known as an Executive Director. Managing Director has to carry out the day to day routine functions of the company. He has also to carry out and execute policy decision taken by the Board of Directors. So managing director should have tactfulness, ethics and business strategy Such type of Managing Director is appointed by Board of Directors.

[3] Nominee Director : As per the provisions of Articles of Association of a company, Board of Directors can appoint Nominee Director in the following circumstances.
(1) The Board of Director may appoint any person as a director nominated by any institution in pursuance of any agreement
(2) The Board of Director may appoint any person as nominee director nominated by an institution in pursuance of provision of any law.
(3) The Board of Director appoints any person as director nominated by central government or state government by virtue of his shareholding in a government company.

[4] Additional Directors : According to the provisions of Articles of Association, when experts or technocrats are essential for company at that time such type of persons can be appointed as a director. But the person who fails to get consent as a director in general meeting would not be appointed. The additional director, shall hold office up to the date of next Annual General Meeting.

[5] Alternative Directors: If a director goes out of the country for more than three months due to any reason, another person is appointed to act as director who is called Alternative Director. As per the provision of Articles of Association or by passing a resolution in the General meeting an alternative director can be appointed. A person holding an alternative directorship for any other director can not be appointed. As per the provision of the companies act the person shall not be appointed as an alterantive director for an independent director unless he is qualified to be appointed as an indpenedent director.

[6] Director appointed before completion of Term on Director’s Vacant position : Board of Director or Central Government may appoint a director as per the provisions of the companies act, if a director is removed from his post, before completition of his term or is unable to complete his term, Board or Central Government may appoint a director. Such a appointed person shall hold office only to the date which the director in whose place he is appointed, would have held office, if it had not been vacated. Underthe following circumstances Director’s post falls vacant.
(1) Director removed in general meeting or in the meeting of Board of Directors.
(2) Director remains absent, without permission, in the Board meeting for 12 months.
(3) Director becomes insolvent or expires or he is of unstable mind.
(4) When director has been declared disqualified by court.
(5) When director has been convicated by a court for an offence involving moral turpitude or any other offence.
(6) When director has direct or indirect financial interest or agreement in the company and he fails to disclose it.
(7) Private limited company may include other restrictions in his Articles of Association. Under the above circumstances. Directors are appointed on the post that fall vacant.

[7] Appointnent of Directors elected by small sharehioders: As per the Companies Act-2013, small shareholders means a shareholder holding shares of nominal value of not more than 20,000/ or such other sum as may be prescribed.
A listed company may have one director elected by small shareholders. Minimum of 1000 shareholders should be there for appointment of such director.

[8] Female Directors : As per the provisions of Companies Act-2013 every listed company having paid up capital of 100 crores or more or such class or classes of companies as may be prescribed shall have at least one female Director.