Board of Directors A Powerful Instrument in Governance

Director

Section 2(13) defines: director as including any

person occupying the position of director, by whatever name called;

A director may therefore be defined as a person having control over the direction, conduct, management or superintendence of the affairs of company

Director

Agent

Directors act as agents of company and company acts as principal

Trustee

Directors are trustees of assets of a company but they are not trustees of individual shareholders.

Minimum Number of Director

Listed Public Company Unlisted Public Company Private Company Single Member Company

7 3 2 1

Directors appointment

First Board of Directors is usually appointed by virtue of provisions of articles of association. In the absence thereof, the number and names of directors shall be determined in writing by the subscribers of the Memorandum of Association or by majority of them . If not, the subscribers of MOA become the directors. First directors hold their office uptil the holding of first AGM and taking over by next BOD.

Kinds of Directors

Executive Directors Full time working director covered by a service contract. EDs are in charge of day to day conduct of the affairs of the company Together with other team members collectively known as Management. Non-Executive Directors Nothing to do with day to day management of company. They may attend meetings of BOD and meetings of committees to which they are members.

Kinds of Directors

Nominee Directors.

A nominee director is generally appointed in a company by the creditors and or by other special interest to ensure that affairs of the company are conducted in the manner dictated by law governing companies and to ensure good corporate governance.

Duties and Responsibilities of Directors

Fiduciary Duties Duties of care, skill and diligence Duties to attend Board meetings Duties not to delegate their functions except to the extent authorized by the act or the constitution of company and To disclose their interests

Board of Directors
The Board of Directors of a company includes all directors elected by shareholders to present their interests is vested with the powers of management. The Board of Directors is authorized to exercise such powers and to perform all such acts and things as the company is entitled to do.

Board of Directors
The power of the Board of Directors is co-extensive with those of company subject to two conditions: the board shall not do any act which is to be done by company in general meeting of the company. The board shall exercise its powers subject to the provisions contained in Articles of Memorandum of Association or in companies ordinance or any regulation made by the company in general meeting.

Powers of Board of Directors

The directors of a company shall exercise the following powers on behalf of the company, and shall do so by means of a resolution passed at their meeting, namely.

(a) to make calls on shareholders in respect of moneys unpaid on their shares; (b) to issue shares; (c) to issue debentures or [participation term certificate, any instrument in the nature of redeemable capital]; (d) to borrow moneys otherwise than on debentures; (e) to invest the funds of the company; (f ) to make loans;

Powers of Board of Directors

(g) to authorize a director or the firm of which he is a partner or any partner of such firm or a private company of which he is a member or director to enter into any contract with the company for making sale, purchase or supply of goods or rendering services with the company; (h) to approve annual or half-yearly or other periodical accounts as are required to be circulated to the members; (i) to approve bonus to employees; (j) to incur capital expenditure on any single item or dispose of a fixed asset in accordance with the limits as prescribed by the Commission from time to time];

Powers of Board of Directors

(k) to undertake obligations under leasing contracts exceeding one million rupees; (l) to declare interim dividend; and (m) having regard to such amount as may be determined to be material (as construed in Generally Accepted Accounting Principles) by the Board(i) to write off bad debts, advances and receivables; (ii) to write off inventories and other assets of the company; and (iii) to determine the terms of and the circumstances in which a law suit may be compromised and a claim or right in favour of a company may be released, extinguished or relinquished:

Liabilities of Directors to the company

1.

2.

3.

4.

Ultra Vires acts Jointly and severally liable to the company for illegal acts Negligence Negligence without damage or damage without negligence is nonactionable Breach of Trust Liable for breach of trust or secret profits. Misfeasance- Liable for Wilful misconduct

Liability for Breach of Statutory Duties

Companies Law imposes penalty upon directors for not complying with or contravening the provisions of the act e.g. Mis-statement in prospectus Penalty for fraudulently inducing persons to invest money Concealment of names of creditors entitled to object reduction of capital Penalty for default in filing with registrar the particulars of any change created by the company

Other Liabilities

Liability for acts of his Co-director Directors with unlimited liability

Corporate Governance-Role of Directors

1. 2. 3. 4. 5. 6.

7.
8.

Exhibit total commitment to company Steer Discussion Properly Clear Stand on Issues To ensure Efficient CEO Decisions on Acquisitions Anticipate business events Long term focus and stakeholders interest Promoting overall interest of company and stakeholders

Qualification and Eligibility of Director

No listed company shall have as director, a person who is serving as a director of ten other listed companies. No person shall be elected or nominated as a director of a listed company if; His name is not borne on the register of National Tax Payers except where the person is non-resident. He has been convicted by the court of competent jurisdiction as defaulter in payment of any loan to a banking company, a DFI or a NBFC or he being a member of stock exchange, has been declared as defaulter by such stock exchange.

Qualification Shares

A share qualification can also be prescribed in AOA i.e. a director must possess atleast 500 shares. If director fails to attain such shares within stipulated time, he ceases to hold the office of directorship.

Membership of the Company

Membership is the basic qualification of for the office of directorship of a company. This does not, however, apply to the following directors: Nominee of Government or Insitution or Authority which is member A whole time director who is employee of company Chief Executive Nominee of Creditor

Ineligibility of Directorship

Minor Persons having unsound mind Applicant for adjudication as an insolvent Undischarged insolvent Person convicted by court of law for an offence involving moral turpitude. Persons debarred from holding such office under this ordinance.

Ineligibility of Directorship

Person who is not member of the company Persons who have betrayed lack of fiduciary behavior and declaration to this effect has been made by court under section 217 at anytime during the preceding five years. In case of a listed company, a person who is member of stock exchange engaged in business of brokerage, or is a spouse of such member.

Election of Directors

Un-Opposed Election Candidates more than number of directorsCumulative Voting Voting Procedure for Companies not having share capital

Removal of A director

A company by passing a special resolution in general meeting remove a director appointed under section 176 or 180 or 178 Provided that resolution for removal of director shall not be deemed to have been passed if number of votes cast against it is equal to or exceeds:

i. The minimum number of votes that were cast for the election of director at the immediately preceding election of directors, if the resolution relates to removal of director elected in the manner provided in section 178(5).

Removal of A director

The total number of votes for the time being divided by number of directors for the time being, if the resolution of a director elected under section 176 or section 180.

Vacation of office by director

a.

b.

A director shall ipso facto ceases to hold office if He becomes ineligible to act as director on anyone or more of the grounds enumerated in clauses (a) to (h) of section 187 He absents himself from three consecutive meetings of directors or from all the meetings of directors for a continuous period of three months, whichever is longer, without leave for absence from directors.

Vacation of office by director

c. He or any firm of which he is a partner or any private company of which he is director
i.

ii.

Without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of chief executive or a legal or technical adviser or bank or Accepts a loan or guarantee from the company in contravention of section 195