DIRECTORS & BOARD MEETING

The director is a person who holds a fiduciary position in running the business of the company. Directors are the elected representative of the members. This note, details about the appointment, vacation of office and removal of directors of the company and a small detail on the board meetings.

NUMBER OF DIRECTORS

Particulars	Provisions
Public company	Minimum of 3 directors Maximum of 12 directors as defined in the articles. Appointment of directors beyond 12 requires Central Government approval
Small shareholder directors	In a public company having a paid up capital of Rs. 5 crore or more and having 1000 or more small shareholders.
Private company	Minimum of 2 directors No limit in the maximum no of directors

Appointment of directors

By the Board of Directors

• Additional Director
• Casual Vacancy
• Alternate Director

By the Members

• Directors
• Managing Directors

By Central Government

• Under Section 408 of the Companies Act, 1956

By the Article of Association

• First Directors as named in the Articles

• Subscribers to Memorandum and Articles deemed to be directors

 Additional directors are appointed by the board and hold office till Annual General Meeting. At the AGM, the Additional Director must be appointed as Director with member’s approval. (Section 260)

Alternate directors are appointed in the place of a director who is not in the state or country. They can hold office for not less than 3 months and his tenure is based on the tenure of the original director in whose place he has been appointed.  He vacates office, when the original director returns.

Casual vacancy which arises in the office of any director appointed by the company in general meeting may be filled by the board of directors subject to the provisions of AOA.

The power to appoint directors lies with the Members at the General Meeting. The appointment of Managing directors & Executive Directors with the Members at the General Meeting and the guiding provisions are detailed in Section 267 to 269 and Schedule XIII. (A detailed note on the same will be forwarded to you soon.)

The Central Government has the power to appoint directors in case of Oppression and Mismanagement as detailed by the order of Company Law Board requesting to appoint directors in the Company.

First Director is usually named in the Articles of Association of the Company and the procedure to appoint the first directors are also mentioned.

If the Articles are silent with regard to the appointment of first directors, the subscribers to the memorandum, who are individual, are deemed to be the directors of the company.

No of directorship:

A person can be a director of only 15 companies.  This does not include

·         A private company, which is neither a neither a holding nor a subsidiary of a public company.

·         An unlimited company.

·         An association not carrying on business for profit or which prohibits the payment of dividend

·         A company in which such person is only an Alternate Director. 

Vacation of office of directors: Section 283

A director is said to have vacated from his office, in the following circumstances:

·         Failure to obtain or hold Qualification shares

·         Unsound mind or adjudged insolvent

·         Convicted for an offence involving moral turpitude

·   Absenting himself for 3 consecutive board meetings without obtaining leave of absence.

·         Contravention of section 295, 299
Disqualified by an order of court under section 203

Removal of director: Section 284

A director can be removed at a general meeting, by passing an ordinary resolution.

Special notice must be given to the members for the removal of director and to appoint any person in his place.

The newly appointed director will hold office only upto the expiry of the tenure of his predecessor in whose place he has been appointed.

The notice of the meeting for removal of director must be sent to the concerned director and if he so wishes, he can make a representation to the company.

The removal of director does not prohibit him from getting the compensation or damages payable to him in respect of the termination of his appointment as director or any appointment terminating with that of director.

Retirement of directors: (Section 255 to 257)

In case of private company, the AOA governs the retirement of directors.

For a public company, unless there is any restriction in the AOA, not less than 2/3^rd of the total number of directors shall be persons whose period office is liable to be determined under retirement by rotation.

Out of the above 2/3rd who is liable to retire by rotation, 1/3rd of the directors or if their number is not three or a multiple of three, then, the number nearest to one third, shall retire from office. (Section 256)

Eg: if a company has 12 directors

Directors liable to retire = 12* 2/3 = 8

Directors who will retire = 8 * 1/3 = 2.67 = 3 directors should retire from office.

The vacancy arising in the office of the director may be filled by appointing the retiring director.

The retiring director may express his unwillingness to be reappointed as Director of the Company.

The casual vacancy arising in the office of the directors must be filled by the company at the AGM. If the same has not been filled at the AGM, the same must be filled at the adjourned AGM. Even in the adjourned meeting the vacancy has not been filled, then the retiring director shall deemed to be reappointed unless he has expressed his unwillingness or is disqualified in anyway.

Any person other than the retiring director can be appointed for the position of director by giving a notice of not less than 14 days before the meeting. And such intimation must be forwarded to the members along with the notice or through publication in newspaper. This is applicable in case of a public company and a private company which is a subsidiary of a public company.

The consent of every director of a public company must be intimated to the company and with the Registrar within 30 days from the date of appointment. (Section 264)

Share Qualification (Section 270)

Applicable only for a Public Company and a private company which is a subsidiary of a public company.

The provisions relating to share qualification is as per the AOA. If AOA authorizes to hold Qualification shares, the directors must obtain his qualification within 2 months of appointment as director.

If the articles contain any provision to hold qualification shares within the shorter span of 2 months or before his appointment as director, then that provision shall be void.

The nominal value of the Qualification shares should not exceed Rs. 5000 or the nominal value of one share when it exceeds Rs. 5000/-.

BOARD MEETINGS

It is mandatory for every company to hold the meeting of board of directors once in every three months and four such meetings should be held in every year.

Notice of the meeting must be given to the directors who are residing in India. Nowadays notice of board meeting is sent through E-Mail.

Quorum for the board meeting is 2/3^rd of the total number of directors or 2 directors whichever is higher. For the purpose of quorum to be counted for any discussion, the interested directors will not be counted.

If at any time the no. of interested directors exceeds 2/3^rd, the remaining directors are counted for quorum, provided there are at least 2 non-interested directors

The board meeting resolutions can be passed through circulations. The draft resolutions must be sent to all the directors who form the quorum for the meeting along with necessary papers and documents. The resolution is deemed to be passed after getting the approval of the concerned directors.

The minutes of the board meetings must be prepared within 30 days of the meeting and it must be dated and signed by the Chairman of the meeting or by the Chairman of the subsequent meeting.  The minutes should be consecutively numbered.