Company Management

Subjects to be covered

BOARD OF DIRECTORS

MANAGING DIRECTOR

AUDITORS

COMPANY SECRETARY

Board of Directors

Definition:“any person occupying the position of a director by whatever name called.” u/s 2(13)

Only individuals to be directors u/s 253

Legal position of directors

Appointment1. Appointment of First directors u/s254

2. Appointment at General Meeting u/s255

3. Appointment by Third Parties4. Appointment by Central government

us/408

5. Appointment by the Board: As an additional director u/s 260 To fill a casual vacancy u/s 262 As an alternate director u/s 313

RIGHTS:

Attend the meetings

Participate in the management

To receive remuneration

DIRECTORS:

Minimum number of directors

Maximum number of directors

Increase or decrease in number

Number of directorships

Duties

General duties: Duty of good faith Duty of care Duty not to delegate

Statutory Duties: Not to issue irredeemable

preference shares redeemable after 10 years

Disclose interest Attend Board Meetings Convene General

Meetings Prepare report

Powers

General powers of board

Exercised only at Board Meetings

Requiring consent of Central Government

Requiring unanimous voting

Restrictions on powers

Remuneration:

Director: 1% of Net Profits 3% of Net Profits if

no MD

Managing Director: 5% of Net Profits 10% in case of 2 MDs

* Maximum remuneration should not exceed 11% of Net Profit

End to Directorship

Disqualification Removal Retirement Vacation from office Resignation

Removal

Removal by shareholders Removal by central government Removal by law board

Definition:Managing Director means a director who by virtue of an agreement with the company , or of a resolution passed by the company in general meeting or by its Board of Directors , or by the virtue of its memorandum or articles of association , is entrusted with substantial powers of management which would not otherwise be exercisable by him.

MANAGING DIRECTOR OR WHOLETIME DIRECTOR u/s 2(26)

A managing director may be appointed in any of the following ways :

by agreement with the company; by a resolution passed by the company

in general meeting; by a resolution passed by the Board of

Directors; by memorandum of associations; by articles of association.

Appointment of managing director or whole-time director: u/s 269, 268 & 317

On and from 5.06.1988, every public company, or a private company which is a subsidiary of a public company, having paid-up share capital of rupees five crores or more, shall have a managing or whole-time director.

No appointment of a person as a managing or whole-time director in a public company or a private company which is a subsidiary of a public company shall be made except with the approval of the Central Government unless such appointment is made in accordance with the conditions specified in Parts 1 & 2 (subject to provision of Part 3) of Schedule 13 & a return in the prescribed form is filled within ninety days from the date of such appointment.

Every application seeking approval to the appointment of a managing or whole-time director or a manager shall be made to the Central Government within a period of ninety days from the date of such appointment.

Company Law Board.

Appointment Number of companies in which one person may be appointed managing director: u/s 316 A person can be appointed as a managing director or

manager of one or more company in the following cases:

• such appointment or employment is approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting;

• specific notice of a meeting and resolution to be moved thereat regarding the appointment of a managing director of more than one company has been given to all the directors then in India.

• The Central Government may, by order, permit any person to be appointed as a managing director of more than two companies, if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common managing director.

Powers of managing director or whole-time director:

power to affix the common seal of the company to any document; or

to draw and endorse any cheque on the account of the company in any bank; or

to draw and endorse any negotiable instrument; or

to sign any certificate of share; or to direct registration of transfer of any share.

Disqualification of a managing director u/s 267

No company shall appoint or employ or continue the appointment of any person as a managing or whole-time director who:

• is an undischarged insolvent, or has at any time been adjudged an insolent;

• suspends or has at any time suspended payment to his creditors, or makes, or has at any time made a composition with them; or

• is or has at any time been convicted by Court of an offence involving moral turpitude.

Who are auditors

Types of auditors

Qualifications of auditors – (S- 226)

Auditors

Appointment of auditors

1st Auditor u/s 224(5)

Subsequent auditors u/s 223(1)

Through special resolution

Who can not be appointed as auditors

A body corporate An officer or employee of the company A person who is the partner of the

company A person who is in debt to the copmay

exceeding to Rs. 1000/- or who has given guarantee or provided any security

Removal of auditors

By passing a resolution in General meeting

Rights of auditors

To call for information & explanation To access books of accounts To attend meetings and to receive notices Inspection of articles other than books of

accounts

Duties of auditors

To scrutinize Loans & advances Entries Investment Expenses

Company Secretary

Definition –“Secretary means a company secretary within the meaning of clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and includes any other individual possessing the prescribed qualifications and appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties.”

Qualifications

Statutory QualificationsUnder two categories : Companies having a paid-up share capital of

Rs. 2 crores or more For other companies

Qualifications Contd…

Other qualifications : Sound general education Proficiency in language Wide knowledge Knowledge of company law Knowledge of other laws Knowledge of office organization and methods Knowledge of economics, banking and finance Good personality

Appointment of company secretary

Compulsory appointment of a company secretary u/s 383A

Engaging Company Secretary in whole-time practice by Companies Act 2000.

What is the procedure of appointment?

Position of Company Secretary

Recognized as a responsible officer of the company under rule 2(b) of the Company Rules.

Carries out the policy decisions of Board but for routine day-to-day affairs, the secretary has the authority to carry out the work.

Acts as a link between the company and the outside world.

Enjoys a unique position in the management but does not have managerial powers.

Duties of Secretary

General Duties Statutory Duties Duties under Income-tax Act Under the Indian Stamp Act Under other acts

Rights of company secretary

Right to control and supervise the working of his department.

Right to sign a document or proceeding. Right to be indemnified by the company

for any loss suffered by him. Right to receive remuneration.

Dismissal of a company secretary

May be removed from his office by a resolution of Board of Directors.

Can be dismissed without giving him a notice in the following cases – For willful disobedience For misconduct or moral turpitude For negligence For incompetence or permanent disability

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