Company, Articles of Association can recommend the way of appointment of any everyone of the Executives. To invest the sale proceeds of any property of the company in securities other than trust securities. Payment of dividend is the prerogative of the board Duties of Directors Directors as individuals have a duty to attend board meetings and contribute to the deliberations of the board and ultimately to the decision making leading to formulation of policies. We do not sell or recommend any investment product. What penalties are there if I breach my general duties? Not to issue irredeemable preference shares or shares, redeemable after 20 years: A company cannot issue irredeemable preference shares or preference shares, redeemable beyond 20 years. Negligence may give rise to liability; there need not be fraud. He shall not vote on that matter.
Failure to repay application money if the minimum subscription is not subscribed. Subject to the approval of the Government, the Board has the power to invest in the shares of another company in excess of the limits specified in Sec. Declare interests in proposed or existing transactions or arrangements with the company If you are in any way, directly or indirectly, interested in a transaction or arrangement with the company, you must declare the nature and extent of that interest to the other directors. A director must not accept financial or non financial benefits from third parties. Typical examples include cross-directorships of group companies or positions relating to the company pension scheme.
In the event that Articles of Association are silent, the directors must be selected by the shareholders. Others arise from the responsibility of the directors to ensure that the company carries out its obligations where both the company and the directors may face liability in the event of a failure. Directors must act honestly and in bona fide. Section 178: Election of directors. This prohibition is much less flexible than the prohibition against the transactions with the company, and attempts to circumvent it using provisions in the articles have met with limited success.
Meaning of Director as per the Companies Act, 1956 A company is a legal entity and does not have any physical existence. Such agents have duties to discharge of a fiduciary nature towards their principal. They shall not utilize money other than purposes mentioned in the Act. A charity can reimburse a director or trustee for reasonable expenses. In such case directors are personally liable for the loss caused to the company. If property is improperly used, directors or trustees may be required by a court to repay the money.
The power to invest in funds The power to borrow money otherwise than on debentures The power to make loans or give guarantee in respect of loans. The Board of directors consists of part time directors and whole time directors. Any such appointment, agreement or arrangement may be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit. The Directors shall be held, personally, liable for acts beyond the aforesaid limits, being ultra vires the company or the Directors. Directors, making any such issue, may be held liable as 'officer in default' and, may be subject to a fine, up to Rs. They enter into a contract on behalf of a prospective company.
More recently, it has been suggested that both the tests of skill and diligence should be assessed objectively and subjectively; in the United Kingdom the statutory provisions relating to directors' duties in the new have been codified on this basis. The shareholders of Company A sued asking that directors and their friends to disgorge the profits that they had made in connection with their 3,000 shares in Company B - the very same shares which the shareholders in Company A had been asked to subscribe through Company A but refused to do so. Failure to disclose an interest in an existing transaction or arrangement with the company also carries the risk of a criminal fine. Authorisation may be given in the articles of association, by specific shareholder resolution or, in certain circumstances, by the other directors who do not share the same conflict. Right to elect a Chairman: Regulation 76 1 of Table-A provides that the directors are entitled to elect a chairman for the board meetings. Substantial powers of management imply the ability to take a decision to do or not to do a thing. Traditionally, the law has divided conflicts of duty and interest into three sub-categories.
A large sized company may have its members running into lakhs, who are dispersed all over the country and they even lack the expertise to manage the affairs of the company, which makes it impossible to give the management of the company in their hands. There are certain powers which can be exercised only with the approval of the shareholders and also Central Government for eg: Sec. They can delegate the day-to-day management of the charity to employees but they remain responsible and must maintain proper supervision and control over the work of the employees. He is not, however, bound to attend all such meetings, though he ought to attend whenever, in the circumstances, he is reasonably able to do so. Whatever form the financial service arrangements take the directors must, at all times, retain general control over the funds. To maintain contact with the govt.
Section 252: Appointment of Auditor The first auditors of a company are to be appointed by the directors within sixty days of the date of incorporation of the company. It is not the name by which a person is called but the position he occupies and the functions and duties which he discharges that determine whether in fact he is a Director or not. So long as a person is duly, appointed by the company to control the company's business and, authorized by the Articles to contract in the company's name and, on its behalf, he functions as a Director. What is my role as a director? Exercise independent judgment You must exercise independent judgment and make your own decisions. For example, where the directors apply company property of their own benefit they are guilty of breach of trust. Directors are paid remuneration for their efforts in formulating policies and for devoting their valuable time for the company.
If directors are guilty of negligence or found to be misusing their position, they will be liable for civil as well as criminal liability. In other words, the directors have the power to deal with any particular matter unless the Act, the articles or a previously passed special resolution says to the contrary. However, where the Director, seeking contribution alone, benefited from the wrongful act, he is not entitled to contribution. While in many instances an improper purpose is readily evident, such as a director looking to feather his or her own nest or divert an investment opportunity to a relative, such breaches usually involve a breach of the director's duty to act in good faith. Action should be taken to correct any problems. It may also be given in any regulations made under section 5. It includes any person who occupies the position of a director is known as Director whether or not designated as Director.
Greater difficulties arise where the director, while acting in good faith, is serving a purpose that is not regarded by the law as proper. Rights of Directors Rights can be categorized into individual and collective rights. They should be selected on the basis of their experience, skills and knowledge. Section 159: Calling of Extraordinary General Meeting An extra ordinary general meeting may be called at any time by the directors for consideration of any matter requiring approval of the company in a general meeting. Competing with the company Directors cannot, clearly, compete directly with the company without a conflict of interests arising. However, error of judgment will not be deemed as negligence. There are, however, two limitations upon their powers: E.