Company Management: Roles and Responsibilities of Directors

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40 Questions

What is the maximum number of directors that can be appointed by the Board of Directors?

Fixed in the Articles

Why can the Central Government appoint directors?

To prevent mismanagement

What is the maximum period for which directors appointed by the Central Government can serve?

Three years

What is required for the Central Government to appoint directors?

Order from the Company Law Board

What is the purpose of appointing nominee directors?

To have effective control on the company

Who can appoint alternate directors?

The Board of Directors

Under what circumstances can alternate directors be appointed?

During the absence of an existing director for more than three months

What is the characteristic of directors appointed by the Central Government?

They are not required to hold qualification shares and are not subject to retirement by rotation

What is the minimum number of directors required for a public company?

Three

What is the role of the Board of Directors in a company?

To govern and control the management

Who elects the directors of a company?

Shareholders

What is the primary function of the directors in a company?

To direct, govern, and control the management

What are the directors considered to be in relation to the company?

Agents, trustees, and managing partners

What is the requirement for a person to become a director?

Must be competent to enter into a contract

What is the statutory provision related to directors in the Companies Act?

Sections 252 to 323

How many directors are required for a private company?

Two

What is a director according to Sec. 2(30)?

An officer of a company

What is the minimum number of directors required for a public company?

Three

Who appoints the auditor of a company?

Board of Directors

What is the primary responsibility of the CEO?

Making major corporate decisions

What is the role of the auditor?

Reviewing and verifying financial records

Who is the highest-ranking executive in a company?

CEO

What is the minimum number of directors required for a private company?

Two

Who presides over every meeting of the Board of Directors?

Chairman

How many days' notice is required to be sent before the date of the extraordinary general meeting?

21 days

What is the quorum for a Public limited company in an extraordinary general meeting?

5 members

Where must the resolution passed at the extraordinary general meeting be filed?

With the Registrar of Companies (ROC)

Who can call an extraordinary general meeting of the company?

Either the Board of Directors or the Shareholders

What percentage of paid-up share capital is required to requisition an extraordinary general meeting?

One-tenth

What must the requisition made under sub-section (2) set out?

The matters for the consideration of which the meeting is to be called

Who must sign the requisition sent to the registered office of the company?

The requisitionists

Under which section is the calling of an extraordinary general meeting governed?

Section 100

Who is responsible for making arrangements for annual general meetings of a company?

Company Secretary

What is the minimum number of days' notice required before a general meeting of shareholders?

21 days

How should notices for general meetings of shareholders be sent?

By hand delivery, post, fax, or email

What should be attached along with the notice of a general meeting of shareholders?

Attendance slip and proxy form

What is the purpose of convening a Board meeting before the annual general meeting?

To discuss and approve the annual accounts

When should the Auditor's report on the accounts be secured?

Before the Board meeting

What should be displayed on the company's website?

The notice of the annual general meeting

What should not be taken up at the time of the annual general meeting?

Any item not mentioned in the notice and agenda

Study Notes

Role and Responsibilities of Directors

  • Directors are responsible for directing, governing, and controlling the management of their company.
  • They function as a group, with the Board of Directors being the principal authority in company management.
  • Directors are elected representatives of shareholders and are given substantial powers of management.
  • They must honour legal provisions regarding their qualifications, appointment, retirement, and use of powers.

Legal Position of Company Directors

  • The Board of Directors is a must for the management and administration of a company under the Companies Act.
  • Directors are elected representatives of shareholders and are given substantial powers of management.
  • Such powers are not to be used individually but collectively by all directors, i.e., by the Board of Directors.
  • The statutory provision relating to Directors is given in Sections 252 to 323 of the Companies Act.

Qualification of a Director

  • Any person who is competent to enter into a contract can become a Director.
  • Additional Directors can be appointed by the Board of Directors, subject to the maximum number of directors fixed in the Articles.
  • Alternate Directors can be appointed in place of an existing Director, during their absence of more than three months.

Appointment of Directors by the Central Government

  • The Central Government may appoint directors to prevent mismanagement, with the number of directors specified by the Company Law Board.
  • Such directors are appointed for a period not exceeding three years on any one occasion.
  • They are not required to hold any qualification shares and are not subject to retirement by rotation.

Nominated Directors

  • Directors can be nominated by third parties, such as financial institutions, on a non-rotational basis.
  • These "Nominee" directors are usually appointed by financial institutions providing huge financial support to the concerned company.

Summary

  • A director is an officer of the company, acting as an agent of shareholders and looking after the management of the company.
  • The Board of Directors is the top administrative organ of the company, with individual members being called Directors.
  • Every public company must have at least three directors, and every private company must have at least two directors.

Chairman of the Board of Directors

  • The Chairman of the Board of Directors presides over every meeting of the Board.
  • Regulations regarding the appointment of a chairman are given in the Articles of a company.

Chief Executive Officer (CEO)

  • The CEO is the highest-ranking executive in a company, responsible for making major corporate decisions and managing overall operations and resources.
  • The CEO acts as the main point of communication between the Board of Directors and the company.

Auditor

  • An auditor is appointed by the Board of Directors to review and verify the accuracy of financial records and ensure compliance with tax laws.
  • The auditor protects businesses from fraud, points out discrepancies in accounting methods, and may work on a consultancy basis to boost operational efficiency.

Extraordinary General Meeting

  • An Extraordinary General Meeting (EGM) can be called by the Board of Directors or by shareholders holding at least one-tenth of the paid-up share capital.
  • The notice of the meeting must be sent 21 days in advance, and the quorum for a public limited company is five members, and two members for a private limited company.

Notice of General Meeting

  • Every member of the company should receive a written notice of the meeting.
  • Notices should be sent to other important persons, such as auditors, secretarial auditors, and debenture trustees if necessary.
  • The notice should specify the nature of the meeting and business to be transacted, and should be sent at least 21 days in advance.
  • Attendance slips and proxy forms should be attached to the notice with clear instructions.

Company Secretary

  • The Company Secretary is responsible for making all arrangements for holding the annual general meetings of the company.
  • The Company Secretary must perform various functions and duties, including convening a Board meeting, inviting the Auditors for their report, and transacting business at the meeting.

This quiz covers the functions and authority of the Board of Directors in a company, including their role in management and governance. It also touches on the requirements for public companies and the relationship between directors and shareholders.

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