Director of a Company

Director of a Company

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Director of a Company
Director of a Company

The term “director” has no specific meaning but is defined under Section 2(1) of the Companies Act, as follows: ‘director’ “includes any person occupying the position of director by whatever name called”

He is the person who is appointed by the members of the company.  The person who takes decisions on behalf of the company and operates and manages the company. It directs, supervises, and controls the affairs of the company. Since Company is a legal entity and not the person itself. Hence, it has to act only through the agency of natural person called “Director”.

To become a director in PRIVATE LIMITED COMPANY , a Director Identification Number is required (DIN).  Only the individual aged above 18 can obtain the DIN from certifying authority.

No. of Directors– Maximum, there can be 15 directors in a company. However, the number can be increase by passing the special resolution.

Minimum Number of Director in Company is as follows:

Business entity Minimum Director
Private Limited Company 2
Limited Company 3
One Person Company 1

 

Foreign national can become a director provided that he has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.

Appointment of women director for public Limited Company is required under following condition:

  • If a company has paid-up share capital of Rs.100 crore rupees or more.
  • If a company has turnover of Rs.300 cores or more.
  • There is no requirement of women director for a PRIVATE LIMITED COMPANY.

Duties and Responsibilities:

Directors have to owe Duties and Responsibility no matter if it is PRIVATE LIMITED COMPANY or LLP REGISTRATION  or ONE PERSON COMPANY.

Fiduciary relation

Directors of the company hold fiduciary relation with the company. They act as a guardian for the company and have to take care of all the asset of the company.   The individual interest must not prevail over the company’s interest and work best for the interest of the company.

Effective utilization of Company’s asset

Directors do not owe the company’s asset. They act as a legal guardian and has to take care of the asset of company. Company’s asset should not be use for personal use but must be employed in a way so that it has efficient and effective utilization in improving the productivity and smooth functioning of business.

Avoid Conflict

The Director must avoid any conflict between the director’s duties to the company and the director’s other interests unless the director is released from his or her duty to the company in relation to the matter concerned.

Duty of confidentiality

All the confidential information of the company must be properly taken care of. It must not be disclosed. If, it is leaked or disclosed or not handled properly, the company may suffer loss and its director duty to keep such information properly.

Duty to convene meetings

It is a duty of director to convene Statutory, Annual General Meeting and Extraordinary General Meetings.

Duty to attend meetings

A Director must attend all the meetings of company. If a  director is absent from three consecutive meetings or do not attend any meeting in three months , whichever period is longer, then a director can lose his /her position. To prepare and place at the AGM, along with the balance sheet and profit and loss account, a report on the company’s affairs, including the report of Board of Directors.

No Secret Profit

Directors hold a supreme position in a company in a way that its decision affects the company. The Director may come across wide variety of information from general to sensitive to highly secretive. The trade off secrets must be kept confidential and must not be used for personal benefits and the company’s interest should not be suffered in any case.

Act according to the provisions of the Company.

The Director must act honestly and responsibly in relation to the conduct of the affairs of the company. It acts in accordance with the company’s constitution and exercise his or her powers only for the purposes allowed by law.

Duty to Not Permit Conflict of Interest

Conflict of interest arises when a director’s decision will either gain him or the company. Director’s will face the dilemma of neglecting company’s interest versus personal interest .Such dilemma should be kept at aside and conflict of interest must not be allowed.

Duty not to exceed powers

The Memorandum of Association (MOA) of a Company states what the company is authorized to do. Whereas, the Articles of Association (AOA) of the Company state what powers are given to the Directors of the Company. It is the duty of the Directors to ensure that company does that is being authorized to do and not exceed the power endowed to him.

Duty to appoint First Auditor and Cost Auditor of the company.

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