1. DIRECTOR – AN OVERVIEW
By
Mihir Panchmatiya
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2. Requirements of the Board
BOARD OF DIRECTORS
A corporation has neither a mind nor a body of its own. This makes it
necessary that the company’s business should be entrusted to some
Human agents.
The Company is governed by the broad Policies formulated by Board
of Directors which requires ethical behavior coupled with honesty.
The policies formulated by the Board is of long term strategy and it
will not only involve the regulatory and statutory requirements but
also the organizational need coupled safety, environmental issues and
creating wealth to its stakeholders.
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3. Requirements of the Board
BOARD OF DIRECTORS
• Obligation to constitute the Board of Directors which is central to
its decision making and governance process of the company.
• Only individuals can be appointed as directors. No body
corporate, association or firm can be appointed as the director of a
Company
• Board of Directors has to exercise strategic oversight over
business operations.
• Board has to ensure with the legal framework, integrity of
financial and reporting systems.
• To ensure proper and timely disclosures 3

4. REQUIREMENTS OF THE BOARD
Framework encompassing
Continuous Improvement of
I System,
II processes and controls
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5. MINIMUM AND MAXIMUM NUMBER OF DIRECTORS
• Section 252 of the Companies Act provides for 2 minimum
number Directors in case of a Private Company and 3 for a Public
Company
• Section 259 provides for the maximum Directors in a Public
Company which shall not be more than 12 for a Public Company
• A Private Company can provide for the maximum number of
Directors in its Articles of Association
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6. BOARD MEETINGS
• In case of every Company, a meeting of its Board of directors
shall be held at least once in every three months and at least
four such meetings shall be held in every year
• The quorum for a meeting of the Board of directors of a
company shall be one-third of its total strength (any fraction
contained in that one-third being rounded off as one), or two
directors, whichever is higher
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7. ROLES OF DIRECTORS
To act as Agent of the Company
To exercise Power in good faith and honestly
To ensure due Compliance with the Provisions of the Companies
Act and all other laws, bylaws governing the corporate Sector
To avoid Direct or Indirect Personal Involvement in any
Transaction Of the Company
Not to make Secret Profit in derogation of his fiduciary position
towards the Company
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8. COMPLIANCES BY A DIRECTOR
» Apply for Director Identification No. (DIN) (sec. 266 A)
Every Individual intends to be appointed as Director of a
Company shall make an application for allotment of DIN to the
Central Government in Form DIN 1along with a fee of Rs. 100
and such other documents as may be prescribed.
» Consent to act as Director (sec. 264)
Every Person proposed as a candidate for the office of a
Director shall sign, and file with the Company his Consent in
writing to as a director, if appointed
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9. DISCLOSURES BY A DIRECTOR
» Disclosure under Section 299
Every Director is required to submit a general notice to the Board of
Directors disclosing his directorships held in other companies as well
as shareholding exceeding 2 % of paid-up share capital of any public
company, membership / partnership in any private company/ firms
which may tantamount to stating that he may be regarded as concerned
or interested in any contract or arrangement.
The Notice is required to be given in the prescribed form 24AA under
the Companies (Central Government’s) General Rules & Forms, 1956.
This form is required to be submitted at the time of appointment and
afresh in each Financial Year, which is being presented to the Board at
their Meeting next to the receipt of the Notice.
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10. DISCLOSURES BY A DIRECTOR
» Memberships/Chairmanships of Committees of Directors
In terms of the Listing Agreement, Directors cannot be members
in more than 10 Committees or act as Chairman of more than 5
Committees of Public Limited Companies. For the purpose
Chairmanship/Membership of the Audit Committee and the
Shareholder’s Grievance Committee are to be considered.
Further, it is mandatory annual requirement for every Director to
inform the Company about the Committee position he occupies in
other Companies and notify changes as and when it takes place
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11. DISCLOSURES BY A DIRECTOR
» Declaration under Section 274 (1)(g)
Pursuant to the provisions of Section 274(1)(g) of the Companies
Act, 1956 declarations are to be provided by all the Directors of
following Compliances by all Companies on which Directorships
held to be presented to Statutory Auditors.
• The Company has not failed to file the Annual Accounts and Annual
Returns for the previous 3 financial years
• The Company has not failed to repay its deposits or interest thereon on
due dates or redeem its debentures on due date or pay dividend on
them
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12. DISCLOSURES BY A DIRECTOR
» Disclosure under Insider Trading Regulations
In terms of Clause 5.1 (c) of Schedule I of the
Securities and Exchange Board of India (Prohibition
of Insider Trading) Regulations, 1992 every Director/
officer/ designated employee of a Listed Company,
shall forward the Annual Statement of all holding in
their securities transactions including the statement of
dependant family members to the Compliance Officer
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13. RESPONSIBILITES OF A DIRECTOR
• Not to hold Office of Director in more than 15 Public
Companies (Sec. 277)
• Not to wrongfully obtain possession of any property of a
Company or having any such property in
possession, wrongfully withhold it or knowingly applies it to
purposes other than those expressed or directed in the
Articles and authorized by the Companies Act,1956 (Sec.
630)
• Not to hold any office or place of profit carrying a total
monthly remuneration of not less than Rs.50,000 under the
Company either by himself / by his partner / his relative
without the prior approval of Central Government (sec. 314)
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14. Not to make Loans / give Guarantee / provide Security to
the following categories of persons, except without the
previous approval of Central Government (Sec. 295):-
• Any director of the Company or
• Any Director of the Holding company;
• Any partner or relative of any of such Director;
• Any firm in which any such Director or relative is a partner;
• Any Private Company of which any such Director is a Director or
Member;
• Any Body Corporate in which not less than 25% of the total voting
power may be exercised or controlled by any such Director or by
two or more such Directors together.
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15. Not to enter into following Contract without the consent
of the Board of Directors of the Company & the prior
approval of the Central Government (Sec. 297):-
• for the sale, purchase or supply of any goods,
materials or services, the cost of which is not less
than Rs. 5,000 in the aggregate in any year; or
• for undertaking the subscription of any shares in
or debentures of the Company
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16. POWERS THAT CAN BE EXCERCISED ONLY AT A
BOARD MEETING (SEC. 292 )
• Power to make calls on shareholders in respect of money
unpaid on their shares
• Power to authorise the buy back of shares
• Power to issue Debentures
• Power to borrow moneys otherwise than on debentures
• Power to invest the funds of the Company
• Power to make loans.
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17. When an Office of Director becomes Vacant ?
The office of a Director shall become vacant, if:-
• He fails to obtain within the time specified in Section 270(1)
the Share qualification, required by him by the Articles of
the Company
• He applies to be adjudicated/ adjudged as an insolvent
• He acts in contravention of section 299
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18. • He absents himself from 3 consecutive meetings of the
Board of Directors or from all meetings of the Board for a
continuous period of 3 months, whichever is
longer, without obtaining leave of absence from the Board
• He either by himself or by any person for his benefit/any
firm in which he is partner/any private company of which
he is a director guarantee/security for a loan from the
company in contravention of Section 299 of the
Companies Act,1956
• Having been appointed a Director by virtue of his holding
any office or other employment in the company, he ceases
to hold such office or other employment in the Company.
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19. PENALTIES
• Any person who holds office or acts as a director of more
than 15 Companies in contravention of Section of 277 shall
be punishable with fine which may extend to Rs.50000/-
(Sec. 279)
• Any Director of the Company who holds the property of the
Company in contravention of Section 630 of the Companies
Act shall be punishable with fine which may extend to
Rs.10,000/- (Sec. 630)
• Any Director who fails to comply with the provisions of
Section 299 with regard to the disclosure of their interest at
Board Meetings shall be liable to punishment which may
extend to Rs. 50,000/- (Sec. 299)
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20. PENALTIES
• Any Director who is knowingly a party to any contravention
of the provision of Section 295 which deals with loan to
director without the previous approval of the Central
Government shall be punished with fine which may extend to
Rs. 50,000/- or with simple imprisonment for a term which
may extend to 6 months. (Sec. 295)
• Every Directors are liable to be punished with simple
imprisonment for a term which may extend 3 years and also
liable to fine, if they fail to pay dividend within 30 days of its
declaration by the shareholders.
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