Company Law

Unit 3
Directors- Appointment,Rights,
Duties, Powers, Removal,Meetings

-Akhila Rani
Assistant Professor, RCL
Appointment of Directors

1. Appointment of first Directors,

2. Appointment at general meeting,
3. Appointment by the Board of Directors,
4. Appointment of Resident Director
5. Appointment of Independent Directors
1 Appointment of first directors [Section 152]
• The first directors are usually appointed by name in the
articles or in the manner provided therein.
• Where the articles do not provide for the appointment of
first directors, the subscribers to the memorandum, who are
individuals, shall be deemed to be the first directors of the
company until the directors are duly appointed.
• In case of a One Person Company an individual being
member shall be deemed to be its first director until the
director or directors are duly appointed by the member in
accordance with the provisions of this section.
• No appointment without DIN
• Consent to act as Director
2. Appointment of directors at general meeting
• According to section 152(2) every director shall be
appointed by the company in general meeting except where
the Act provides otherwise.
• Sub-section (6) of section 152 provides that unless the
articles provide for the retirement of all directors at every
annual general meeting, not less than two-thirds of the
total number of directors of a public company shall—
• (i) be persons whose period of office is liable to
determination by retirement of directors by rotation; and
• (ii) be appointed by the company in general meeting except
where otherwise expressly provided in this Act.
• The remaining directors appointed by the company in
general meeting subject to any regulations in the articles
of the company
• This 2/3rd rotation is not applicable in the case of
Government Companies and subsidiaries of Government
Company
Manner of rotation (Section 152(6)(c) )
• At the first annual general meeting of a public
company held next after the date of the general meeting
at which the first directors are appointed and at every
subsequent annual general meeting, one-third of such of
the directors for the time being as are liable to retire by
rotation
Re-appointment of a retiring director [Sec. 152]
• At the annual general meeting at which a director retires as
aforesaid, the company may fill up the vacancy by
appointing the retiring director or some other person
thereto [Section 152(6)(e)].
Rotational and non-rotational directors vis-a-vis private
company
Ministry of Corporate Affairs] expressed the following views
• In the case of a private company which is not a subsidiary of
a public company, it is not compulsory under the law that
they must have rotational directors unless the Articles of
Association of the company so require
Appointment of a director other than a retiring director
[Sec. 160]
• Section 160 along with Rule 13 of Companies
(Appointment and Qualification of Directors) Rules, 2014
lay down the procedure of appointment of a person other
than retiring director at the general meeting
2. Appointment by Board of directors [Section 161]
• The Board of directors can exercise the power to appoint
directors in the following three cases :
• (i) Additional Directors
• (ii) Filling up the Casual Vacancy
• (iii) Alternate Directors
• (iv) Nominee Directors
(i)Appointment of Additional Director
• The articles of a company may confer on its Board of
Directors the power to appoint any person as an additional
director at any time. However, a person who fails to get
appointed as a director in a general meeting cannot be so
appointed.
• without a power given by the Articles, the Board cannot
appoint additional directors.
• The section applies to all companies, public as well as
private – Needle Industries (India) Ltd. v. Needle Industries
Newey (India) Holdings Ltd. AIR 1981 SC 1298.
(ii) Filling up Casual Vacancy
• Section 161(4) as amended by the Amendment Act, 2017,
empowers the Board to fill casual vacancies in the case of
any company including a private company
• A casual vacancy is one that arises otherwise than by
retirement or the expiration of the time fixed for an
appointment.
• If the office of any director appointed by the company in
general meeting is vacated before his term of office expires
in the normal course, the resulting casual vacancy may,
subject to any regulations in the AOA, be filled by the Board
of Directors at a meeting of the Board.
(iii)Alternate Director
• The Board of directors of a company may, if so authorised
by its articles or by a resolution passed by the company in
general meeting, appoint an alternate director to act for a
director during his absence for a period of not less than 3
months from India.
• A person holding any alternate directorship for any other
director in the company shall not be appointed.
• A person who is already a director of the company cannot
be appointed as an alternate director for another director in
the same company.
• No person shall be appointed as an alternate director for
an independent director unless he is qualified to be
appointed as an independent director under the provisions
of this Act.
• An alternate director is not an agent of the original director

(iv) Nominee Director

• Subject to the AOA, Board may appoint any person as a
Director nominated by any institution in compliance with
the law in force or of any agreement or by Central
Government or the State Government by virtue of its
shareholding in a government company.
Resident Director
• For the first time the Companies Act, 2013 has introduced
the concept of resident director.
• Sub-section (3) of section 149 provides that every company
shall have at least one director who stays in India for a total
period of not less than 182 days during the previous
financial year.
Independent Director
• Section 149(4) of the Companies Act states that every listed
public company should have at least one-third of its total
number of directors as independent directors.
The following qualifications have to be met for appointment
as an independent director:
• The individual should not be a managing or a whole-time
director of the company.
• The individual should not be a promoter of the company.
• Neither the individual nor the relatives of such an individual
should have a pecuniary relationship/interest in the
company.
• Neither the individual nor the relatives of such an
individual should be or had been an employee of the
company.
• The individual should be a person of integrity.
• The individual should have sufficient skill/expertise in the
area of business of the company.
 Appointment of Independent Director
• The Central Government vide Rule 4 of Companies
(Appointment and Qualification of Directors) Rules, 2014
has prescribed as follows
• The following class or classes of companies shall have at
least two directors as independent directors –
• (i) the Public Companies having paid up share capital of ten
crore rupees or more; or
• (ii) the Public Companies having turnover of one hundred
crore rupees or more; or
• (iii) the Public Companies which have, in aggregate,
outstanding loans, debentures and deposits, exceeding fifty
crore rupees.
• Woman Director
• According to Section 149(1) of the Companies Act read
with Rule 3 of the Companies Appointment and
Qualification of Director) Rules 2014, the appointment of a
woman director has been made mandatory for the following
companies:
• Every Listed companies.
• Every other public company
a) having a paid-up share capital of ₹100 crores or more or
b) having a turnover of ₹300 crores or more
Duties of Director
• Section 166 of the Companies Act, 2013 defines the
duties of Directors. A Director of a company should
perform the following duties
• He should act in accordance with the articles of the
company.
• He should always Act in good faith for promoting the
objects of the company and for the benefit of its
members and act in the best interests of the company,
shareholders, its employees and the community at large.
• Exercise his duties with due and diligence and should
exercise independent judgment.
• Should not involve in situations which directly or indirectly
conflict with the interest of the company.
• Should not achieve or take undue gain or advantage of his
office whether for himself or for his relatives, associates or
partners.
• Not to assign his office – A director of a company shall not
assign his office and any assignment so made shall be void –
section 166(6) of Companies Act, 2013.
• If the director contravenes any provisions of this section, he
shall be punishable by a fine of Rs. 1,00,000 or more, which
may extend up to Rs. 5,00,000.
Rights of director and limitations
• Right to inspect books of account and other books and
papers of the company and copies of financial information
• Right to receive notices of Board meetings – section
173(3) of Companies Act, 2013
• Right to receive remuneration including sitting fees –
section 197 of Companies Act, 2013
• Right to be heard at the general meeting if notice for his
removal has been received– section 169 of Companies Act,
2013
• Right to record his dissent to any proposed resolution in
Board meeting – section 118(4) of Companies Act, 2013
• Right to participate and vote at board meetings, unless he
is interested in a particular resolution
• Right to claim travel, hotel and other expenses for
attending the Board and committee meetings and also in
connection with business of the company
• Right to summon Board meetings
• Right to compensation for loss of office in situations
specified in 191 of Companies Act, 2013

• In Air Asiatic Ltd. Re Thomas George v. KCG George (1995)

3 Comp LJ 491 (CLB), it was held that a director has right to
inspect all statutory registers
POWER OF BOARDS (Section 179 OF Companies Act, 2013)
• Section 179(1) prescribes that the Board of Directors of a
company shall be entitled to exercise all such powers, and to
do all such acts and things, as the company is authorised to
exercise and do
• But while exercising such power or doing such act or thing,
the Board shall be subject to the provisions contained in
that behalf in:
• Act
• Rules,Regulations
• Memorandum
• Articles
• Section 179(3): As per Section 179 (3) the Board of
Directors of a company shall exercise the following powers
• a) to make calls on shareholders in respect of money unpaid
on their shares;
• b) to authorise buy-back of securities under section 68;
• c) to issue securities, including debentures, whether in or
outside India;
• d) to borrow monies;
• e) to invest the funds of the company;
• f) to grant loans or give guarantee or provide security in
respect of loans;
• g) to approve financial statement and the Board’s
report;
• h) to diversify the business of the company
• i) to approve amalgamation, merger or reconstruction
• j) to take over a company or acquire a controlling or
substantial stake in another company;
• k) any other matter which may be prescribed
• Rule 8 of the Companies (Meeting of Board and its Powers)
Rules, 2014 prescribes additional powers which can also be
exercised by the Board of Directors only by means of
resolutions passed at meetings of the Board
• 1. to make political contributions;
• 2. to appoint or remove key managerial personnel (KMP);
• 3. to appoint internal auditors and secretarial auditor.
• By passing the resolution at its meeting, the Board may
delegate the powers specified in clauses (d) to (f) on such
conditions as it may specify to:
• any committee of directors,
• the managing director, the manager,
• any other principal officer of the company or
• the principal officer of the branch office (in the case of a
branch office of the company)
Removal of Directors
1. Removal by Shareholders
2. Removal by Tribunal

• Section 169 of the Companies Act, 2013 provides for

removal of directors.
• A company may by ordinary resolution remove a director
provided he is not appointed by the tribunal under Section
242 of the Act, before the expiry of the period of his office
and after giving him a reasonable opportunity of being
heard
1 .When the Director himself gives Resignation
The steps to be followed in this scenario are:
• Holding a board meeting by giving 7 days of notice
• In the meeting, the board members will take note of the
resignation
• Then they have to pass a resolution in a particular format
to that effect
• After that, Form DIR-11 needs to be filed by the resigning
director in his individual capacity
• The company has to file Form DIR-12 with the registrar of
companies (RoC) along with the registration letter and the
board resolution
• When all the forms are filled and the formalities for the
removal of the director are done, the name of the
director will be removed from the master data of the
company on the Ministry of Corporate Affairs (MCA)
website
2. Director Remains Absent from the Board Meetings for
12 Months
• If a director absents himself from all the meetings of the
board of directors held over a period of 12 months, with
or without seeking leave of absence from the board, they
are considered to have vacated their office as per Section
167
• A Form (DIR-12) must be filed
• Upon completion of the formalities, the concerned
director’s name will be removed from the database of the
Ministry of Corporate Affairs (MCA).
3. Removal of Director by Shareholders
• A notice is to be sent to all the shareholders for a
meeting required to be conducted within seven days
from the date of the issue
• A resolution is to be passed to have a general meeting
and then for the removal of the director, subject to the
approval of the shareholders on the day of the meeting
• After providing a 21 days notice, the second meeting of
shareholders is held to vote on the resolution passed
earlier and the director who is being removed by the
shareholders will be allowed to speak on their removal
• The shareholders must file Form DIR-12, along with
the attachments of the board resolution, and an
ordinary resolution
• Once all the formalities are over, the name of the
concerned director is removed from the database of
the Ministry of Corporate Affairs (MCA) and its
website.
2. Removal by Tribunal (Sec.242)
• When an application has been filed to Tribunal under
section 241 against oppression and mismanagement of
company’s affairs, Tribunal may order for the removal
of any of the directors of the company
Company Meetings
• The meetings of a company can be broadly classified into
four kinds.
1. Meetings of the Shareholders.
2. Meetings of the Board of Directors and their Committees.
3. Meetings of the Debenture Holders.
4. Meetings of the Creditors
1. Meeting of the Share Holders
The meetings of the shareholders can be further classified
into four kinds namely,

a) Statutory Meeting
b) Annual General Meeting
c) Extraordinary General Meeting and
d) Class Meeting
a) Statutory Meeting
• This is the first meeting of the shareholders conducted after
the commencement of the business of a public company.
• Companies Act provides that every public company limited
by shares or limited by guarantee and having a share capital
should hold a meeting of the shareholders within 6 months
but not earlier than one month from the date of
commencement of business of the company.
• It is conducted only once in the lifetime of the company.
• A private company or a public company having no share
capital need not conduct a statutory meeting.
• objective
• The purpose or objective of convening a statutory meeting is
to discuss the statutory report prepared by directors which
contains particulars relating to the formation of the
company to enable them to know the working of the
company from the date of its incorporation and also its
financial position
b) Annual General Meeting
• The Annual General Meeting is one of the important
meetings of a company.
• It is usually hold once in a year.
• AGM should be conducted by both private and public ltd
companies whether limited by shares or by guarantee;
having or not having a share capital.
• As the name suggests, the meeting is to be held annually
to transact the ordinary business of the company
Objective
• To give full information to members of the progress by the
company during the year .
• Period of holding the meeting every company other than
one person company shall hold its first annual general
meeting within the period of 9 months from the date of
closing of the first financial year of the company and
subsequent annual general meeting within a period of
6 months , from the date of closing of the financial year .
• The gap between two meetings shall not be more than 15
months.
• If a company hold its first annual general meeting as
aforesaid , it shall not be necessary for the company to hold
any annual general meeting in the year of its incorporation .
• The registrar may for any special reason , give extension up
to three months for holding the annual general meeting .
• Every annual general meeting shall be called during business
hours , that is between 9 am and 6 pm on any day that is not
c) Extra-ordinary General Meetings (EOGM)
• Statutory Meeting and Annual General Meetings are
called the ordinary meetings of a company.
• All other general meetings other than these two are called
Extraordinary General Meetings.
• As the very name suggests, these meetings are convened
to deal with all the extraordinary matters, which fall
outside the usual business of the Annual General Meetings.
To convene the EOGM , Requisition shall be made by
• In the case of a company having a share capital-not
less than members holding 1/10th of such paid-up
share capital of the company as on that date carries
the right of voting.
• in the case of a company not having a share capital-
members having not less than 1/10th of the total
voting power on the said date a right to vote, can call
an extraordinary general meeting of the company.
Class Meetings
• Class meetings are meetings which are held by the
holders of a particular class of shares
• e.g. preference shareholders
• Class meetings are generally conducted when it is
proposed to alter, vary or affect the rights of a particular
class of shareholders
• For example, for cancelling the arrears of dividends on
cumulative preference shares, it is necessary to call for a
meeting of such shareholders and pass a resolution as
required by Companies Act
2. Meetings of the Directors
• Meetings of directors are called Board Meetings.
• These are the most important as well as the most
frequently held meetings of the company.
• All important matters relating to the company and its
policies are discussed and decided upon.
1) Meetings of Board
2) Meetings of Committees of Board
• [Audit Committee
• Nomination and Remuneration Committee
• Corporate Social Responsibility (CSR) Committee
• Stakeholders Relationship Committee]
3. Meetings of Debenture Holders
• The debenture holders of a particular class conduct these
meeting.
• They are generally conducted when the company wants to
vary the terms of security or to modify their rights or to
vary the rate of interest payable etc.
• Rules and Regulations regarding the holding of the meetings
of the debenture holders are either entered in the Trust
Deed or endorsed on the Debenture Bond so that they are
binding upon the holders of debentures and upon the
company.
4. Meetings of the Creditors
• Strictly speaking, these are not meetings of a company.
• They are held when the company proposes to make a
scheme of arrangements with its creditors.
• Companies may sometimes find it necessary to compromise
or make some arrangements with their creditors, In these
circumstances, a meeting of the creditors is necessary