Directors

 Introduction: 

In several cases, the requirement of the directors has been clarified, as the company is an  artificial being invisible, intangible and existing only in contemplation of law. It has neither A  mind nor a body of its own. A living person has a mind which can have knowledge or intention  and he has hands to carry out his intention. Thus, a living person is required to conduct the  company's business. 

Definition: 

As per section 2(34), a director means a director appointed to the board of a company. Section  149 of the act requires that every public company shall have at least three directors and every  private company shall have at least two directors and in case of a one-person company at least  one is required. 

Appointment of Directors: The appointment of directors of a company is strictly regulated by  the Companies Act, 2013. 

1) Appointment of directors through election by small shareholders: A listed company is  required to have a director who should be elected by small shareholders as per section 151 of the  Companies Act, 2013. Small shareholders in this context are referred to the shareholders holding  shares of the value of maximum Rs. of 20000. 

2) First director: The subscribers of the memorandum appoint the first directors of the  company. They are generally listed in the articles of the company. If the first director is not  appointed then all the individuals who are subscribes become a director. The first director holds  the office only up to the date of the first Annual General Meeting and the subsequent director is  appointed as per the provisions laid down under section 152. This same view was held in Usha  Chopra VS Chopra hospital private limited.i 

Appointment at General Meeting: Section 152 Lays down the provision that the director  should be appointed by the company in the general meeting. The persons who appointed is  assigned to the director identification number. He also has to make sure in the meeting that he is  not disqualified from becoming a director. The individual appointed has also to file his consent  to act as a director within 30 days with the registrar. But the point is to be noted is that there is a 

prescribed procedure for appointment of directors even if directors are not appointed by  following such procedure, promoters would have no right to clear right to act as directed even as  in case of Rajshekhar Agrawal v. Union of Indiaii where the registrar of companies dismissed  their application for uploading their signature in the website. 

3) Appointment by Nomination: Section 161(3) leaves a scope for appointments to be made in  accordance with the company’s article without being rotated the company's General Meeting.  When an agreement between the shareholders has been included in the articles that and title  every shareholder with more than 10% shares to be appointed as a director then they can be  nominated as director. This procedure was also applied in the Bharat Bhushan v.HB Portfolio  Leasing Limited.iii 

Also as per section 161(3), subject to the articles of the company the board can appoint any  nominated person by any institution in pursuance of law as a director. 

4) Appointment by voting on an individual basis: The appointment of a director is made by  voting at the general meeting. It was laid down under section 162 of the Companies Act, 2013 that the candidates have to vote individually and the wishes of the shareholders regarding each  proposed director are required. Also, it was held in the case of Raghunath Swaroop Mathur vs  Raghuraj Bahadur Mathuriv when two or more directors are appointed based on single  resolution and voting then it is considered to be void in the eyes of law. 

5) Appointment by proportional representation: As per section 163 of the Companies Act, the  article of a company can enable the appointment of directors through the system of voting by  proportional representation. The system of voting is used to make effective minority votes. The  system of proportional representation can be followed by a Single Transferable Vote or by the  system of cumulative voting or any other means. 

Cumulative voting is a voting procedure which permits a substantial minority of the stakeholder  to select one or more directors one or more directors. 

6) Appointment of directors by the board: Generally, the appointment of the directors is done  in the Annual General Meeting of the shareholders but there are two cases when the board can  also appoint a new director. Those are as follows: 

1) Articles may empower the directors to appoint additional directors subject, of course, to the  maximum number fixed therein under section 161(1). 

2) The act itself by section 161 authorises the director to fulfil casual vacancies. 

Thus, this situation may result of conflict between the General Meeting and directorate, which  was also found in the BN Viswanathan v. Tiffins Baryt Asbestos Private Limitedv, which  resulted in a principle, "a company has inherent power to take all steps to ensure it's proper  working and that, of course, includes the power to appoint directors. It can delegate the power to 

the board and such delegation will be winding up on it but if there is no legally constituted board  which could function or if there is a board that is unable or unwilling to function, then the  authority delegated to the board lapses and the member can exercise the right inherent in them of  appointing directors." The similar appointment was made in Ram Kissendas Dhanuka v. Satya  Charan Law.vi 

Appointment by Tribunal: Under section 242 (j), the Company Law Tribunal has the power to  appoint directors for the prevention of oppression and mismanagement. Here, this process also  applied in the Rolta India Limited v. Venire Industries Limited.vii 

Disqualifications: 

1) unsoundness of mind 

2) An undischarged insolvent 

3) where the person is applied to be declared as insolvent and such application is pending 

4) when he is a sentence for the imprisonment for an offence involving moral turpitude for a  period of a minimum of 6 months 

5) if the Tribunal Court has passed an order disqualified him for being appointed as director

6) if he has not paid his calls in respect of any shares of the company 

7) when he is convicted for an offence which deals with related party transaction

8) when he has not complied with the requirements of the direction identification number 

9) a private company, as per section 164 (3), may by its articles provide for additional  disqualifications. 

Case study: 

In the case of Cricket Club of India v. Madhav L Apte, viiithe Supreme Court has held that a  public company and its subsidiary private companies can’t increase the disqualifications or any  other qualifications. But as per the case of Ketan HarKishan Marvadi v. Saurashtra Kutch  Stock Exchange Limitedix, such restriction has been removed from the stock exchange public  company. 

2) Number of Directorships: It is known that a person can’t hold the office of a director in more  than 20 companies at the same time. Where the director already holding offices in 20 companies,

is appointed, the appointment shall not take effect and shall become void unless within 15 days  he vacates his office in some companies to bring down the number to 20. 

But as per section 165(2), the members of a company may be our special resolution specify any  number of the companies in which a director of the company may act as directors. 

Conclusion: 

Thus, for the application of the company's objects, and to check upon the functioning of the  companies act, the authority appointed named as the director is necessary. But at the same time, this authority is also subject to some provisions laid down under the Companies Act. 

Payal Agrawal 

S. S. Jain Subodh Law College, Rajasthan University, Jaipur