COMPANY

MANAGEMENT

Director Defined
Director includes any person occupying
the position of director, by whatever name
called.
Only individuals can be director.
Every public company shall have at least
three directors every private company at
least two directors.
Increase in number of directors to be
sanctioned by Central Government if total
exceeds twelve (Sec.259)
2

APPOINTMENT OF
DIRECTORS

First directors named in articles.

Directors appointed by the company.
Retirement by rotation.
Appointment of directors by directors.
Appointment of directors by third parties.
Appointment by proportional
representation.
Appointment of directors by Central
Government.
3

POSITION OF DIRECTORS
Directors as agents.
Directors as employees.
Directors as officers.
Directors as trustees.
Trustees of the companys money
and property.
Trustees of the powers entrusted to
them.
4

DISQUALIFICATION OF
DIRECTORS
A person of unsound mind
An un-discharged insolvent.
A person who has applied to be
adjudicated as an insolvent and his
application is pending.
A person who has been convicted by
Court of any offence involving moral
turpitude for six months and a period
of five years as not elapsed.
5

 A person whose calls where in

arrears for more than six months.
A person who is disqualified by court
u/s.203.
A person who is already a director of
a public company which has not
filed annual returns/accounts for
three consecutive years or failed to
repay deposits, redeemed
debentures or pay dividend for one
year or more.
6

VACATION OF OFFICE AND

REMOVAL OF DIRECTORS

Vacation of Office (Sec 283):-

Fails to obtain qualification shares within 2

months of his appointment or ceases to
hold thereafter.
Adjudged to be of unsound mind.
Applies to be adjudged as an insolvent
Adjudged as insolvent
Convicted by court for any offence
involving moral turpitude for a period not
less than 6 months
Has calls in arrears for more than 6 months
7

 Absents himself from 3 consecutive board

meetings or for 3 months whichever is longer
without leave of absence
He or his firm or any private company of which
he is a director accepts loan or any guarantee or
security without central government approval
Fails to make disclosure of his disinterest in any
contract
Becomes disqualified by an order of court on the
ground of conviction of an offence in promotion,
formation or management or found guilty of
fraud or misfeasance in relation to winding up
He is removed by the company by ordinary
resolution
Ceases to hold office or employment in the
holding company

 Removal of Directors
By share holders (Sec 284)
By central government (Sec 388-B to
388-E)
Removal by company law board (Sec
402)

MANAGERIAL
REMUNERATION
Overall maximum managerial remuneration
not to exceed 11% of net profits of the
company(Sec.198)
Rules for payment of remuneration to
directors.
Shall be determined in accordance with the
provisions of Sec.198 and 309, either by the
articles or by a resolutions passed by the
company in general meeting.
Non executive director may received
remuneration by way of fee for each meeting.
10

 A whole time director or a managing

director may be paid either by way of
monthly salary or at a percentage of the net
profits of the company or by both the ways.
Shall not exceed 5% for one director or 10%
if more than one of the net profits without
Central Government approval.
A part time director may be paid
remuneration by way of periodical payments
with approval of central government or by
way of commission if authorized by a special
resolution which shall be in force for a
maximum period of five years.

11

 The remuneration to part time

directors shall not exceed 1% of the
net profits, if the company has a
managing director or whole time
director and 3% of the profit in any
other case.
The above rules shall not apply to a
private company unless it is a
subsidiary of a public company.

12

MEETINGS OF
DIRECTORS
Number of meetings four in a year and
once in three months.
Notice of meetings to be given in writing
to every director for the time being in India
at his usual address.
Quorum for meeting to be 1/3 of the total
strength or two directors whichever is
higher.
Quorum to be uninterested directors.
13

POWERS OF DIRECTORS

General powers of the Board (Sec.291):

1. Entitle to exercise all powers and to do
all such acts and things as the company
is authorised to do.
2. Restrictions:- Shall not do any act which
is to be done by the company in general
meeting and shall exercise its powers
subject to the provisions of company's
act or Memorandum.
14


1.
2.
3.
4.
5.

Powers to be exercised only at Board

meetings (Sec.292):
To make calls on share holders in respect
of money unpaid on their shares.
Issue debentures.
Borrow moneys otherwise than on
debentures (public deposits, etc.)
Invest the funds of the company and
Make loans.
The board may, by a resolution, delicate
the last three powers to a committee of
directors or the manager or any other
principal officer subject to specific limits.
15

Powers to be exercised with the approval

of the company in general
meeting(Sec.293)-(in case of public
company or a subsidiary of public
company):
1. To sell, lease or otherwise dispose of the
whole, or substantially whole, of the
undertaking of the company.
2. To remit or give time for repayment of any
debt due to the company by a director
except in case of a banking company.
3. To invest (excluding trust securities) the
amount to compensation received in
respect of compulsory acquisition of any
undertaking or property of the company.
16

4. To borrow moneys in excess of paid up

capital and free resource.
5. Excluding temporary loans raised from
banks.
6. To contribute to charitable or other
funds not relating to the business of
the company in excess of Rs.50,000/in any financial year.

17

DUTIES OF DIRECTORS

Fiduciary duties:
1. Exercise the powers honestly and
bonafide for the benefit of the company
as a whole.
2. Not place themselves in position in which
there is a conflict of interest.
3. Must not make any secret profit out of
their position.

18

 Duties of care, skill and diligence:

1. To carry out their duties with reasonable
care and exercise such degree of skill
and diligence as is reasonably expected
of persons of their knowledge and
status. Not bound to bring any special
qualifications to their office.
2. Standard of care depends upon type and
nature of work, division of powers
between directors and other officers,
general usage and customs and whether
directors work freely or remuneratively.
3. Case law in re: City Equitable Fire
Insurance co. ltd.
19

Other duties:
1. To attend board meetings not to
delicate functions except to the extent
authorised by the Act or Articles of the
company.
2. To disclose his interest.

20

LIABILITIES OF
DIRECTORS
Liability to third parties:
1. When prospectus not containing the
particulars required by the Companies Act
or which contains material
misrepresentation.
2. On the failure to repay application money.
3. On irregular allotment of shares.
4. On dishonour of bills, cheques etc. which
are signed without mentioning the
companys name.
21


1.
2.
3.
4.

Liability to the Company:

Ultra vires acts.
To negligence
Breach of trust
Misfeasance

Liability for breach of statutory duties

Liability for acts of his co-directors.

22

MANAGING DIRECTOR
Is a director who is entrusted with
substantial powers of management and
includes a director who occupies the
position of Managing Director, by whatever
name called.
Certain companies to appoint Managing or
whole time Director or a Manager
compulsorily.
Appoint subject to conditions specified in
Schedule XIII.
23

 Prior approval of Central Government

unless appointment is in accordance
with Schedule XIII.
Disqualifications of Managing Director
(Sec.267).
No.of Managing Directorships not to
exceed two without Central
Governments permission.
Term of office not to exceed five years
at a time in case of public limited
company.
24

WINDING UP.

Winding up or liquidation of a company is

the last stage of its life. It means a
proceeding by which a company is
dissolved.
Modes of winding up:1. Winding up by the court, i.e., compulsory
winding up [secs 433-483].
2. Voluntary winding up by members or by
creditors [secs 484-521].
3. Winding up subject to Supervision of Court

25

WINDING UP BY THE
COURT

1.
2.
3.
4.
5.
6.

Grounds for compulsory winding up [sec

433].
Special resolution of the company.
Default in delivering the statutory report to
the Registrar or in holding the statutory
meeting.
Failure to commence, or suspension of,
business.
Reduction in membership.
Inability to pay its debts.
Just and equitable.
26

When the management is carried on in

such a way that the minority is
disregarded or oppressed.
Where there is a deadlock in the
management of the company.
Where public interest is likely to be
prejudiced.
Where the company was formed for
fraudulent and illegal business.
Where the company is a mere bubble
and does not carry on any business or
has no property.
27

JUST AND EQUITABLE

1.
2.
3.
4.

When substratum of a company is gone.

Substratum of a company disappears:
When the very basis for the survival of the
company is gone.
When the main object of the company has
substantially failed or become
impracticable.
When the company is carrying on its
business at a loss and there is no reasonable
hope that profit can be made.
When the existing on probable assets of the
company are insufficient to meet its existing
liabilities.
28

Company is unable to pay its

debts when:1. Demand for payment neglected.
2. Decreed debt unsatisfied.
3. Commercial insolvency.

29

PETITION [SEC.439]
Petition by the company.
Petition by any creditor or creditors.
Petition by any contributory or
contributories.
Petition by all or any of the prior
parties whether together or
separately.
Petition by registrar.
Petition by the Central Government.
30

CONSEQUENCES OF
WINDING UP ORDER
Intimation to Official Liquidator and
Registrar.
Copy of winding order to be filed with the
Registrar.
Order for winding up deemed to be notice
of discharge.
Suits stayed.
Power of the Court.
Effect of winding up order.
Official Liquidator to be liquidator.
31

DUTIES OF LIQUIDATOR
To conduct the proceedings in winding up.
To submit Preliminary report and
Additional report.
To take custody of companys property.
To exercise and control of liquidators of
powers.
To summon meeting of creditors and
contributories.
To take directions from the court.
To keep proper books.
To get accounts audited.
To file report pending liquidation.
32

POWERS OF LIQUIDATOR

1.
2.
3.
4.
5.

Powers exercisable with the sanction of the

Court.
To institute or defend suits in the name of
and on behalf of the company.
To carry on the business of the company for
beneficial winding up.
To sell properties and actionable claims.
To raise money on the securities of the
companys assets.
To do all such other things as may be
necessary.
33


1.
2.
3.
4.
5.
6.

Powers exercisable without the sanction of

the Court.
To do all acts and execute documents
under companys seal.
To inspect records and returns of the
company.
To prove, rank and claim in the insolvency
of any contributory.
To draw, accept, make an endorse any bill
of exchange, promissory note etc.
To take out, in his official name, letters of
administration to any deceased
contributory.
To appoint an agent.
34

7. Duty of liquidator to call creditors

meeting in case of insolvency.
8. Duty to call General meeting at
the end of each year.
9. Final meeting and dissolution.
10.Provisions as to annual and final
meeting incase of insolvency.

35

GENERAL POWERS OF
COURT

Stay of winding up proceedings.

To settlement of list of contributories.
Payment of debts due by contributory.
Power to make calls.
Adjustment of rights of contributories.
Delivery of property.
Exclusion of creditors.
Order as to costs.
36

 Summoning of persons suspected

of having property of the company.
Public examination.
Arrest of absconding contributory.
Meeting of creditors or
contributories.

37

VOLUNTARY WINDING UP
[Secs.484 to 520]

1.
2.
3.

Members voluntary winding up.

Declaration of solvency.
Passing a special resolution.
Appointment and remuneration of
liquidators.
4. Boards power to cease on appointment of
a liquidator.
5. Power to fill vacancy in office of liquidator.
6. Notice of appointment of liquidator to be
given to registrar.
38

 Creditors voluntary winding

up.
1.Meeting of creditors.
2.Notice of resolution to be given
to Registrar.
3.Appointment of liquidator.
4.Appointment of committee of
inspection.
5.Liquidators remuneration.
39

6.Boards power to cease on appointment

of liquidator.
7.Power to fill vacancy in office of
liquidator.
8.Power of liquidator to accept shares,
etc.
9.Duty of liquidator to call meeting at the
end of each year.
10.Final meeting and dissolution.
40

CONSEQUENCES OF
WINDING UP

1.
2.
3.
4.

As to shareholder/members.
As to creditors.
Where the company is solvent
Where the company is insolvent
Secured and unsecured creditor
Preferential payment
As to servants and officers
As to proceedings against the company
As to cause
41

OTHER POINTS

Commencement of winding up
Powers of Court
Statement of affairs
Committee of inspection
Dissolution of company
Contributory
Defunct company
42

CORPORATE
GOVERNANCE.
Corporate governance is about
maintaining an appropriate balance of
accountability between three key players:
the corporations owners, the directors
whom the owners elect, and the managers
whom the directors select. Accountability
requires not only good transparency, but
also an effective means to take action for
poor performance or bad decisions.
- Chairperson Mary.L.Schapiro SEC,
USA.
43

 Clause 49 of Listing Agreement to

Indian stock exchanges came into
effect from 31st December 2005 with
object of improving corporate
governance in listed companies.
It ensure commitment to values, ethical
conduct of business, transparency,
statutory compliance, disclosures and
effective decision making.
It is about promoting corporate
fairness, transparency and
accountability Good Business.
44

COMPOSITION OF
BOARD.
50% of the Board should be

comprised of non- executive directors.

At least 1/3rd should be comprised of
independent directors where
chairman is a non- executive director.
At least of the board should be
comprised of independent directors
where chairman is an executive
director.
45

 Independent director is a non- executive

director who (a) does not have any material
pecuniary relationship or transaction with
the company. (b) not related to promoters
or management etc.
Non- executive directors including
independent directors fees/compensation
shall have prior approval of share holders in
general meetings.
The board shall meet at least four times a
year with a maximum gap of four months.
A director shall not be a member in more
than 10 committees or chairman of more
than five.
46

 The board shall lay down a code of

conduct for all board members and
senior management of the
company.
The board and senior management
shall affirm compliance with the
code on annual basis.

47

AUDIT COMMITTEE
A qualified and independent audit
committee shall be set up.
The audit committee shall have minimum
three directors as members.
2/3rd of the members of audit committee
shall be independent directors.
All members shall be financially literate
and at least one member shall have
accounting or related financial
management exercise.
The chairman shall be an in dependent
director who shall be present at the AGM.48

 The finance director, head of

internal audit and a representative
of the statutory auditor maybe
present as invitees.
The company secretary shall act as
secretary to the committee.
The committee should meet at
least four times in a year.

49


1.
2.
3.
4.

The audit committee shall have

powers which include :investigation of any activity
within its terms of reference.
To seek information from any
employee.
To obtain outside legal or other
professional advice.
To secure attendance of outsiders
with relevant expertise, if
considered necessary.
50

 Role of audit committee.

Review of information by audit
committee.

51

DISCLOSURES.

Basis of related party transactions.

Disclosure of accounting treatment.
Board disclosures risk management.
Proceeds from public issues, right issues,
etc.
Remuneration of directors.
Management discussion and analysis
report.

52

 Share Holders.
Share holders Grievance Committee with
the Chairmanship of non executive
director.
CEO/CFO certification.
Report on Corporate Governance.
Certificate of compliance.

53

NON MANDATORY
REQUIREMENTS
Remuneration committee.
Half yearly declaration of financial
performance to each share holder.
Training of Board members.
Mechanism for evaluating non
executive board members.
Whistle blower policy.
54

THE FACTORIES ACT,

1948

55

The act provides for working

conditions in a factory in order to
ensure health, safety and welfare
of workmen.
Factory means any premises
including the precincts thereof :1. 10 or more workers are working or
were working in a manufacturing
process during the preceding 12
months with aid of power.
2. 20 or more without aid of power.
56

 Manufacturing process is defined

by sec 2(k).
Worker as per sec 2(l) means a
person employed directly or
through any agency a
manufacturing process.
Occupier as per sec 2(n) means a
person who has ultimate control
over the affairs of the country.

57

APPROVAL, LICENSING AND

REGISTRATION OF FACTORIES
State government empowered under
sec 6 to make rules for licensing etc.
Application for permission to be
submitted to the Chief Inspector along
with certified plans and specification
for factory.
Notice by occupier [sec 7].
General duties of the occupier [sec 7A]
58

HEALTH[secs 11to20]

Cleanliness :1. Factory to be kept clean and free

from effluvia and dirt.
2. Effective means of drainage.
3. Use of disinfectants.
Disposal of waste and effluents
Ventilation and temperature.
59

Dust and fume.

Artificial humidification.
Overcrowding.
Lighting
Drinking water
Latrines and urinals
Spittoons

60

SAFETY [secs.21 to 41]

Fencing of machinery-dangerous
part of every machinery to be
securely fenced.
Work on near machinery in motion.
1. Examination of machinery in motion
by a trained adult male worker only.
2. Restriction on women and young
persons.
61

Employment of young persons on

dangerous machines.
1. Restriction on young persons to
work on dangerous machines.
2. Machines dangerous for young
persons to be specified by State
Government.

62

 Striking gear and devices for cutting off

power.
Self acting machines. Traversing part not
allowed to run within a distance of 45 cms
from any fixed structure.
Casing of new machinery to prevent
danger.
Prohibition of employment of women and
children near cotton-openers.
63

 Hoists and lifts.

Lifting machines, chains, ropes and
lifting tackles.
Revolving machinery.
To have notice of safe working speed
and speeds not to be exceeded.
Pressure plant.
64

 Floors, stairs and means of access.

Pits, sumps and openings in floors etc. to
be securely covered or fenced.
Prohibition on lifting or carrying of
excessive weights. Maximum weights to
be lifted or carried to be prescribed.
Protection of eyes.
Precaution against dangerous fumes.
Prohibition on entry in to any chamber,
tank, pipe etc. where any gas,fume etc. is
present.
65

 Precautions regarding use of

portable electric light.
Precautions against explosives or
inflammable dust, gas etc.
Measures to prevent explosions on
ignition of gas, fumes etc.
Precautions in case of fire.
Measures to prevent fire and its
spread. Familiarity with means of
escape.
66

 Power to require specifications of

defective parts or tests of stability.
Safety of building and machinery.
Maintenance of building.
Safety officers.

67

THANK YOU

68