Directors are those members of the collective body sometimes referred to as the Board of Directors who oversee, manage, and direct the activities of a firm. Considered the trustees of the company's assets and money, directors also serve as the agents in deals they negotiate on behalf of the business.
Directors are expected to carry out their duties and obligations as logically conscientious persons with talent, knowledge, and experience as the person performing functions of a director and of that herself. He/she performs several responsibilities in the business, including agent, employee, officer, and trustee of the corporation.
Directors as defined in the Companies Act, 2013
Under section 2(34) of the Companies Act, 2013, a director is defined as "a director appointed to the board of a company." The Organization chooses a director to provide direction to the company in which he is named.
The directors in question are also referred to as "officials of the Company." All of the objectives specified in the Company's Memorandum of Association are concurrently their responsibility. Directors are responsible for the administration, execution, supervision, and control of tasks under the Companies Act 2013.
Directors strive to attain the organization's overarching objective by assessing its strengths and weaknesses. Their appointment and dismissal are overseen by a comparable body.
Public firms need three directors, privately held enterprises demand two, and sole proprietorships mandate one director. Directors are nominated and dismissed by a comparable organization.
Types of Directors
- Executive Director
- Non-executive director
- Director of Operations/ Managing Director
- Residential Director
- Independent Director
- Directors of Small Shareholders
- Women Directors
- Deputy Director
- Alternate Director
- Directors who have been Nominees
Various Roles of a Director in a Company
Directors are responsible for the management, supervision, and direction of a company. They are considered employees, trustees, officers, and agents of the company or the corporation. The company hires professional men to manage its affairs.
However, they are not considered as servants. Directors may offer their professional services as sole employees and directors through a special service agreement. No such provision has been made in the Companies Act, 2013, where the role of the directors has been expressed, but to communicate rich perceptions, these words have been used.
Qualifications of Director under the Companies Act 2013
Based on all the rules about Directors, the following can be called Director Qualifications under the Companies Act 2013:
- An Indian citizen
- Must be older than 18 years old.
- Under the Companies Act 2013, each director must be a real person.
- Someone with a clear head
- Must be able to give their word in a deal.
- If it was given out under the AOA, it must have a share qualification.
- Can't be the person who is insolvent or bankrupt
- Cannot be found guilty of any of the crimes by a court
- The person needs to have their DSC.
Disqualifications of Director under the Companies Act 2013
Section 164 of the 2013 Act allows the following as grounds for director disqualification:
- An unsound person is deemed such by a competent court.
- Undischarged insolvency
- Convicted by a court for any crime
- Order was approved for his Companies Act 2013 disqualification of directors.
- Has not suffered for calls about Company shares in regard.
- Has not submitted yearly returns or financial statements for three consecutive financial years.
- Has failed to pay a dividend for one year or redeem the debenturies on the due date or pay back the deposit or interest.
- He does not have a DIN.
- Convicted for an infraction involving a transaction between related parties within the last five years.
Duties of a Director in a Company or Corporation
A director is accountable for adhering to the company's Articles of Association, utilizing independent judgment, avoiding conflicts of interest, and pursuing the best interests of stakeholders.
To approve related party transactions, they must ensure that they are adequately deliberated and that sensitive information, commercial secrets, and technologies are kept confidential. The office of directors is not assignable, and they may be subject to penalties ranging from one lakh to five lakh rupees.
The Companies Act 2013 also specifies the duties of Independent Directors, who are members of the Board of Directors but do not possess any shares or have a pecuniary relationship with the company.
They are accountable for safeguarding and advancing the interests of all stakeholders, serving as a mediator in instances of conflict of interest, facilitating the transmission of independent and equitable judgment to the Board of Directors, and reporting instances of suspected fraud, code of conduct violations, or unethical behaviour.
Appointment of Auditor
The Companies Act 2013 requires companies to carefully select directors, with private companies having at least two directors and public companies having at least three. One-person businesses can have up to fifteen directors, and a female director is required. Each fiscal year, at least one member must spend 182 days in India.
Independent directors must serve on the boards of every company listed. First directors are appointed through Memorandum of Association (MOA) members, and no one can be named as a director of a publicly traded company unless they meet certain requirements.
The Act also allows proportional representation, allowing small owners to pick directors. Directors can be made by the board, and at least one-third of a company's members must be independent. Independent directors must be knowledgeable, trustworthy, and have never worked for or supported the business, its partner, or any other parent company.
Removal of Director
By following Section 169 of the 2013 Act, either the company or the panel can fire a director. Either a regular settlement or a proportional representation method can be used by the company to get rid of a director.
At least 14 days before the meeting, a special reminder must be sent out. A person in charge can speak out against the motion at the general meeting. If a director makes a show, a copy of it needs to be sent to all members.
The panel has the power to fire any member of the company, including the managing director, the manager, or any other director. If someone goes to the commission to get help for being mistreated or oppressed, it can end any deal with a director. If a director's job is ended, they can't be a boss for five years without taking time off from the Tribunal.
Conclusion
Directors are very important to a business and have certain duties. The Companies Act 2013 deals with issues related to directors.
Shareholders choose who these people are. The AOA spells out what makes someone qualified or not qualified. There is a five-year bar for approved agents, but filing mistakes can be appealed and fixed within 30 days.
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