Corporate Laws

Concept of Directors and their different positions in a company

Download PDF

In this article we will discuss about Concept of Directors and their different positions in a company.


Concept of Director

Concept of Directors and their different positions in a company

According to the Supreme Court of India “ A person who guides policy and superintends  the working of a company is a director”.

A director is a person in a company who lead, supervise company to meet their day to day operations  and director is a person who appointed as a board of director,Overseeing their specific department such as Finance, Marketing or Manufacturing.

Concept of Directors and their different positions in a company

The Position of the Directors in a company is explained in this article.

  1. As Agent
  2. As Trustee
  3. As Officers
  4. As Employees
  5. As Organ of the company
  6. As Managing partner

1.Director As Trustees:

Directors are the trusties of the company’s money, property and their powers and such must account for all the moneys over which they exercise control and shall refund any moneys improperly paid away, and shall exercise their powers honestly in the interest of the company and all the shareholders, and not their own sectional interest.

Concept of Directors and their different positions in a company

The directors of a company are trustees for the company, and for reference to their power of applying funds of the company and for misuse of the power they could be rendered liable as trustees and on their death, cause of action survives against their legal representatives. Directors are those persons selected to manage the affairs of the company for the benefit of shareholders. It is an office of trust, which if they undertake, it is their duty to perform fully and entirely. This peculiar nature of their office is one of the reason why the directors been described as trusties.

2.Director As Agents

In Ferguson v. Wilson6, the court clearly recognized that directors are in the eyes of law, agents of the company. It was held that, the company has no person; it can act only through directors and the case is, as regards those directors, merely the ordinary case of a principal and agent.

Concept of Directors and their different positions in a company

When the directors contract in the name, and on behalf of the company, it is the company which is liable on it and not the directors

3.Director As Organs Of Corporate Body :

The organic theory of corporate life “treats certain officials as organs of the company, for whose action the company is held liable just as a natural person is for the action of his limbs17. Thus the modern directors are more than mere agents or trustees. The Board is also correctly recognized to be a primary organ of the company. Directors and managers represent the directing mind or will of the company and control what it does.

Concept of Directors and their different positions in a company

The state of mind of these managers is the state of mind of the company and is treated by law as such. The practical effects of these rules are that the directors’ personal fault in the business of the company becomes the “fault of the company”; their reason to believe is attributed to the company and the intention to occupy a premises as expressed by their conduct is the intention of the company.

Concept of Directors and their different positions in a company

Q.2.Explain the disqualification of directors ?

Ans:Section 164 of Companies Act, 2013 contains the provision related to Disqualification of Director, which is produced as under:

(1) A person shall not be eligible for appointment as a director of a company, if

(a) he is of unsound mind and stands so declared by a competent court;

(b) he is an undischarged insolvent;

(c) he has applied to be adjudicated as an insolvent and his application is pending;

(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence.

(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;

(f)  he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;

Concept of Directors and their different positions in a company

(2) No person who is or has been a director of a company which

(a) has not filed financial statements, or  annual returns for any continuous period of three financial years;

(b) has failed to repay the deposits accepted by it, or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more,

shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

 

So we have discussed the Concept of Directors and their different positions in a company. If you have any query please let us know in the comments section below.

Download PDF

Leave a Reply