Director of a Company - Complete 16 Marks
1. Meaning of Director
A Director is a person appointed to the board of a company to help manage and guide its
operations. Directors are responsible for taking important decisions and ensuring the company
follows legal and ethical standards.
Types of Directors
1. Managing Director - In charge of daily operations.
2. Executive Director - Full-time employee and part of management.
3. Non-Executive Director - Not part of daily operations, gives advice.
4. Independent Director - Free from company influence, ensures fairness.
5. Nominee Director - Represents a group or institution.
6. Women Director - Required in certain companies under law.
Features of Director
1. Appointed under Companies Act.
2. Responsible for company management.
3. Must act in company's best interest.
4. Can be individuals only (not firms).
5. Work as a team in the Board of Directors.
Advantages of Director
1. Provides expert guidance.
2. Ensures legal and ethical compliance.
3. Brings leadership and strategic vision.
4. Maintains transparency.
5. Represents company externally.
Disadvantages of Director
1. May misuse power.
2. Poor leadership can harm business.
3. Internal conflicts possible.
4. High costs of salaries.
5. Can create dependency.
Importance of Director
1. Backbone of company governance.
2. Drives company growth.
3. Ensures accountability and efficiency.
4. Protects investor interests.
5. Maintains good corporate image.
2. Appointment of Directors
Directors are appointed by:
1. Shareholders in the general meeting.
2. The Board of Directors for casual or additional positions.
3. Government or tribunal under special cases.
4. As per Articles of Association.
Types of Appointment
1. First Director - Named in Articles.
2. Additional Director - Temporarily appointed.
3. Alternate Director - Acts in absence of another.
4. Nominee Director - Appointed by lenders or institutions.
Features of Appointment
1. Legal and formal process.
2. Director must consent.
3. Filed with Registrar of Companies.
4. Must meet qualifications under the law.
Advantages of Appointment
1. Brings in needed talent.
2. Maintains continuity in leadership.
3. Ensures proper management.
4. Builds investor confidence.
Disadvantages of Appointment
1. Risk of unfit selection.
2. May lead to power imbalance.
3. Costly appointment process.
4. May resist reforms.
Importance of Appointment
1. Vital for company formation.
2. Ensures capable management.
3. Provides legal recognition.
4. Supports growth and planning.
3. Removal of Directors
Directors can be removed:
1. By shareholders with ordinary resolution.
2. Through disqualification under the Act.
3. By court or tribunal for fraud or misconduct.
4. If they resign or term ends.
Types of Removal
1. Voluntary Resignation.
2. Term Completion.
3. Legal Disqualification.
4. Shareholder Action.
Features of Removal
1. Requires notice to all.
2. Director has right to explain.
3. Must follow proper legal steps.
4. Effective only after resolution passed.
Advantages of Removal
1. Removes ineffective or corrupt directors.
2. Maintains performance standards.
3. Encourages accountability.
4. Brings change and reform.
Disadvantages of Removal
1. Can affect stability.
2. May cause disputes.
3. Reduces morale.
4. May lead to legal trouble.
Importance of Removal
1. Keeps board effective.
2. Avoids conflicts of interest.
3. Maintains company standards.
4. Protects shareholder interests.
4. Powers of Directors
1. Manage daily business.
2. Borrow money and invest.
3. Approve accounts and reports.
4. Sign contracts and documents.
5. Appoint staff and consultants.
6. Declare dividends.
5. Duties of Directors
1. Duty of care and skill.
2. Duty to act in good faith.
3. Duty to avoid conflict of interest.
4. Duty to follow law.
5. Duty to protect company and stakeholders.
6. Liabilities of Directors
1. Personally liable for fraud.
2. Can be fined or jailed.
3. Liable for losses due to negligence.
4. Can be sued by shareholders.
5. Subject to disqualification.
