DIRECTORS.  An appointed or elected member of the board of directors of a company who, with other directors, has the responsibility for determining and.

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Presentation transcript:

DIRECTORS

 An appointed or elected member of the board of directors of a company who, with other directors, has the responsibility for determining and implementing the company’s policy.

First and Subsequent appointments a) Subscribers to the memorandum(sec-91(1)(a) b) Shareholders in general meeting c) Board of directors d) Government, and e) Third parties Ref.: page 140

Provisions as to appointment Sec.90(1) :Every company shall have at least three directors Sec.90(3) :Only natural persons can be appointed directors Sec.91(1)(b) :The directors shall be appointed by the members in general meeting. Sec.91(1)(c) :Casual vacancy may, however, be filled up by the directors. Sec.91(2) :The duration of office of a director shall be liable to determination at any time by retirement in rotation. Sec.92(1)(a) :A consent in writing by persons to act as directors must be filed with the registrar. Sec.92(1)(b):A contract of directors to take qualification shares must be filed with the registrar or sign the memorandum of association by taking qualification shares. Ref.: page 141

Sec.93:A signed consent to act as director should accompany the proposal for directorship to the company. Sec.101:A director away from Bangladesh for a consecutive period of at least three months may appoint his alternative director if so authorized by the article or by a resolution of the general meeting. Sec. 115(1):A registrar of directors shall be maintained in which shall be entered all individual particulars of directors including their any other directorship. Sec. 115(2):A return is to be filed with the registrar within fourteen days of appointment of directors. Every subsequent changes in the directorship must be supported by like returns within a period of fourteen days of such changes.

Qualification shares These are the shares which must be held by each director as a condition for acting as directors under the articles of association. A director need not hold more than one share as his qualification share. An amplification of the sub-section (1)of section 97 gives the following: a) The articles of association may provide and define the qualification shares b) If so provided every director shall take the qualification shares. c) The qualification shares should be acquired within sixty days or such shorter time as fixed in articles after appointment as directors. d) In default a director will cease to be a director e) If an unqualified person acts as a director he will be liable to a fine of tk.200 for every day of default.

Duties of directors In ascertaining the scope of duties of directors it is necessary to consider a)the nature of business of the company b)the working manners of business. directors are not infallible(dependable), but here, the attitude of directors should be -Supportive in the situation and -consistent with the articles of association of the company.

Continue… Directors should be attentive to the followings: -act honestly and bonafide (genuine) -exercise a reasonable degree of skill and elegance (Style) -be cautious and careful about company’s interests -through their continuous attention is not expected, but they need to be mindful at least in board meeting and -act within the scope of the articles

Continue… The directors should take specific care about the following important aspects of their duties towards the company: - Not to make any secret profit - Avoid direct or indirect personal involvement in any transactions of the company. - Not to conflict company’s interest with that of his own - Net to enter into a contract, the benefits where under would otherwise have accrued to the company.

Remuneration of directors -Directors are not servants of the company. Regulation 70 provides that the remuneration of the directors shall from time to time be determined by the company in general meeting. -If a company stipulates such a provision in its articles and the directors remuneration is fixed on the basis of it, the company has the right to a)reduce or increase the remuneration and b)discriminate between directors the remuneration so payable.

When office of a director stands vacated? Vacation of the office of the Director As per section 108 of the Companies Act, the office of a Director shall become vacant under the following circumstances: 1. If he fails to obtain within the due time or at any time thereafter ceases to hold the qualifications shares, if any, necessary for his appointment; or 2. If he is found to be of unsound mind by a competent court; or 3. If he is adjudged an insolvent; or 4. If he fails to pay calls money made on him in respect of shares held by him within six months from the date of such calls being made; or 5. If he or any firm of which he is a partner of any private company of which he is a director, without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of a managing director or manager or a legal or technical adviser or a banker; or

When office of a director stands vacated ? 6. If he absents himself from three consecutive meeting of the Directors or from all meeting of the Directors for a continues period of three month. Whichever is the longer, without leave of absent from the Board of Director; or 7. If he or any firm of which he is a partner or any private company of which he is a director accepts a loan or guarantee from the company in contravention of section 103; or

position, powers and liabilities of directors. Legal position of Directors.  There are different views about the legal position of Directors. They have been described sometimes as trustees of the company and sometimes as its agents. Neither view is wholly correct but both contain elements of truth. Fiduciary Position:  It is generally agreed that the Directors occupy a fiduciary position in relation to the Company. They must make full disclosure of all material facts of the Company. Fiduciary meaning: Law Involving trust, especially with regard to the relationship between a trustee and a beneficiary: the company has a fiduciary duty to shareholders Officers:  The Section 2(i) (o) of the Companies Act provides that a Director is an officer of the Company.

Power of Directors  Directors derive their power and authority from two sources (i) the Articles of Association of the Company and (ii) the Companies Act.  The articles of association generally contain a list of the powers, which may be exercised by Directors and the limitation on those powers. Liabilities of Directors  The liabilities of Directors may be analyzed with reference to liability of Directors to third parties, liability to the company, liability for breach of statutory duties and liability for acts of his Co-Directors. Directors, liability may be civil liability, criminal liability and unlimited liability. Civil Liability  The directors may, under certain circumstances, be liable to pay compensation to the Company and to outsiders, such as:  1. Untrue statements in the prospectus.  2. Ultra vires acts. : Some thing done without such authority, it is ultra vires

Managing director The companies act-1994,in section 2(1) (m) defines a managing director. It stipulates that a managing director means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its board of directors or by virtue of its memorandum or articles of association, is entrusted with substantial powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called. It is further provide that a managing director shall exercise his powers subject to the superintendence, control and direction of its board of directors. As per Section 110 no Company shall appoint or employ any individual as its Managing Director for a term of exceeding five years at a time.

Continue…. The new companies act, however, in sections 109 and 110 has set certain limits in the appointment of managing director. These are: 1. A person cannot be appointed managing director of a public company if he is the same in any other company. 2. None can be so appointed without consent of the general meeting, 3. Government approval will be necessary to appoint one as managing director for more than two companies. 4. A managing director cannot be appointed for a term of more than five years at a time, 5. The tenure of appointment may be renewed after every five years but nothing can be done without consent of the general meeting.

Appointment of the Managing Director of Banking Companies:  As per Banking Companies Act 1991 and Financial Institution Act Managing Director is appointed as contractual employee. Any person who has at least 10 years of experiences in the line of Bank and Financial institutions with well conversant for Managing the Bank or Financial Institutions is eligible for appointment as the Managing Director,

following rules to be complied with. 1. Term of appointment will be three years and will be eligible for reappointment. 2. The Managing Director shall not be a shareholder of the bank. 3. Prior approval of Bangladesh bank should be taken for the appointment of the Managing Director. 4. Terms and condition of appointment including salary and allowances and other benefits to be specified and to be informed to the Bangladesh Bank for approval. 5. The Managing Director will not be eligible for any special bonus. 6. A person aged over 65 years will not be appointed as the Managing Director.

Civil Liability The directors may, under certain circumstances, be liable to pay compensation to the Company and to outsiders, such as:  1. Untrue statements in the prospectus.  2. Ultra vires acts. : Ultra vires is a Latin phrase meaning literally "beyond powers"Latinphrase Criminal liability  For certain breaches of duty the Companies Act imposes criminal liabilities upon Directors such as:  1. Untrue statements in prospectus, failing to keep certain register, falsification of books and reports etc.