Introduction

“A corporation is an artificial being, invisible, intangible and existing only in contemplation of

Section 2(13) of the Companies Act, 1956 defines a ‘director’ as including “any person
occupying the  position of a director by whatever name called “. Thus, it is not the name by
which a person is called but the position he occupies and the functions and duties which he
discharges that determine whether in fact He is a director or not.

In Re, Forest of Dean Coal Mining Co. it was stated that function is everything; name matters 
nothing. So long as a person is duly appointed by the company to control the company’s business
and authorised by the articles to contract in the company’s name and on its behalf , he functions
as a director. A company is Indeed a person but  juridical person and the directors as a body
endow the juridical person with human face that can act and react.

Section 303(1) of the Companies Act ( through for the limited purpose of maintenance of
Register of directors, etc.) provides that any person with whose directions or instructions the
Board of Directors is accustomed to act is also deemed to be a director.

Position of Director standing in relation to the Company

A company is a legal person who is leaving only in the eyes of law. It's a creation of law which
lacks both body and mind. It cannot act, just like a human being. It can act only through some
human agency. Directors are those persons through whom company acts and does business. They
are collectively known as Board of Directors.
Section 252-323 of the Companies Act, 1956 deal with the appointment of directors,
remuneration of directors, disqualification of directors, vacation of office by directors, Meeting
of Board of Directors.

Board of Directors is the brain and the only brain of the company which is the body, and the
company can does act only through the board of directors. A director is a person who has control
over the direction, conduct management or Superintendence of the affairs of the company. Only
an individual can be appointed as a director. An association or a firm cannot be appointed as
director of a company.

Director as Agents

Directors are the agents of a company. They are acting on behalf of the company. So the
directors cannot be held personally liable for any default of the company. It was held that for a
loan taken by a company, the directors, who had not given any personal guarantee to the creditor,
could not be made liable merely because they were directors.

In Ferguson v. Wilson, the court clearly recognised 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. The directors contract in the name, and on behalf of
the merely the ordinary case of a principal and agent. When company. It is the company which is
liable on it and not the directors.

Like agents, directors have to disclose their personal interest, if any, in any transaction of the
company. In Ray Cylinders & Containers v. Hindustan General Industries Ltd, held that, the
directors are the agents of the institution and not of its individual members, except when that
relationship arises due to the special facts of the case. Also granted permission to file a suit
against a company was not allowed to be treated as permission against directors as well.

Director as Trustees

Directors are the trustees 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.
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 11.
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 trustees.

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 limbs 17. Thus
the modern directors are more than mere agents or trustees. The Board is also correctly
recognised 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.

The state of mind of these 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.

5(b). What are the statutory provisions relating to the appointment of directors in a
company?

Appointment of Directors

The success of the company depends, to a very large extent, upon the competence and integrity
of its directors. It is, therefore, necessary that management of companies should be in proper
hands. The appointment of directors is accordingly strictly regulated by the act. There are now
special provisions for preventing management by undesirable persons.

Appointment of first directors –

The first directors are usually appointed by name in the articles or in the manner provided
therein. Where the articles do not  provide for the appointment of first directors, the subscribers
to the memorandum, who are individuals, shall be deemed to be the first directors of the
company subject to the regulations of the company’s articles. The first directors can hold office
until the directors are duly appointed in accordance with the provisions of section 235) (Section
254). It may, however, be noted that in case of a public company, a list of persons who are   to be
the first directors of a company along with their consent in writing must be delivered to the
Registrar of Companies.

Appointment of directors at general meeting –

According to section 255, the director must  be appointed  by the company in general meeting. In
the case of a public company or of a private company which is a subsidiary of a public company,
unless the articles provide for the retirement of all directors at every annual general meeting, at
least two-third of total number of directors must be persons whose period of office is liable to
determination by rotation. In other words, only one third  of the total number of directors can be
non-rotational directors.

Section 256 provides that one-third of the directors subject to retirement by rotation must retire
at an annual general meeting. It follows that all such directors must retire in the course of three
years, one-third of them retiring in each year. The directors to retire by rotation at every annual
general meeting shall be those who have been longest in office since their last appointment. As
between persons appointed on the same day, retirement is to be determined by mutual consent
and in case of default, by lots [Section 256(2)].

If the directors do not hold a general meeting in time, can they continue till the meeting is held?
The Delhi High Court in B.R. Kundra V. Motion Picture Association, held that directors cannot
prolong their tenure by not holding a meeting in time . The directors due to retire by rotation
must vacate office at the latest on the last day on which an annual general meeting ought to have
been held. Retiring directors are, however, eligible for re-election.

Deemed re-appointment of a retiring director [Sec. 256]- The vacancy caused by the retirement
of a director by rotation should be filled up at the same meeting or at an adjourned meeting. If it
is not so done, the retiring director shall be deemed to have been appointed at such adjourned
meeting except in the following cases:
 1. At any previous meeting, a resolution for his re-appointment was put to vote, but was
lost; or

2. the retiring director has, in writing, expressed his unwillingness to continue, or

3. he is not qualified or is disqualified for appointment; or

4. a special or ordinary resolution is necessary for his appointment or reappointment by

5. it is resolved not to fill the vacancy; or

6. it is resolved to fill two or more vacancies by a single resolution (Sec. 263).

Appointment of a director other than a retiring director [Sec. 257]-

Section 257 provides for the procedure of appointment of a person other than retiring director. If
any person other than the retiring director wishes to stand for directorship or any  member
proposes a person for directorship, he must signify his intention to do so by giving 14 days’
notice to the company before the general meeting and the company must inform the members not
later than seven days before the general meeting either by individual notices or by advertisement
of this fact in at least two newspapers circulating in the place where its registered office is
located of which one must be in English and the other in the regional language of that place.