Company Management

COMPANY MANAGEMENT
A company, being an artificial person, has no mind, or body or soul. Therefore, it
must act through human agency.The persons through whom the company acts
and does its business are called as its directors. Directors are those persons who
are responsible for directing, governing or controlling the policy \ management
of the company. Directors collectively are called as " Board of Directors". The
board of directors is the top administrative organ of the company..As per Sec.2(34)
of the Companies Act, 2013, a director means a director appointed to the Board
of a company.
Since directors are at the helm of affairs of a company, if they are irresponsible ,
dishonest and unscrupulous, interest of countless persons in the capacity of
shareholders, employees, creditors etc. will be adversely affected. Therefore,
Companies Act has made stringent provisions regarding their appointment,
powers and functions. Under the Companies Act,. Board of directors is a must for
every company. In addition to Board, companies may also have ' key managerial
personnel (KMP) like managing directors \ managers\CEO to assist the Board.
Legal Position of Directors.

It is difficult to define the exact legal position of the directors of a company. Directors are
described sometimes as agents, sometimes as trustees and sometimes as managing partners.
But none of these expressions is exhaustive of their powers and responsibilities. In fact directors
play different roles at different points of time. Let's examine their legal position in detail.
DIRECTORS AS AGENTS
Why can directors be regarded as agents Why can't directors be regarded as agents

Directors represent the company just like agents represent the Agents are appointed but directors are elected
principal

Directors have to act within their scope of their authority just like Agents work for commission whereas directors do not
agents always work for commission. eg. small shareholders
director doesn't get anything in return
Directors enter into contracts and put signatures on behalf of
company just as agents do on behalf of principal

Acts of directors within the scope of their authority are acts of the
co. and co. is liable on them just as principal is liable for the acts
of the agent.
DIRECTORS AS MANAGING PARTNERS

Why can they be regarded as managing partners Why can't they be regarded as managing partners
If company is visualised like a large partnership, directors are They don't bind other directors whereas each partner binds
like active partners and share holders as dormant partners other partners for his acts

They perform all proprietorial functions like allotments, calls, Directors are subject to retirement whereas partners rarely
forfeiture , raising loans, investment of funds etc. retire
DIRECTORS AS TRUSTEES
Why can they be regarded as trustees Why can't they be regarded as trustees
Like trustee, directors occupy fiduciary position in the Director cannot contract in his own name whereas trustee can
company i. e.position of trust and confidence

Just as a trustee works for the benefit of beneficiary and , a Director does not hold any property in trust for the co. as
director also administers the assets and exercises those powers company is the owner but trustee contracts with third parties
for the benefit of the company & not for own interest in relation to trust property as owner subject only to an
obligation to account to the beneficiaries

Directors are liable to make good moneys they have misapplied Director can neither sue nor be sued on contacts while acting
same way as trustees have to . intravires whereas trustees can sue or be sued in their own
name.

Thus we can conclude that directors are neither agents nor managing partners nor trustees, in the full sense of the term. They
combine in themselves all the three positions. They stand in fiduciary position towards the company and can best be termed
as officers of the company.
Composition of Board of Directors
Following are the provisions of Companies Act regarding Board of Director-
• Directors must be individuals only- A firm, association or company cannot be appointed as director. The individual must be
competent to contract, must have a DIN and should not be disqualified u\s164.
• Minimum No. of directors required in a company are -
1 in case of one person co.
2 in case private company
3 in case of public company
• Maximum No of directors- Every company shall have maximum 15 directors. This limit can be further increased by passing a
special resolution in the general meeting.
• Woman Director- There must be at least 1 women director in the Board *1of  the following companies-
every listed public company ;
every unlisted public company having paid up share capital >= ₹100 crore or turnover>= ₹300 crore
• Resident Director-- Every company shall have at least 1 director who has stayed in India for a period of 182 days or more during
the financial year.*2 
*1 Existing companies to meet this requirement within 1 year of date of commencement of Companies Act,2013 whereas newly
incorporated companies to meet this requirement within 6 months from date of incorporation of company
*2  Existing companies have to meet this requirement within 1 year from the date of commencement of Companies Act, 2013. In
case of newly incorporated companies, the requirement of period of 182 days shall apply proportionately in the year of
incorporation.
Composition of Board of Directors
• Independent Director- There must be presence of Independent Directors also in the Boards of the prescribed companies to ensure
adherence to good corporate governance standards .They must be men of outstanding merit and integrity having no pecuniary
relationship with the company so that they can act independently without any influence or pressure from promoters or
management. The number of independent directors shall be as follows
Incase of listed public company- at least 1\3 of total number of directors must be independent. ( any fraction to be rounded off to 1)
Incase of unlisted public company having paid up share capital >= ₹10 crores or turnover>=₹100 crores or aggregate outstanding
loans, debenture and deposits>=₹50crores, at least 2 directors in Board must be independent directors.
• Small Shareholders' Director(Sec.151)-A listed company may have one director elected by small shareholders from amongst
themselves*  .Small shareholder means a shareholder holding shares of nominal value<=₹20,000. Other provisions regarding small
shareholders directors are -
Having small shareholders director in the BOD is optional.
The company may decide to have small shareholders director suo-moto or upon written notice from atleast 10% of total small
shareholders or 1000 shareholders , whichever is less, proposing the name of a small shareholder for directorship.
The tenure of such a director shall be <=3 years and he shall not retire by rotation.
A person can't be small shareholders director in more than 2 co.s simultaneously.
He shall be treated as director for all purposes except for appointment as MD\ WTD.
Notes
* Only small shareholders can vote on the election of small shareholder director and such a director should himself be also a small
shareholder.
INDEPENDENT DIRECTORS ( ID)(Sec.149, Sec.150)
The concept of "Independent Director" was introduced for the first time in Companies Act,2013 to ensure adherence to good corporate governance
standards. They must be men of outstanding merit and integrity having no pecuniary relationship with the company so that they can actually act
fearlessly and independently and don't blindly follow what promoters or management dictate .Some of the important provisions relating to IDs are
as follows-
• Every listed public company shall have at least 1\3 of the total number of directors as independent directors. Unlisted public companies having
paid up share capital >= 10 crores ; or having turnover >= 100 crore; or having aggregate loans & borrowings>=50 crores, shall have minimum 2
directors as independent directors. Private companies are not required to have independent directors.
• An independent director may be selected from a data bank( containing particulars such as names, addresses ,qualifications of persons eligible and
willing to act as independent directors) maintained by a govt. notified institutes and after exercising due diligence by the company.( SEC.150)
• The appointment of ID shall be approved by the company in the general meeting and the explanatory statement annexed to the notice of this
general meeting shall indicate the justification for choosing the appointee as independent director.
• The ID shall at the first meeting of the Board in which he participates as director and thereafter in every financial year's first Board meeting, give a
declaration that he meets the criteria of independence given in Sec.149(6)
• Independent director shall hold office for a term up to 5 consecutive years.The provisions of retirement by rotation shall not be applicable to
Independent Directors.
• He shall be eligible for reappointment after performance evaluation by the entire Board, on passing of a special resolution by the company ,and
disclosure of such appointment in the Board's report.
• No ID shall hold office for more than 2 consecutive terms . Such ID shall be eligible for appointment after the cooling period of 3 years and during
this 3 year period, he should not be associated with the company in any capacity whether directly or indirectly.
• The Independent director may receive sitting fee, reimbursement of expenses for participating in Board Meetings and profit related commission
as may be approved by the members . They may be given stock options but only of an unlisted co.
• An ID shall be liable only in respect of such acts of ommission or commission by a company which had occurred with his knowledge, attributable
through board processes with his consent or where he had not acted diligently.
• ID have to follow Code of Conduct as specified in Schedule IV of the Companies Act
Appointment of Directors (Sec.152)

Every person appointed as director of the company must

• Furnish his DIN no.
• Give a Declaration that he is not disqualified to become director under the Act
• Give his written consent to act as director in the company
First Directors
• Appointed by subscribers to the memorandum & their names are mentioned in AOA or
• AOA prescribe the method of appointing them or
• The subscribers to MOA shall be deemed to be the first directors
• Such directors shall retire at the Ist AGM of the company and thereafter subsequent
directors will be duly appointed as per sec.152(6)
• In case of OPC, where director is not appointed by AOA, the individual member shall be
deemed to be the first director until a director (s) are duly appointed by the member.
Subsequent Directors

• Unless the article provide for the retirement of all the directors at every AGM, at least 2/3 of
total number ( any fraction to be rounded off as one) of directors of a public company shall be
rotational directors i.e. liable to retire by rotation and shall be appointed by the shareholders
in the meeting. Total number of directors shall not include Independent Directors. This means
that directors liable to retire by rotation shall be 2\3 of non- independent directors.( Sec.152)
• The remaining directors , not exceeding 1\3 of total number, in case of any such company may
be appointed on a non - rotational basis for such duration and in such manner as provided in
the articles of the company. Here the power to appoint directors can be conferred by the
articles on third parties e.g. debenture holders, specified creditor, and such nominee directors
maybe appointed for any duration . In the absence of any regulations in this regard in the
articles, even these directors shall also be appointed by shareholders in the general meeting.
(Sec.152)
• At every subsequent AGM , out of 2\3 directors liable to retire by rotation , 1\3 or the number
nearest to 1\3 must retire. The directors longest in office shall retire in the first place , but as
between persons who became directors on the same day, those who are to retire shall be
determined by lots, if there is no agreement among them.
Subsequent Directors
• The vacancies caused by the retirement of directors should be filled up at the same meeting either by appointing the retiring director or
some other person .
Retiring directors are eligible for re election and reappointment
 If a new person is interested in becoming director, a notice in writing along with security deposit of ₹1 lakh must be given by that
person \any member proposing his name for directorship, to the company atleast 14 days before the meeting.The company will then be
required to inform the members about such candidature. This security deposit will be refunded to the depositor in case the candidate
gets elected as director or secures more than 25% of total valid votes cast on such resolution, otherwise it would be forfeited by the
company.( Sec.160)
If the vacancies caused by retirement are not filled up in the same meeting , the meeting shall be adjourned for a week. If at the
reassembled meeting also, the places of retiring directors are not filled up, the retiring directors shall be deemed to have been re-
elected automatically unless :
it is resolved not to fill the vacancy, or
a resolution for his re-election is lost, or
he has expressed in writing his unwillingness to continue, or
he has incurred a disqualification, etc.

• In case of private companies, the directors may be appointed in accordance with the provisions of the company's articles. If the
articles provide for their appointment by third persons such as debenture holders or creditors, they may be so appointed , otherwise
in the absence of any regulations in this regard, these directors shall also be appointed by shareholders in the general
meeting.Sec.160 and Sec.162 do not apply to private companies. This means in case of private companies there is no requirement of
14 days notice or of any security deposit . Also private companies are free to appoint their directors through a single resolution or
"enbloc".
Director Identification Number (DIN)(Sec.153- Sec.159)

Sec.152 provides that no company can appoint or reappoint any individual as a director unless he has been alotted a DIN.
Director Identification Number ( DIN) is a unique identification number allotted by CG to any individual who intends to
become a director in a company. A single DIN is required for an individual irrespective of number of directorships held by
him. The same DIN will remain with the person even if he resigns from a company or joins another company . All the
directorships of a person would be mapped in the database through that DIN and this way it will help the government to
keep track of people who run companies. Sec.153 to Sec.159 of the Act contain provisions regarding the as allotment of
DIN-
• An individual who wants to become a director in a company shall make an application to CG for allotment of DIN , in
prescribed form along with prescribed fees.( Sec.153)
• Within 1 month from receipt of application for DIN, the CG shall allot DIN to the applicant ( Sec.154)
• An individual, who already has a DIN cannot apply, obtain or possess another Director Identification Number.(Sec.155)
• Every existing director shall ,within 1 month of receipt of DIN, intimate his DIN to the company\ companies wherein he is
a director. ( Sec.156)
• Every company shall, within 15 days of receipt of DIN from its director, furnish this DIN to the Registrar of Companies
( Sec.157)
• Every person \ company shall have to quote the DIN while furnishing any return, information, particulars etc .required
under the Act (Sec.158)
• Whosoever contravenes the above provisions of Sec.152, Sec.155 and Sec156, shall be punishable with imprisonment for
<=6 months or fine <= ₹50,000 and where contravention is a continuing one, with a further fine up to ₹ 500\ day .
( Sec.159)
Persons Other than Retiring Directors to Stand for Directorship ( Sec.160)

If a new person is interested in becoming director, a notice in writing along with

security deposit of ₹1 lakh must be given by that person \any member proposing
his name for directorship, to the company atleast 14 days before the meeting. The
company will then be required to inform the members about such candidature.
This security deposit will be refunded to the depositor in case the candidate gets
elected as director or secures more than 25% of total valid votes cast on such
resolution, otherwise it would be forfeited by the company.
Appointment of Directors by the Board (Sec.161)
• Additional director- If the AOA authorise, the BOD may appoint any person as additional
director, who shall hold office up to the date of next AGM. But they cannot appoint such person
as additional director who fails to get appointed as a director in a general meeting (Sec.161(1))
• Alternate director-If the AOA authorise, the BOD may appoint any person as alternate director
for a director during his absence for more than 3 months from India . Alternate director shall
hold office till expiry of the original directors term or on the return of the original director to
India.(Sec.161(2))
• Nominee director-Subject to the articles, the BOD may appoint such person as director who has
been nominated by any Financial Institution/ CG/State Govt.in pursuance of any agreement/
any provision in law to ensure that finance provided by them is put to best use .Such director
shall be appointed for such duration as may be prescribed by the nominators.(Sec.161(3))
• Casual vacancy- In case a casual vacancy arises because of death/ resignation etc of a director,
then the BOD may fill it up and get it subsequently approved by members in the immediate
next general meeting.. The director, so appointed, shall hold office till the expiry of the original
directors term.( Sec.161(4))
Appointment of Directors to be Voted Individually (Sec.162)

This section prescribes that every director is to be voted on individually and not "en-bloc".This means that no motion
can be made at a general meeting for appointment of two or more persons as directors by a single resolution.
Option to Adopt Principle of Proportional representation for Directors' Appointment
(Sec.163)
To enable the minority shareholders to have proportionate representation on the Board, the AOA may provide for
atleast two- thirds of total number of directors of a company as per the principle of proportional representation
whether by the method of Single Transferable Vote or by the method of Cumulative Voting System.
• Single Transferable Vote Method- Here a person gets elected if he gets the required number of votes as fixed by the
quota. Quota =( Total Number of Votes \ Total Number of seats +1)+1
Suppose in company having 1000 shareholders each possessing 1 share carrying 1 vote each and 4 seats are to be
filled, then a person will get elected if he gets (1000\5 )+1=201 votes. So if minority shareholders manage to secure
the support of just 201 members, they will be able to place at least I director of their choice.
• Cumulative Voting System- Here, votes are accumulated i.e. Total Number of votes = Number of shares X No. of
seats. So ,if the minority is bent upon having atleast 1 of its representatives on Board, it can do so by casting all its
votes in favour of that single candidate and manage to elect him . In the above example, Total Number of votes will
be 1000X4 i.e. 4000. A candidate getting 1000 votes shall be declared elected.So even with the support of just 250
members( whose total votes would accumulate to 250X4 i.e.1000), they will be able to have 1 director of their
choice.
Disqualifications of directors ( Sec.164)

The Companies Act doesn't prescribe any academic or shareholding qualifications for a director. AOA of the companies usually
provide for certain minimum share qualifications for being a director. Technical/special/nominee directors are exempted even from
possessing qualification shares ,if any. But disqualifications for directors have been specifically provided. So a person is not eligible to
be appointed as a director in a company ,if
• he has been adjudged to be of unsound mind
• he is an undischarged insolvent
• he has applied to be adjudged insolvent
• he has been convicted for an offence involving moral turpitude & sentenced to at least 6 months imprisonment & 5 years haven't
expired from date of expiry of the sentence
• he has been convicted of an offence and sentenced to imprisonment for a period of 7 years or more
• he had been convicted of an offence dealing with' related party transactions' u\s 188 at any time during preceding 5 years
• he has failed to pay any call on his shares for 6 months
• he had not been allotted Directors Identification Number
• he holds directorships in more than 20 companies at the same time
• he has been disqualified by a Court\ Tribunal for appointment as a director
• he is or has been a director of a company which has defaulted ( i.e such company has not filed financial statements or annual
returns for continuous 3 years with Registrar or has failed to repay\ redeem its deposits\ debentures on maturity or failed to pay
due interest\ declared dividends and such failure continues for one year or more ), then such director cannot be appointed as
director in that company or any other public company for a period of 5 years from the date of default committed by the company.
• A private company can add any other additional disqualifications in its Articles for appointment as a director.
Number of Directorships ( Sec.165)

• A person cannot become director of more than 20 companies at the same time.
• However, the maximum number of public companies in which he can be director cannot exceed 10.
• The members of a company can ,by special resolution, reduce this limit of 20 companies.
A person who acts as director in contravention of these provisions shall be punishable with fine ranging from ₹5000 to
₹25,000 every day during the period of contravention.

Duties of Directors( Sec.166)

• To comply the legal provisions i.e. Companies Act ,Company rules, MOA and AOA
• Duty to attend Board's meetings
• To act in good faith for the benefits of shareholders as a whole
• To act in best interest of the company and various stakeholders like., its employees, ,community, investors and environment.
• Duty of reasonable care, skill and Diligence
• Duty to exercise independent judgement
• Duty not to Involve himself in conflicting situation- he should avoid situations where his personal interest clashes with the
interests of the company.
• Duty not to make any undue gain- he should not attempt to obtain any undue advantage for self, relatives or friends at the
cost of the company
• Duty not to assign his office
• Duty to perform duties personally and not to delegate power to some other person.
Vacation of office of director (Sec.167)

• He incurs any of the disqualifications specified in Sec.164

• He absents himself from all meetings of the Board held during a period of 12 months
• He acts in contravention of Sec.184 ( failure to disclose his interest)
• He becomes disqualified by an order of a Court or the Tribunal
• He is convicted by a court of any offence and sentenced to imprisonment >= 6 months
• He is removed in pursuance of the provisions of this Act
• He ceases to hold the office\employment in the holding\ subsidiary\ associate by virtue of which he was appointed as the
director in this company.
• A private company can provide any other additional ground for vacation of the office of the director, in its Articles.
• If a person keeps functioning as director despite knowing that he his office has vacated because of any of the above reasons, he
shall be punishable with Imprisonment for a term <=1 year or Fine = 1lakh to 5 lakh or with Both.

Resignation of director( Sec.168)

• A director may resign from his office by giving a notice in writing to the company.
• The company shall intimate the Registrar about the resignation in a prescribed manner
• BOD to take note of this resignation & place this fact in the following general meeting .
• Director may forward his resignation copy + reasons to ROC <=30 days of resignation
• The resignation shall take effect from the date on which the notice of resignation is received by the company or date specified for
resignation in the notice, whichever is later
• The director who has resigned shall be liable even after his resignation for the offences which incurred during his tenure.
Removal of Directors before expiry of his term ( Sec.169)
Removal by shareholders
• A company may , by ordinary resolution, remove a director , before the expiry of his term after giving him a reasonable opportunity of being
heard.
• The shareholders, however, cannot remove the following types of directors-
A director appointed according to the principle of proportional representation
A director appointed by the Tribunal under Section 242
• A special notice( 14 days notice) is required to be given by the mover of the resolution whenever any resolution is to be passed to remove a
director or to appoint somebody in place of such director .
• On receipt of notice of resolution to remove a director, , the company shall send a copy thereof to the director concerned and he shall have a
right to make a representation in writing to the company and request the same to be notifier to the members of the co.
• The company shall then send a copy of representation to every member of the company if it is possible otherwise ensure that it is being
read out in the meeting.The tribunal may however, exempt the company from this if it is satisfied that this exercise is being used to secure
needless publicity of the defamatory matter.
• The director removed can claim compensation for the termination of this appointment which shall be calculated on the basis of his lost
income from the office of the director.
• A vacancy so created may either be filled at the same meeting provided special notice of the intended appointment has been given or it may
be filled as a casual vacancy.

Removal by Tribunal
• The Tribunal has the power to remove a director on an application made to it for prevention of oppression or mismanagement. ( Sec.242)
• The person so removed is not allowed to hold any managerial office in the company for a period of 5 years .
• Further, he cannot claim any compensation for the termination of his appointment.
Powers of Directors(Sec.179)

GENERAL POWERS
• Individual directors have no authority to bind the company and they have to act as Board in a
meeting to exercise their powers.
• The Board shall be entitled to do all such acts as the company is authorised to do.
• While doing such acts, the Board shall be subject to the provisions of the Companies Act , the MOA
and the AOA.
• Once the articles set out their powers , only directors may exercise them and the shareholders
cannot interfere provided the directors act within the scope of their authority and in the best
interest of the company. If the shareholders are unhappy with the way the dfirectors are working ,
they can alter the articles to restrict their powers or refuse to re-elect them but cannot seize those
powers as are vested in the directors.
• However, in the following exceptional circumstances, the majority of shareholders in a general
meeting may intervene and exercise the powers vested in the Board-
Malafide- When directors act for their own personal interests in complete disregard to the interests of the
company
Board Incompetent-When all the directors are interested in a dealing.
Deadlock-When directors are not on speaking terms with each other so that theycan't discuss, decide and act.
POWERS TO BE EXERCISED BY MEANS OF BOARD RESOLUTIONS ONLY

• To make calls on shares

• To authorise buyback of securities u\s 68
• To issue shares or debentures
• To borrow monies
• To invest the funds of the company etc.
• To approve Corporate Social Responsibility Policy
• To make following appointments of directors- casual\alternative\ additional
• To recommend the rate of dividend
• To make the following appointments of auditors- first auditors\ casual vacancy
• To make contribution to political party etc.

RESTRICTIONS ON THE POWERS OF DIRECTORS ( Sec.180)- The BOD shall

exercise the following powers only with the consent of the company by a special resolution -
• To sell \ lease\dispose of the whole\ substantially the whole of the undertaking of co.
• To invest compensation amount received as a result of merger or amalgamation in securities other than trust
securities
• To borrow money exceeding the aggregate of paid up capital, free reserves and securities premium .
• To remit, or give time for repayment of, any debt due from a director.
Committees
Audit Committee
of Board of Directors
Nomination & Remuneration Stakeholders Relationship Corporate Social
(AC) Committee .(NRC) Committee ( SRC). Responsibility Committee
(CSRC)
Sec.177 Sec.178(1) Sec.178(5) Sec.135
Applicability

-Every listed public co. -Every listed public co. -Co. having more than 1000 -Every company having net
-Public co. with paid up capital -Public co. with paid up capital shareholders, debenture worth of ₹ 500 crore or more,
of ₹ 10 crore or more of ₹ 10 crore or more holders etc. or turnover of ₹1000 crore or
-Public co. having turn over of -Public co. having turn over of more or a net profit of ₹ 5
₹100 crore or more ₹100 crore or more crore or more during the
-Public co.. having total -Public co.. having total immediately preceding year.
borrowings of ₹ 50 crore or borrowings of ₹ 50 crore or
more more
AC shall consist of minimum 3 NRC shall consist of minimum SRC shall consist of such CSRC shall consist of minimum
directors with Independent 3 non-executive directors out numbers of members as may 3 directors out of which at
Directors forming a of which Independent be decided by Board. Its least 1 director shall be
majority.Also they shall be directors shall be 1\2 or more. chairman shall be a non independent director.
persons with ability to read Chairperson of the company executive director
and understand ,the financial may become member but not
statements. the chairman of this
Committee.
Committees of Board of Directors-Role and Responsibility
Audit Committee Nomination & Remuneration Stakeholders Corporate Social
(AC) Committee .(NRC) Relationship Committee Responsibility Committee
( SRC). (CSRC)
-to recommend appointment, - to identify persons eligible for - to consider and resolve -to formulate and recommend to
remuneration etc. of auditors director ship\senior mgt position the grievances of the Board , a CSR Policy keeping in
-to review auditors independence, -to specify methodology for security holders of the mind activities specified in
performance, audit process effective evaluation of company. Schedule VII.(eg. eradicating
-to examine financial statements and performance of BOD, its various hunger, education, empowering
auditors report thereon committees, and its directors women, environmental
- to approve or modify the transactions of -to review the implementation of sustainability, healthcare etc.)
co.with related parties evaluation system - to recommend the expenditure
-to scrutinize intercorporate loans and -to formulate criteria for to be incurred on such activities
investments determining qualifications, - to monitor the CSR policy from
- to evaluate internal financial controls positive attributes and time to time.
and risk mgt. systems independence of directors. Note-The BOD shall ensure that
-to oversee vigil mechanism ( which shall -to recommend to Board, the co. spends every financial
provide for adequate safeguards against remuneration policy year, at least 2% of its average
victimisation of employees and directors wrt.directors, KMP, and other net profits made during 3
who report genuine concerns and shall employees suggesting therein immediately preceding financial
have direct access to the Chairperson of appropriate performance bench years , as per the CSR Policy
the Audit Committee). marks, fixed pay, incentive pay otherwise the Board shall specify
- to investigate into any matter specified etc. the reasons for not spending the
above amount in its report.
KEY MANAGERIAL PERSONNEL

As per Sec.2(51), Key Managerial Personnel (KMP) in relation to a company means:

• the CEO - whether called Managing Director or Manager
• the Whole Time Director
• the Company Secretary
• the Chief Financial Officer
• such other officer, not more than one level below the director who is in the whole- time
employment , designated as key managerial personnel by the Board
• such other officer as may be prescribed
Important points
• The Companies Act, 2013 introduced the concept of KMP for the first time.
• KMPs are appointed by BOD on the recommendation of Nomination and Remuneration
Committees.
• Any vacancy in the office of KMP is also filled up by the BOD within 6 months
• Every listed company and every other public co .having paid up share capital of Rs. 10 crore or more
shall have wholetime KMPs namely MD\ Mgr\ CEO\ WTD + CS+ CFO. A whole time KMP cannot
hold office in more than 1 company.( except in the subsidiary of the company)
• KMP is considered as ' Officer who is in default' implying that along with the company, he shall be
held liable for any penalty or punishment by way of fine, imprisonment or otherwise imposed for
non- compliance of the provisions of the Act.
MANAGERIAL PERSONNEL
• MANAGING DIRECTOR is defined in Sec. 2(54). It means a director who is entrusted with
substantial powers of management of the affairs of the company. Since a MD must necessarily be
a director, his office of MD gets automatically terminated if he ceases to be a director either
because of any disqualification or because of his retirement by rotation. He derives his substantial
powers of management from agreement \ AOA\ Board Resolution\ General Meeting Resolution.
• MANAGER is defined in Sec.2(53). It means an individual who subject to the superintendence ,
control and direction of the Board of Directors, has management of the whole or substantially the
whole of the affairs of a company .
• WHOLETIME DIRECTOR is defined in Sec.2(94).It means a director who is in the whole time
employment of a company. Eg. a director appointed as a Chief Engineer of the company ,becomes
a whole time director.
No company shall appoint or reappoint any person as MD\ WTD\ Mgr
• for a term exceeding 5 years at a time.
• if the age of that person is <25 years or >= 70 years
• if he has even been adjudged insolvent or is an undischarged insolvent
• if he has ever suspended payments to creditors or made any composition with them
• if he has ever been convicted by a court of an offence and sentenced for > 6 months
• U\s 196, there cannot be simultaneous appointment of both MD and Mgr in a company.
Difference between MD and Manager
Managing Director Manager

Has substantial powers of management of the affairs of the company Has management of whole or substantially whole of the affairs of the
company
MD must be a director in the company A Mgr need not be director in the co.

There may be more than 1 MD in a co. ,each in charge of only a division There cannot be more than one manager in a company
of the business
His powers are restricted compared to Mgr. He has more powers compared to MD

When there are more than one MD, the maximum remuneration Maximum remuneration payable to him cannot exceed 5% of net
payable to them cannot exceed 10% of net profits profits.

Difference between MD and Whole time Director

Managing Director Whole time Director

He is entrusted with substantial powers of management He exercises powers as per the terms of his employment which are
generally not as wide as that of MD
A MD cannot coexist with a Mgr A WTD can coexist with a Mgr

A person can be MD of more than 1 company at the same time A WTD, being a whole time employee of the co., can't t be WTD of any
other company
As per section 149(6) ,Independent Director in relation to a company
means a director other than MD\WTD\Nominee
a) who in the opinion of the board is a person of integrity, and possesses relevant expertise and experience
 

 
b) who is neither the promoter nor related to any promoter \ director of the company \ its holding\ subsidiary\ associate company
 

 
c) who has no pecuniary relationship with the company \ its holding\ However, the following is allowed.
subsidiary\ associate company\their promoters or directors during the  the person can have remuneration as a director
two immediately preceding FYs or during the current FY.  the person can have transactions ≤ 10% of his total income with
  them
d) none of whose relatives- is holding any security or interest in \ is  relative may hold security\ interest in the co. of face value<=50
indebted to \has given guarantee in connection with indebtedness of a lakhs or 2% of paid up capital of the company\.....
third person to\ has any other pecuniary interest in -the company \ its  relative may be indebted \ may give guarantee up to ₹ 50 lakhs in
holding\ subsidiary\ associate company\their promoters or directors the company\........
during the two immediately preceding FYs or during the current FY.  relative may have transactions of value < 2% of its gross turnover\
total income
e) who neither himself or nor any of his relatives is\was KMP\ employee in the company \.... or is\was employee\ proprietor \partner in the
audit firm \ legal firm\ consulting firm having transactions amounting to >=10% of its gross turnover with the company\...in any 3 preceding FYs
\ who together with relatives holds >= 2 % voting power in the company \is CEO of any nonprofit organization that receives 25% or more of its
receipts from the company\.... or that holds>= 2% voting power of the company.
f) who possesses such other qualifications as may be prescribed.
THANK YOU SOOOOOOOOOOOOOOOOOO MUCH !

AT LAST ITS OVER !