Role and Type of Directors

 As per the Companies Act, 2013, Section 2(10) “Board of Directors” or “Board”, in relation to a company, means the collective body of the directors of the company. A director can be a full time working director i.e. managing or whole time director. These directors look after the day to day affairs of the company and are collectively known as ‘management' directors.

Collectively, all directors as a group and the supreme acting authority of the company are called ‘board of directors’

Directors refer to the part of the collective body known as the Board of Directors, that is responsible for controlling, managing and directing the affairs of a company. Directors are considered the trustees of company’s property and money, and they also act as the agents in transactions which are entered into by them on behalf of the company.Directors are expected to perform their duties and obligations as a rationally diligent person with skill, knowledge, and experience as the person carrying out functions of a director and of that himself. Directors are responsible for controlling, managing and directing the affairs of a company. He/She plays multiple roles in the company. Hence, a director plays several roles in a company, as an agent, as an employee, as an officer and as a trustee of the company.


 

Role of the Directors

 

·         Agent: A Company is an artificial person and need few persons in the Board of Company to run the business of Company on behalf and welfare of Shareholders of Company. The Director acts as agent of shareholders and promotes the objects of Company so that Company can earn good profit and increase the intrinsic value of share and Earning of the Company.

·         Employee: Any Whole time director appointed by the Board of Directors and approved by the shareholders of the company acts as an employee of the Company by managing day to day affairs of the Company. All the Directors operate the Company in the contours of employment Letter issued by the Board of Company.

·         Officer: Directors is treated as main officer of Company who shall be liable for penal consequences under various statues, if affairs of Company are not in compliances as per Companies Act, Income Tax Act, FEMA provisions and other applicable Legal statues defined for various industries.

·         Trustees: Director is treated as trustees of the company, money and property of the powers entrusted to and vested in them only as trustee.

Type of the Directors

Directors hold different positions and powers in a company. The division of power helps in maintaining a fair and transparent system. Moreover, the distribution of control keeps a check on abuse of power and increases efficiency.

Executive director

H/she is the full-time working director of the company. They have a higher responsibility towards the organization. The company and its employees expect them to be efficient and careful in all the dealings.

Non-Executive Directors

H/she are non- working directors and are not involved in the everyday working of the company. They might take part in the planning or policy-making process. They challenge the executive directors to come up with decisions and solutions that are in the best interest of the company.

Managing Directors

They have a substantial ability to make decisions, manage and direct other members of the company. A Public Company or a subsidiary of a Public Company that has a share capital of more than Five Crore rupees must have a Managing Director.

Independent Directors

According to Section 149(6) an independent director is an alternate director other than a Managing Director which is known as Whole Time Director Or Nominee Director. According to Rule 4 of Companies (Appointment and Qualification of Directors) Rules,2013 these are the following type of companies which have to appoint minimum 2 independent directors:-
I} Public Companies which have Paid-up Share Capital-Rs.10 Crores or More; –
II} Public Companies which have Turnover- Rs.100 Crores or More:-
III} Public Companies which have total outstanding loans, debenture, and deposits of Rs. 50 Crores or More.

They are the ones who do not have any direct relationship with the company. Their experience is their asset and gives expert advice to the board when required. Public companies who have paid-up share capital, turnover, or outstanding loans of Rs. 100 Crores, Rs.100 Crores, and Rs.50 Crores or more as the case may be, need two independent directors.

 

Qualifications to be an independent director:

  • Must have expertise and experience;
  • Must be a person of integrity;
  • Should not be a promoter of the company or its subsidiaries;
  • Should have no relations (financial/personal) with the promoters, or directors of the company;
  • Should not have been key managerial personnel of the company or any of its holdings and subsidies;
  • Should not hold total voting power exceeding two percent in such company.

As per Clause 49 of the listing agreement, the independent directors  are non-executive and they don't have a material relationship with the company other than sitting in the board.

Residential Director

As per Section 149(3) of Companies Act,2013, every company should appoint a director who has stayed in India for a total Period of not less than 182 days in the previous calendar year. A company should have one residential director.

Small Shareholder Directors

They are the ones who can appoint a single director in a listed company. By issuing a notice to at least 1000 shareholders or 1/10th of the shareholders whichever is lesser, to approve this action.

Women Directors

As per Section 149 (1) (a), the companies who have their securities listed on the stock exchange or have a paid-up capital of Rs. One hundred crores/Turnover of Rs. Three hundred crore or more must have a women director.

Additional Directors

An individual can act as an additional director by taking the position of a director until the next Annual General Meeting under section 161(1) of the companies act 2013.

Alternate Director

When a director is absent for more than three months; an alternate director comes on board on his behalf. He acts as a director for a temporary period. And can only hold office as permissible to the director whose office this director holds. As per Section 161(2), a company may appoint, if the articles confer such power on the company or a resolution is passed (if a Director is absent from India for at least three months).

Nominee Director

Shareholders, central government or third parties appoint them. Nominee directors come on board when there is grave mismanagement or theboard members abuse their powers.

Shadow Director

There is another category of directors known as shadow directors who are not officially appointedas directors but in accordance with whose directions, the directors of a company are accustomed to act. Thus, directors are the key managerial persons of the company and plays a crucial role in corporate governance.


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