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    Monday, 23 March 2015

    Director of Company under company law

    1. Introduction
    A company is a legal entity and does not have any physical existence. It can act only through natural persons to run its affairs. The person, who acts on its behalf, is called director. In short, directors of company are professional men, who are hired by company to direct its affairs. But, they are not servants of company. They are rather officers of the company.

    2. Definition of Director

    By section 2(13) of the companies ordinance, Director includes any person occupying the position of director, by whatever name called. Thus function is everything name matters nothing. By whatever name called so long as a person occupies a position which imposes on him the duty of guiding or controlling the company’s business, he is a director in law.

    director, rights, duties, qualification and disqualification


    3. Number of Directors


    a. Private company
    Every private company must have at least two directors.

    b. Public company
    Every public company must have at least two directors.

    4. Appointment of Director
    A director of company can be appointed in either of following manners:

    i. Appointment of first director
    Promoters of company elect first directors of company.

    ii. Subscriber as Directors
    In absence of any provision in articles of association about first director, subscribers are considered directors of company.

    iii. Appointment through Shareholders
    In annual general meeting, shareholders can appoint directors.

    iv. Appointment through creditors
    A person can be nominated as director by creditors.

    v. Appointment against casual vacancy
    Whenever a casual vacancy of director become vacant, board of directors can fill such vacancy.

    5. Qualification of Director

    According to section 145, following persons are eligible or appointment as directors of a company.

    i. Natural Person
    A natural person can become a director of company.

    ii. Person Representing the Government
    A person representing the Government or an institution or authority to which he is a member, may become a director.

    iii. Employ of company
    A whole time director who is an employee of company may become a director.

    iv. Chief executive
    A chief executive of a company may become a director. These is no restriction on him to become a director.

    v. Person representing creditor
    A person representing creditor may become a director.

    6. Disqualifications of Directors

    A person is disqualified to become a director, if he

    (i) Is a minor
    (ii) is of unsound mind;
    (iii) Has applied to be adjudged as insolvent and his application is pending;
    (iv) Is an undercharged insolvent?
    (v) Has been convicted by a court of law for an offence involving moral turpitude;
    (vi) Has been debarred to hold office under the ordinance
    (vii) Has been betrayed lack of fiduciary behavior and he been so declared by a court;
    (viii) Is not a member of the company

    7. Powers of directors

    According to companies’ ordinance following are the power of directors

    (a) Powers through Resolution
    The director has the following power through resolution

    i. Issuance of shares
    Director has power to issue the shares of the company. He is authorized to issue the shares of company.

    ii. Issuance of debenture
    Director has power to issue debenture of participation term certificates.

    iii. To obtain loan
    Besides debenture, director has the power to obtain loan.

    iv. To invest money
    The director may invest the money of company for profit in any business or any other scheme.

    v. To make loan
    Director has power to make loans also.

    vi. To make call for unpaid money
    He may make a call for unpaid money of shares from share holders and he may receive unpaid money of shares from share holder.

    vii. To authorize
    He has the power to authorize a director or the firm of which he is a partner or any partner of such firm or a private company of which he is a member or director to enter into any contract with the company for making sale, purchase or supply of goods or rendering services with company.

    viii. To approve bonus
    He also has the power to approve bonus for the employees of the company.

    ix. To incur expenditure
    He may incur expenditure exceeding two hundred thousand rupees on any single item or dispose of a fixed asset of the value exceeding one hundred thousand rupees.

    (b) Powers through consent of general meetings
    A director can exercise following powers through the consent of general meeting.

    (i) Power to sale etc;
    He may sell, lease or otherwise dispose of the undertakings or sizable part thereof.

    (ii) To remit any debt;
    He may give any relief or extension of time for the repayment of any debt outstanding against any person specified in sub-section(1) of section 195.

    8. Duties of Directors

    The duties of the director are as under

    (i) To act honestly
    (ii) To exercise such degree of skill and diligence as would amount to reasonable care, which an ordinary man might take on his own behalf.
    (iii) To attend meetings when reasonably able to do so
    (iv) To get prepared and file annual list of members and summary.
    (v) To hold statutory meeting within six months of the commencement of the business
    (vi) To act for the interest of company
    (vii) To keep profit and loss account before the company in general meeting at least once a year
    (viii) To submit statement of affairs at the time of windingup of company
    (ix) To send their consent to act as directors to the registrar.

    Conclusion
    To conclude I can say that Directors are those persons who are responsible for directing, governing or controlling the policy or management of a company. They occupy a pivtol position in the structure of the company. They are in fact the main spring of the company. Without them a company cannot function properly.
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    Item Reviewed: Director of Company under company law Rating: 5 Reviewed By: Usman Ali
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