Introduction

The very important roles that the Directors of a company play in a company’s success or failure, which in turn affects national development, are often not seriously appreciated, understood or highlighted by both the directors themselves and or by the other parties related to a company. Also, the failure or inability of the board of directors of a company to direct and manage a company in a responsible manner has contributed enormously to corporate governance failures and the current global economic crises. It is a trite principle of law that a company, even though recognized under the law to be an artificial, separate and distinct legal entity from its owners, cannot manage or direct her own affairs because a company is an “abstract” person. This is the reason why a company needs directors and shareholders

Meaning of Director

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, acting on its behalf, is called Director. A Director is any person, occupying the position of Director, by whatever name called. They are professional men, hired by the company to direct its affairs. But, they are not the servants of the company. They are rather the officers of the company.

Appointment of Directors

The methods of appointing the Directors of a company are usually dictated by the provisions of the Articles of Association of each company. The specific qualities that a Director must possess, though generally common, are dictated by the peculiarities of the industry in which such a company operates. The first Directors of a company are appointed by the subscribers to the Memorandum and Articles of Association of the company at the time of its incorporation. Subsequent directorship appointments are undertaken by the Shareholders of the company at the company’s annual general meeting(s). The shareholders also undertake the re-election and removal of a Director or Directors at their Annual General Meeting. Not every person can be appointed as a Director of a company. Persons who are insolvent or bankrupt, persons who are fraudulent, persons under the age of 18 years old, persons of unsound mind, A company could also have executive and non-executive directors. In practice, both the executive and non-executive Directors are appointed to bring their wealth of experience, expertise and network to the benefit of the company. The non-executive directors play the critical role of providing strong, balanced and independent counsel to the Board of Directors.¹

Situations of Casual Vacancy of Directors:-

Generally there are 4 situations, wherein casual vacancy of the Director happens:

(1) Resignation by the Director;

(2) Disqualification of the Director;

(3) Death of the Director;

(4) Insolvency of the Director

Appointment of Alternate Director by Board of Directors

Provisions related to appointment of Alternate Director are governed by Section 313 of the Companies Act, 1956 which reads as:

(1) The Board of directors of a company may. it so authorized by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called" the original director") during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.

(2) An alternate director appointed under sub- section (1) shall not hold office as such for a period longer than that permissible to the original director in whose place he has been appointed and shall vacate office if and when the original director returns to the State in which meetings of the Board are ordinarily held.

(3) If the term of office of the original director is determined before he so returns to the State aforesaid, any provision for the automatic re- appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate, director.

The Board may appoint an alternate director only if this is authorized by the Articles. The alternate director will act as a director for a director (original director) during his absence for at least three months from the state in which Board meetings are ordinarily held. This appointment may be made at a meeting of the Board or by a circular resolution. The Articles of a private company may provide for the appointment of an alternate director. The original director and the alternate director can remain on the Board so long as the above position continues and there is no need of approval by the company in general meeting. But whenever the "original" director returns to the state in question, the alternate director automatically vacates his office and he may be appointed again when the original director leaves that state. The return of the original director to the state will be enough for the cessation of office of the alternate director whether or not the original director attends a Board meeting. Although either the original director or the alternate director can act at a given time, it appears that an alternate director can be appointed only where the maximum strength of the Board permits such addition to the Board.²

Appointment of Additional Directors by Board of Directors

Section 260 of the Companies Act, 1956 provides appointment of additional director which reads as:

Nothing in section 255, 258 or 259 shall affect any power conferred on the Board of directors by the articles to appoint additional directors: Provided that such additional directors shall hold office only to the date of the next annual general meeting of the company: Provided further that the number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the articles.³

CONCLUSION:

As the shareholders of a Company cannot meet so often to take decisions on day-to-day functions of the Company, directors are elected by the shareholders in accordance with the provisions of the Companies Act, 1956. Ultimate control over the directors rests with the shareholders and shareholders can remove a director in the General Body Meeting in accordance with the regulations in the Articles and the provisions of the Act. In reality, directors play a very big role in the functioning and success of any company and the shareholders may not concentrate much on the business issues and the day-to-day affairs of the Company.

REFERENCES:

1. Act Only Through Natural Persons To Run Its Affairs Business Law Essay, (August 27, 2013) http://www.lawteacher.net/business-law/essays/act-only-through-natural-persons-to-run-its-affairs-business-law-essay.php

2. Sudha Reddy, Appointment, Disqualification And Liabilities Of Directors Of A Company: A Legal Perspective, (August 24, 2013) http://www.legalservicesindia.com/article/article/appointment-disqualification-and-liabilities-of-directors-of-a-company-a-legal-perspective-1488-1.html

3. Permission of cg to appoint additional directors, (August 23, 2013) http://www.caclubindia.com/forum/permission-of-cg-to-appoint-additional-directors-49946.asp

Received on 05.03.2014 Modified on 10.03.2014

Int. J. Rev. & Res. Social Sci. 2(1): Jan. – Mar. 2014; Page 76-77