Introduction
Boards of Directors constitute an integral and indispensable component of a corporation as delineated by the provisions of the Companies Act 2013. Every company must have a board of directors for proper functioning and legal recognition. The chief administrative control command controlling the management and working of a company is collectively known as the board of directors. The Board of Directors is referred to as a trustworthy and respectable person who looks after the interests of the company’s shareholders.
They are the decision-making authority that gives direction to the company to achieve specific goals within a bounded time. The landmark legislation of the Companies Act 2013 gives us a framework for the appointment and removal of the board of directors with fairness and transparency. Section 2 (34) of the act dictates the meaning of director, that director means a “director” appointed to the board of the company.
Powers ofthe board of directors
Board of Directors have special powers regarding the smooth functioning of the company under the Companies Act. Section 179 of the Companies Act describes the powers that are vested in the hands of the board of directors. They have the power to pass a resolution regarding the management and running of the firm. If a company does not have a board of directors, then it will not legally be called a company and it will not be able to function according to law. The board of directors exercise their power in different ways so that the company does not suffer any loss. According to the Companies Act, every government or private company must have a board of directors. Shareholders are the most of any company, and the board of directors keeps a balance between them and the company and works in the best interest of both.
Key powers of the board of directors:
- Advisory body – They ggiveadvise and gguidethe firm on critical matters and hhelpto tackles the challenges coming in front of the company.
- Distributes shares – They allot shares to the people or company who have applied for them. They are also accountable for the transfer of shares.
- Appointing and removing power – They had the power to appoint new members to the board and could also recommend the removal of any member, as well as the CEO of the company.
- Conduct meetings – They conduct general meetings to navigate the company towards success and also to discuss on the performance of the company.
- Decision-making body – They are the decision-making authority body of the company, which provides direction in the proper functioning of the firm.
- Fundraising – One of their main function is to raise funds in the form of loans and use them to invest for profit. They also prepare the list of defaulters and present it before the general body.
- Announce dividend – They decide on the distribution of profit to the shareholders of the company.
- Oversees mergers – They also look after the terms and conditions on which the company unites with a new company to expand their reach and business.
- Appoints internal auditor – They appoint an internal auditor and establish an audit committee to oversee the process of audit oprocess f the firm.
- Protect sshareholders’interest – They are responsible tfor protectingthe interest of shareholders of the company. They act as a connection between the company, management, eemployees customers and shareholders.
- Transparent act – They act with transparency to maintain trust and respect of the company and the shareholders.
- Overlooks finances – They monitor and approve financial statements, oversee budgets and tmakefinancial decisions.
- Management of risks – They manage the risks involved in financial transactions and the operation of the firm.
- Compliance with law – They oversee that the functions and operations of the company comply with laws and regulations so the company is safe from any legal conflicts.
Types of Directors:
- Safeguard sshareholders’interest – They are responsible tfor safeguardingthe interest of shareholders of the company. They act as a connection between the company, management, employees customers and shareholders.
- Transparent act – They act with transparency to maintain trust and respect of the company and the shareholders.
- Overlooks finances – They monitor and approve financial statements, oversee budgets and make financial decisions.
- Management of risks – They manage the risks involved finin ancial transactions and the operation of the firm.
- Compliance with law – They oversee that the functions and operations of the company ccomplywith laws and regulations so the company is safe from any legal conflicts.
Composition
Section 149 (1) of the Companies Act 2013 states that a public company shall have a minimum number of 33 directors a private company shall have 2 directors and a one-person company shall have 1 director. A firm may appoint a maximum of 15 directors,and if it wishes to appoint more than 15 directors, then it has to pass a special resolution in the board’s general meeting.
Section 149 (3) of the Companies Act 2013 states that a company must have at least 1 director who resides in India for at least 182 days, and it is mandatory. In case of a wwomandirector, every listed company must have at least one 1womann director according to section 149(1) of the Companies Act.
And section 2(47) of the Companies Act 2013 states the meaning of the independent director, and in every listed company, one-third of its directors must be independent according to section 4 subsection (4) of the Companies Act 2013. They are appointed by the board of directors and serve temporarily for a specific period. For better conditions and performance of the company and to meet the expectations of the shareholders, the board of directors prioritises diversity in terms of gender, skills and experience.
Appointment of the board of directors
- Appointment by the board of directors –
The board had the authority to appoint additional directors, nominee directors for a certain period to fill the vacant posts.
- Appointment by the government –
The government has the right to appoint a director in certain cases, like in public sector companies.
- Appointment by shareholders –
Shareholders have the authority to appoint directors through passing a special resolution or through the voting process in the annual general meeting.
- Independent directors –
They are appointed by the selection committee for a certain period. They are also known as non-executive directors.
- Women directors –
Every listed company must have at least one wwomandirector according to the cCompanies Act2013 to maintain gender equality and equal participation of women.
- Resident director
According to the Companies Act, a company must have at least one director who resides in India for at least 182 days.
Disqualification ofthe board of directors
- If a person is found to be of unsound mind and incompetent to handle the position of board of directors of a firm, he can be disqualified from the post of board of directors.
- If a person declares himself insolvent and wisnot able to pay the company, he can be disqualified from the post of bthe oard of ddirectors
- If a person is convicted by a court of law of any kind of offence which includes a punishment of at least six months or extended to 5 years, he can be disqualified from the post of the board of directors.
- If a person did notfiled his financial statement or annual returns for the 3 following years, he can be disqualified from the post of board of directors.
- If a court or tribunal orders to disqualification a person from the appointment process , he can not be appointed as a board director.
Conclusion
Under the companies act, board of directors an important role in development of a firm and helps to achieve the goals to the company. They are the core members of a company, without them a company could not work legally. They safeguard the interest of shareholders and the company both. The board is responsible in maintaining transparency in the organisation.
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