The directors are the professional men of the company who are hired to direct the affairs of the company. They are the officers of a company and not a servant. In the case of Moriarty v. Regent’s Garage Co, it was held that a director is not a servant of the company, but a controller of the affairs of a company.
Vacation of office
The director shall vacate the office in case-
- He sustains any disqualifications that are specified in Section 164 under The Companies Act, 2013
- If the director absents himself from all the meetings of the Board of Directors that are held during a period of twelve months without obtaining leave of absence by the Board;
- If the director fails to disclose his interest in any contract that is in violation of the provisions of Section 184;
- If the director becomes disqualified because of the order of court or tribunal;
- If the court convicts the director for any offense for which he is imprisoned for not less than six months;
- If he is removed because of the provisions of the Act.
Removal of directors
A company may remove a director who is not a director appointed by the tribunal under Section 242, before the expiry of the period of his office. But it is important to hear his side to give a reasonable opportunity. A special resolution is required to remove a director under the section or to appoint any other director in place of the director so removed.
Removal by shareholders
As per Section 242, a company can remove a director before the expiration of his period of office. A special resolution is required to remove a director under the section or to appoint any other director in place of the director so removed.
Removal by Central Government
A director can be removed by the Central Government, Companies Act enables the Central Government to remove managerial personnel from office on the recommendation of the Company Law Board. The Government can make a reference to the Company Law Board when needed. The power of Central Government can be exercised in removal of directors if:
- The managerial personnel is guilty of fraud, misfeasance or persistent negligence in carrying out legal obligations or breach of trust.
- The business of the company is not conducted in agreement with sound business principles.
- If the person has conducted business with the intention to defraud or the purpose is unlawful subject to public interest.
Removal by Company Law Board
When an application is sent to Company Law Board to prevent mismanagement it may terminate or set aside any agreement of the company with a director or managing director.
The provisions of resignation in a company is mentioned in Section 318 in which no director is entitled to compensation if he resigns his office. If there is a provision for resignation in the articles but if there is no provision resignation will take effect in agreement with terms. Notice can be oral or written. A director can effectively resign even if no other director is in office but a director cannot evade his obligations even if he has resigned.
Once a director has given the notice of resignation to the company he cannot be entitled to withdraw that notice. But withdrawing the notice must be with the consent of the company exercised by the managers.
Powers of directors
Section 291 says the board of directors of a company is entitled to exercise all the powers as the company is authorized to do. The powers of the directors are co-extensive with those of the company mentioned in the memorandum and articles of the company. The director has almost all the power once he is elected for the operations of the company until he is removed. However, there are two important restrictions on the powers of the directors.
- When the board is not competent to do what the act, memorandum, and articles require that is done by the shareholders in general meeting.
- The directors are required to act according to Act, memorandum, articles and other regulations that are consistent with the general meeting.
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