Board of Directors

Constitutional board of directors>

The company being an artificial person carries on its activities in business through individuals called directors. Director includes any person occupying the position of a director by whatever name called. Any person in accordance with whose directions or instructions the Board of Directors of a company is accustomed to act shall be deemed to be a director of the company.

The directors of a company collectively are referred to as Board of Directors or Board. A director controls the company’s affairs. If a person performs the functions of a director he will be deemed to be a director, even if he is not so designated. A body, corporate, association or a firm cannot be appointed as a director of a company. Only an individual shall be appointed as a director. No director shall assign his office.

Number of Directors:

Every public company other than a public company which has become such by virtue of section 43A shall have at least 3 Directors. Every other company shall have at least 2 directors.

However with the commencement of Companies (Amendment) Act 2000 a public company having –

1) a paid up capital of five crore rupees or more;
2) one thousand or more small share holders

May have a director elected by such small shareholders in the manner as may be prescribed

Small shareholders mean a shareholder holding shares of nominal value of Rs 20,000 or less in public company.

Where the number of directors falls below the maximum number the remaining directors cannot act. The Purpose is to avoid one man control over the company. Section 43A company can have minimum two directors. The maximum number of directors is fixed by the articles. The maximum permissible limit of directors is 12. Any increase in number beyond 12 directors requires Central Government approval. A company in a general meeting may, by ordinary resolution increase or reduce the number of its directors within the limits fixed in that behalf by its articles.

Director Identification Number (DIN):

In view of the need for individual identity of persons appointed as directors or intended to be directors of companies to be established section 253 of the companies act is proposed to be amended and new sections 266A to 266G are proposed to be inserted to provide for DIN to every individual director.

DIN means a Director Identification Number which the Central Government may allot to any individual intending to be appointed as director or to any existing director of a company for the purpose of his identification. No company shall appoint or reappoint any individual as director of the company unless he has allotted a DIN. An individual shall make an application to the Central Government for allotment of DIN. An individual who has already been allotted a DIN shall not obtain another DIN. It shall be the obligation of every director to intimate his DIN to the company within one week of receipt of DIN. The company shall within one week of receipt of such intimation furnish DIN Number to the register. In case of default Director or the company as the case may be shall be punishable with fine which may extend to Rs 5,000 and in case of continuing default, the fine may extend to Rs 500 for everyday during which the contravention continues.

In the case of public company or a private company which is a subsidiary of a public company any increase in the number of directors beyond the maximum permitted by the articles shall not have any effect unless approved by the Central Government and shall become void if it is disapproved by that Government. However, when such permissible maximum number is 12 or less than 12, not approved of by the Central Government shall be required to be informed if the increase in the number of directors does not make the total number of its directors more than 12. The above provisions shall not apply to a Government company.

Source: Business Law