Page 153 - DCOM106_COMPANY_LAW

Company Law

Notes Self Assessment

Fill in the blanks:
1. ................................. defines a Director as including “any person occupying the position of
director, by whatever name called.”

2. A ................................. need not necessarily be an individual.
3. A ‘deemed director’ is called as ‘shadow director’ under .................................
4. The directors act as agents of the company and the ordinary rules of .................................
apply.
5. In partnership firm, the directors are also sometimes described as .................................

10.3 Qualifications and Disqualifications of Directors

The Act has not prescribed any academic or professional qualifications for the directors. Also,
the Act imposes no share qualification on the directors. So, unless the company’s articles contain
a provision to that effect, a director need not be a shareholder unless he wishes to be one
voluntarily. But the articles usually provide for a minimum share qualification. Thus, Regulation
66 of Table A provides that a director must hold at least one share in a company. Where a share
qualification is fixed by the articles of a company, the Act provides (s. 270) that:
It must be disclosed in the prospectus;
Each director must take his qualification shares within two months after his appointment;

The nominal value of the qualification shares must not exceed 5,000 or the nominal value
of one share where it exceeds 5,000;
Share warrants will not count for purposes of share qualification.

If a director fails to obtain his share qualification within two months, he vacates office
automatically on the expiry of two months from the date of his appointment and if he acts as
director after the expiry of two months without taking the qualification shares, he is liable to a
fine up to 5,000 for every day until he stops acting as such (s. 272).
However, the articles of a company can neither compel a person to hold qualification shares
before he is elected a director nor can they require him to obtain qualification shares within a
shorter period than two months after his appointment and if any provisions to this effect is
made in the articles, it shall be void.
The effect of this provision is that if the company is wound up during this period of two months,
the director cannot be placed in the list of contributories, in as much as there is no express or
implied contract under which he would be bound to take the qualification shares, since his name
cannot be put on the register of members unless he has applied for shares and these are allotted
to him [Zamir Ahmed Raz. vs. D.R. Banaji (1957) 27 Comp. Cas. 634].

Task X Co. Ltd. wants to make a contract with a partnership firm. Four of the five
directors of the company are partners of such partnership. How can the contract be executed?
[Hint: The contract may be executed by the general body of shareholders by passing an
ordinary resolution to that effect. Also see s.299.]

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