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Unit 10: Management of Company

The borrowing made by the board violates the provisions of the Act because (i) it exceeds the Notes
paid up capital and free reserves even after excluding short term loan of 20 crore assuming that
the loan is obtained from the companies bankers in the ordinary course of business. (ii) the
resolution passed in the general meeting enabling the board to borrow in excess of its paid up
capital and free reserves without specifying the total amount up to which money may be borrowed
by the board.

Example: The position would be different in case the company’s paid up share capital
and free reserves increased to 150 crore and the board borrow money to the extent of 140
crore which neither include any short-term loan nor temporary loan for financing of the
construction of a building for the company. As the board could raise up to 150 crores, but in fact
has raised 140 crore only, there is no contravention of the provision of the Act.

Self Assessment

8. Minimum no. of Directors in case of a public company is
(a) 1 (b) 2

(c) 3 (d) 4
9. Minimum no. of Directors in case of private company is
(a) 1 (b) 2
(c) 3 (d) 4

10. Age limit of Directors in case of public company is
(a) 65 (b) 70
(c) 60 (d) 55
11. Age limit of Directors in case of private company is

(a) 65 (b) 70
(c) 75 (d) No limit

10.14 Duties of Director in Relation to Good Corporate Governance

Duties of directors may be divided under two heads: (1) Statutory duties; and (2) Duties of a
general nature. The statutory duties are the duties and obligations imposed by the Companies
Act. These have been discussed at appropriate places. Important among them are:
1. To file Return of Allotments: Section 75 charges a company to file with the Registrar,
within a period of 30 days, a return of the allotments stating the specified particulars.
Failure to file such return shall make directors liable as ‘officer in default’. A fine up to
500 per day till the default continues may be levied.
2. Not to Issue Irredeemable Preferences Shares or Shares Redeemable after 10 years: Section
80 forbids a company to issue irredeemable preference shares or preference shares
redeemable beyond 10 years. Directors making any such issue may be held liable as
‘officer in default’ and may be subject to fine up to 1,000.
3. To Disclose Interest [Ss.299-300]: A director who is interested in a transaction of the
company must disclose his interest to the Board. The disclosure must be made at the first
meeting of the Board held after he has become interested. This is because a director stands

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