Page 296 - DMGT407Corporate and Business Laws

Unit 12: Management of Companies

than such sum as may be prescribed (Presently, ` 6,000 per month). The aforesaid Notes
appointment may, however, be made by passing a special resolution and the
approval of the Central Government.
If any director or his associate holds an office or place of profit in contravention of the aforesaid
provisions, then: (i) he shall be deemed to have vacated such office or place of profits as such on
and from the date next following the date of the general meeting. (ii) he shall be liable to refund
to the company any remuneration received or the monetary equivalent of the perquisites or
advantage enjoyed by him. The company cannot waive the recovery any sum refundable to it as
above unless permitted to do so by the Central Government.

The aforesaid restrictions do not apply to a person who being the holder of any office of profit in
the company is appointed by the Central Government, under s.408, as a director of the company.
Meaning of ‘office or place of profit’. Any office or place shall be deemed to be an office or place
profit under the company: (a) in case the office or place is held by a director, if the director
holding it obtains from the company anything by way of remuneration over and above the
remuneration to which he is entitled as such director, whether as salary, fees, commission,
perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise;
(b) in case the office or place is held by an individual other than a director or by any firm, private
company or other body corporate holding it obtains from the company anything by way of
remuneration whether as salary, fees, commission, perquisite, the right to occupy free of rent
any premises as a place of residence or otherwise.

Self Assessment

Fill in the blanks:

1. Every public company must have at least …………..directors.
2. A company in general meetings may, by………………………, increase or reduce the
number of its directors within the limits fixed in that behalf by its articles.

3. A person cannot hold office at the same time as a director in more than
………………companies

12.2 Managing Director and Manager

Section 2(26) defines ‘managing director’ as a ‘director’ who, by virtue of an agreement with the
company or of a resolution passed by the company in general meeting or by its Board of
directors or, by virtue of its memorandum or articles of association, is entrusted with substantial
powers of management which would not otherwise be exercisable by him. The expression
includes a director occupying the position of a managing director, by whatever name called.
However, the power to do administrative acts of routine nature when so authorised by the
Board such as the power to affix the common seal of the company to any document or to draw
and endorse any cheque on the account of the company in any bank or to draw and endorse any
negotiable instrument or to sign any certificate of share or to direct registration of transfer of
any share, shall not be deemed to be included within substantial powers of management. Further,
a managing director of a company shall exercise his powers subject to the superintendence,
control and direction of its Board of Directors.
Some of the more important legal provisions about managing directors are summarised as:
(i) He, being a director, must be an individual. (ii) He is appointed, usually to perform such
functions and carry out such duties as may be assigned to him by the Board of directors to whom
he is responsible or subject. The Board can revoke the authority of the managing director.

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