CAIIB BRBL Module D Unit 22 : Directors

28/11/2023

Table of Contents

CAIIB Paper 4 BRBL Module D Unit 22 : Directors (New Syllabus)

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “Directors”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module D (COMMERCIAL & OTHER LAWS WITH REFERENCE TO BANKING OPERATIONS) Unit 22 : Directors, Aspirants must go through this article to better understand the topic, Directors and practice using our Online Mock Test Series to strengthen their knowledge of Directors. Unit 22 : Directors

Introduction

The board of directors control the day-to-day working and management of the company as well as the long-term strategic planning of the company.
No body corporate, association or firm can be appointed as director of a company, and only an individual can be appointed

Minimum Number Of Directors

As per Sec. 149 of ICA, 2013 every company must have:

A minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and
A maximum of fifteen directors
Provided that a company may appoint more than fifteen directors after passing a special resolution: Provided further that such class or classes of companies as may be prescribed, shall have at least one-woman director.

Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.

Independent Director

Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies.

‘Independent director’ has been elaborately defined in Section 149 as “An independent director in relation to a company, means a director other than managing director or a whole-time director or a nominee director,—

Who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience
Who is or was not a promoter of the company or its holding, subsidiary or associate company; and who is not related to promoters or directors in the company, its holding, subsidiary or associate company
Who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent. of his total income or such amount as may be prescribed, with the company, during the two immediately preceding financial years or during the current financial year.

None of whose relatives—

Is holding any security of or interest in the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year: Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed.
Is indebted to the company, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year;
Has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or
Has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii)

Who, neither himself nor any of his relatives-

Holds or has held the position of a key managerial personnel or is or has been employee of the company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed.
Is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed,
Holds together with his relatives two per cent. or more of the total voting power of the company
Is a Chief Executive or director, of any non-profit organization that receives twenty-five per cent. or more of its receipts from the company, or that holds two per cent. or more of the total voting power of the company; or
Who possesses such other qualifications as may be prescribed

Appointment Of Directors And Proportion Of Those Who Are To Retire By Rotation

The provisions for appointment of Directors is found in Section 152 of the Companies Act 2013.

Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed
No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number
A person appointed as a director shall not act as a director unless he gives his consent to hold the office as director and such consent has been filed with the Registrar within thirty days of his appointment in such manner as may be prescribed
Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company shall—
Be persons whose period of office is liable to determination by retirement of directors by rotation; and
Save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation.

The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

Right Of Persons Other Than Retiring Directors To Stand For Directorship

Every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Central Government in such form and manner and along with such fees.
The Central Government shall, within one month from the receipt of the application, allot a Director Identification Number to an applicant.
Any person is eligible for appointment to the office of director at any general meeting, if not less than fourteen days before the meeting, he himself or some other member intends to propose that person be appointed as a director, gives a signed notice in writing to the company signifying that person’s candidature for the office of director along with a deposit of one lakh rupees, which shall be refunded to such person or, as the case may be, to the member, if the person proposed gets elected as a director or gets more than twenty- five per cent. of total valid votes cast either on show of hands or on poll on such resolution.

Additional Director

The board of directors can appoint directors by passing a resolution if such a power exists in the articles. Such directors are known as additional directors and they hold office only up to the date of the next annual general meeting of the company.

Whole-time Director

A “whole-time director” includes a director in the whole-time employment of the company. No company can appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years at a time: Provided that no re-appointment shall be made earlier than one year before the expiry of his term.

Qualification Shares

A director is required to hold certain shares as qualification shares if such requirement is there in the articles of association of the company. This requirement is not applicable to a private company, unless it is a subsidiary of a public company.

Maximum Number Of Directorships

No person, after the commencement of this Act, shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time. Provided that the maximum number of public companies in which a person can be appointed as a director shall not exceed ten. The members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

Vacation Of Office By Directors

In terms of Sec. 167 of Indian Companies Act, 2013, the office of a director shall become vacant in case:

He incurs any of the disqualifications as specified in Sec. 164
He absents himself from all the meetings of the Board of Directors held during a period of 12 months with or without seeking leave of absence of the Board
He acts in contravention of the provisions of Sec. 184 relating to entering into contracts or arrangements in which he is directly or indirectly interested
He fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested, in contravention of the provisions of Sec. 184
He becomes disqualified by an order of a court or the Tribunal
He is convicted by a court of any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than 6 months.
He is removed in pursuance of the provisions of this Act
He, having been appointed a director by virtue of his holding any office or other employment in the holding, subsidiary or associate company, ceases to hold such office or other employment in that company.

Restrictions On Powers Of Board

The board of directors of a public company, or of a private company which is a subsidiary of a public company can exercise the following powers only after a resolution is passed to that effect by the shareholders of the company in general meeting:

Dispose of any undertaking of the company
Remit or give time for repayment of, any debt due by a director
Invest, otherwise than in trust securities, the amount of compensation received by the company in respect of the compulsory acquisition
Borrow moneys in excess of aggregate of the paid-up capital of the company and its free reserves
Contribute to charitable and other funds not directly relating to the business of the company or the welfare of its employees an amount more than Rs. 50 thousand or five per cent of its average net profits during the three immediately preceding, financial years whichever is greater.

Loan To Director

No company shall, directly or indirectly, advance any loan to its Directors or any other person in whom the Director is interested, or give any guarantee or provide any security in connection with a loan taken by the Director or any other person in whom the director is interested.
However, any loan or guarantee given by a company to its wholly owned subsidiary, or a guarantee extended to its subsidiary are exempted provided certain conditions stipulated in Section 186 of the Act are complied.

Alternate Director

The Board of Directors, can appoint an alternate director to act for a director (‘the original director’) during the original director’s absence for a period of not less than three months from India in which meetings of the board are ordinarily held if the articles or a shareholder’s resolution have authorized the directors to make such appointments.
The alternate director vacates the office when the original director returns or when the term of office of the original director expires.

Download PDF

CAIIB Paper 4 (BRBL) Module D Unit 22-Directors ( Ambitious_Baba )