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Types of Directors.

CA IN PRACTICE... ( CA ) (490 Points)

24 December 2009

Dear Friends,

Can anyone provide me the types of directors as per companies act 1956

with definations in summery.

like Managing Director,Shadow Director, Alternate Director, Executive Directors etc.

Thanks in Advance

Gopal Subedi

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5 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 24 December 2009

Meaning of 'Director'

Section 2(13) of the Companies Act, 1956 defined a term director and states that 'director' includes any person occupying the position of director, by whatever name called.

In the ordinary sense a director is someone who administers, controls or directs something, especially a member of a commercial company; one who supervises, controls or manages; a person elected by the shareholders of a company to direct company's policies; person appointed or elected according to law, authorised to manage and direct the affairs of a company.

'Shadow' or 'Deemed' director

Explanation to section 303(1) says that 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.

Same provisions of the Companies Act, 1956 also applies to a 'Shadow director' being person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act. However, if the Board of directors acts on advice given by a person in his professional capacity he will not be considered as a deemed or shadow director of the company.

TYPES OF DIRECTORS

Ordinary Directors

Ordinary directors are also referred to as simple directors who attends Board meeting of a company and participate in the matters put before the Board. These directors are neither whole time directors nor managing directors.

Managing Director

Managing Director is 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, and includes a director occupying the position of a managing director, by whatever name called.

Whole-time/Executive Directors

Whole-time Director or Executive Director includes a director in the whole-time employment of the company.

Additional Directors

Additional Directors are appointed by the Board between the two annual general meetings subject to the provisions of the Articles of Association of a company. Additional directors shall hold office only up to the date of the next annual general meeting of the company. Number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the Articles.

Alternate Director

An Alternate Director is a person appointed by the Board if so authorised by the Articles or by a resolution passed by the company in the general meeting to act for a director called "the original director" during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held. Generally, the alternate directors are appointed for a person who is Non-resident Indian or for foreign collaborators of a company.

Professional Directors

Any director possessing professional qualifications and do not have any pecuniary interest in the company are called as "Professional Directors". In big size companies, sometimes the Board appoints professionals of different fields as directors to utilise their expertise in the management of the company.

Nominee Directors

The banks and financial institutions which grant financial assistance to a company generally impose a condition as to appointment of their representative on the Board of the concerned company. These nominated persons are called as nominee directors.

Best Regards

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 24 December 2009

Independent Directors

Independent director as per Clause 49 of the Listing agreement shall mean non-executive director of the company who—

(a) apart from receiving director's remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates which may affect the independence of the director;

(b) is not related to promoters or persons occupying management positions at the Board level or at one level below the Board;

(d) is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following:—

(i) the statutory audit firm or the internal audit firm that is associated with the company;

(ii) the legal firm(s) and consulting firm(s) that have a material association with the company.

(e) is not a material supplier, service provider or customer or a lessor or lessee of the company which may effect the independence of the director; and

(f) is not a substantial shareholder of the company, i.e. owning two percent or more of the block of voting shares.

CA IN PRACTICE... ( CA ) (490 Points)
Replied 25 December 2009

Thanks Ankur Ji.

Deepak (PGT) (25 Points)
Replied 23 December 2011

Dear Friends,

Can anyone provide me the difference between:

1. "Director" and "Managing Director" and

2. Difference between part time and Full time director.

with definations and role and responsibility etc.

Thanks.

Deepak

ARUN KUMAR MAITRA (Practicing Company Secretary) (1016 Points)
Replied 22 June 2012

Can as person who does not hold any professional qualification but possess experience and knowledge in a particular industry / field, be treated as a professional director ?

Can a person nominated as a director ,subsequent to the formation of the company,by one one of its promoters and who was not a subscribers to the MoA, be treated as a promoter director?