1.

Management of a Company
1. WHO MANAGE THE COMPANY ?
• One of the important features of a company is that there
is separation of ownership from management.

• The shareholders do not directly manage. Instead,

they elect some persons from among themselves
as their representative to act on behalf of the company.
Such persons are known as directors.

• The power to manage however is not entrusted to any

single director but to all the directors, collectively
called the Board of Directors.
 2.Organs of company management
• a) The Shareholders.

• b) The Board of Directors, who frame the business policies of the

company and are responsible for overall management, supervision
and control.

• c) The Chief Executive, who may be a Managing Director (MD) or

a Manager (M) responsible for day-to-day administration of the
company

For the assistance of the chief executive there may be

• Whole- Time Directors (WTD) and other departmental managers
such as finance manager, production manager, personnel
manager and company secretary.
 3.Choice of Managerial
Personnel
• A company can appoint either one of -
Managing Director or Manager (sec 197 A )

• A public company or a private company which is a

subsidiary of a public company having a paid up
share capital of Rs 5crores or more must have
atleast one of the three categories viz, MD , WTD,
or M. sec 269(1)
 4. Number of Directors
• I) Minimum
a) A public company must have at least three directors.
b) A private company must have at least two directors.

• ii) Maximum
a) The Companies Act does not fix any maximum
number.
Where the maximum fixed by articles is less than12,the
number can be increased to 12 without Central
Government approval.
 5. Who can be a Director ?
• Any person can be a director, if he satisfies the
following conditions:
i) He must be an individual (i.e., natural person) sec.
253
ii) He must hold qualification shares if the articles
so provide.
iii) He must not suffer from any of the statutory
disqualifications (mentioned in S.274)

• WHO CANNOT BE A DIRECTOR ? sec. 274

 6. How Directors are
appointed ?
APPOINTMENT OF DIRECTORS
↓
_______________________________
↓ ↓
First Directors Subsequent Directors
* By Articles * By Company in General Meeting S.255
* By Subscribers to the * By Board of Directors S.260,262,313
Memorandum. S 254 * By Central Government S.408
* By Third parties.(Nominee directors)
* By Principle of Proportional
Representation. S.265
* By Small shareholders. S.252
 7. Appointment of MD or WT
Director
• A MD, WTD can be appointed by the Board of Directors
and will further need approval in general meeting
• by an ordinary resolution if it is for MD (S.269(2)
or
• by a special resolution if it is for WTD (S.314(1).
• Further, in case of public companies, the appointment
of MD/WTD needs approval from Central Government if
the appointment is not made in accordance with the
conditions specified in Schedule XIII .
• If the appointment is as per the conditions mentioned in
Schedule XIII then no approval of Central Government is
necessary .
 8. Powers of Directors(sec 291 to 293)

Powers of Directors
__________________|_________________
| |
Statutory Powers Managerial Powers
1. Powers exercisable only at 1. Power of superintendence
meetings of the Board control and direction of
2. Powers exercisble only with affairs of the company.
the consent of the company,
in general meeting.
3. General (Residue) Powers.
 9. When Directors cease to hold office.
• 1. When he resigns from his office; or
• 2. When he retires by rotation; or
• 3. When he vacates his office;
• 4. When he is removed from his office
I) By shareholders in general meeting
ii) By Central Government.
iii) By Court.
 10. Directors Remuneration
• Section 198 lays down the overall limits of remuneration
payable to the managerial personnel.
• Section 309 fixes limits in respect of individual directors or
directors acting as a Board.
• Under section 198 managerial remuneration must not
exceed 11 per cent of the net profits of any financial year.
• Under section 309, a simple director cannot be paid more
than one per cent of the net profits of the company, if the
company has a managing or a whole time director or a
manager.
• In any other case, it cannot exceed three per cent of the net
profits.
 Directors Remuneration (Cont.)
• A whole time director or a managing director may
ordinarily be paid subject to a ceiling of five per cent
of the net profits and

• if there is more than one such director, ten per cent

for all of them together.

• This can be exceeded with the permission of the

Central Government.
 Directors Remuneration (Cont.)

• In case of loss making companies,

Schedule XIII places further limitations
on the1 remuneration payable to MD,
WTD,M.
• Monetary ceilings have been placed
varying with the effective capital of the
company concerned.
 Directors Remuneration (Cont.)
• However, the company in general meeting
may, with the approval of the Central
Government, authorise the payment of higher
remuneration than stipulated under section
309 or Schedule XIII.

• However, no approval of the Central

Government is required if the increase in
remuneration is in accordance with the
conditions specified in Schedule XIII