View Full Version : Q. What are qualifications powers and liabilities of the director of a public

08-26-2012, 11:46 PM
Q. What are qualifications powers and liabilities of the director of a public company? In what circumstances his office fall vacant. (2002)(2003)(2006/A)
1. Introduction:
A company is an artificial person. therefore, its ownership is separated from the management. the shareholders who are the owner of the company do not take part in the management of the company directly but they elect their representatives to run business. these elected representative are called "director of the company."
2. Definition of director:
Under companies ordinance 1984 "director" includes any person occupying the position of a director, by whatever name called.
3. Number of directors:
(a) Private company:
Every private company must have not less than two directors.
(b) Public company:
Every public company must not have less than seven directors.
4. Board of directors:
The board of directors is the top management of the company and representative the interest of shareholders. the board of directors sets and general policy for the company.
5. Appointment of directors:
Directors are appointed according to the following.
I. By promoters:
The first director of the company are elected by promoters.
II. By subscribers:
If there is no provision in the articles regarding the first director then the subscribers of the company are deemed to be directors.
III. By shareholders:
The shareholders in annual general meeting may appointed directors.
IV. By directors:
A causal vacancy of any director may be filled by the board of directors.
V. By creditors:
The creditors of the company may also nominate any person as the director of the company.
6. Qualification of director:
According to the companies ordinance of the company.
(i) A whole time director who is the employee of the company.
(ii) A chief executive.
(iii) A person representing a creditor.
(iv) Any person other than artificial person.
7. Ineligibility of certain person to become director:
Following persons can become director of any company.
(i) A, minor.
(ii) Person of unsound mind.
(iii) One who has applied to be adjudicated as an insolvent and his application is pending.
(iv) A person convicted by a court of law for an offence involving moral turpitude.
(v) Any person who has been debarred from holding such office under any provision of the companies ordinance.
(vi) A person who is not the member of the company.
8. Powers of directors:
I. Power without the consent of general meetings:
(i) To issue shares.
(ii) To issue debentures.
(iii) To obtain loans form other source other than debentures.
(iv) To invest the funds of company.
(v) To make calls for unpaid money of shares.
(vi) To approve the bonus for employees.
(vii) To determine the dividend.
(viii) To pay government expenditure.
(ix) To pass the company,s annual or other periodic accounts.
(x) To fill the vacant seats of directors.
(xi) To allot the shares.
(xii) To make contract on behalf of the company.
(xiii) To transfer a part of a profit to reserve fund.
(xiv) To forfeit shares of member.
(xvi) To perform any other function in the interest of the company.
II. Powers with the consent of general meeting:
Following power may be exercised with the consent of annul general meeting.
(i) To sell or to give the whole business on lease or a sizeable part there of.
(ii) To give any relief or extension of time for the repayment of any debt outstanding against any person.
9. Duties of director:
(i) Director make the arrangement to conduct the company,s meetings.
(ii) Director prevent the misuse of capital.
(iii) Director should submit the constitutional of company, s meetings.
(iv) Director make arrangement for the payment of divident to shareholder.
(v) Director keep check to stop the wrong payment.
(vi) Director form the policies.
10. Liabilities of director:
Liabilities of director may be limited or unlimited.
I. Liability to outsiders:
A director may be made liable to an outsider in case of an ultra vires transaction, on an implied warranty of authority.
II. Liability to the company:
The liability of directors towards the company may arise.
(i) In case of negligence.
(ii) Breach of trust imposed on them by the company.
(iii) From misfeasance.
III. Criminal liability:
The companies ordinance imposes penalities upon the directors for omitting to comply with provisions of the ordinance.
11. Position of director:
The directors are trustee as well as agents of the company.
12. Term of office of director:
Director shall hold office for a period of three years.
13. Remuneration:
The remuneration is provided according to the articles of association of there may be an express agreement regarding there to.
14. Vacation of office of director:
Under the following circumstances the office of director vacant.
(i) At the time of first general meeting, the first director of the company resign his post.
(ii) If any director fails to obtain his qualification shares.
(iii) He becomes unsound mind.
(iv) If he is declared unsound mind.
(v) If the shareholders of the company terminate any director by passing extra ordinary resolution.
(vi) If any director resign voluntarily.
(vii) If any director is not performing his duties according to the article of associations.
(viii) If any director completes fixed duration of his post.
(ix) If director remains absent from three consecutives meeting of the board of directors without notice.
(x) If he works against the interest of the company.
15. Removal of director:
A company may by resolution general meeting remove a director appointed under Sec 176 or Sec 180 or under sec 178 of the companies ordinance.
16. Conclusion:
To conclude I can say that share holders are the actual proprietors of the company but their role in the management of the company is not worth mentioning. the shareholders elect directors to run the business of the company. the directors act as a board. they may meet together for, the dispatch of business, adjurn and otherwise regulate the meeting as they deem fit. they are trustee and agents of the company.