Directors
This query is : Resolved
21 January 2010
what is the difference between executive and non executive directors and how they are different from chairman?
21 January 2010
Executive directors are directors drawing remuneration from the company or holding designation like MD, WTD.
So 2 basic criteria of executive directore are remuneration and designation.
Remaining directors are called non-executive diectors.
So 2 basic criteria of executive directore are remuneration and designation.
Remaining directors are called non-executive diectors.
21 January 2010
Also go through this short article covering chairman.
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
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;
(c) has not been an executive of the company in the immediately preceding three financial years;
(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.
CHAIRMAN
Appointment
Where the Articles so provides, the Chairman of the Board should take the chair and conduct the meeting.
However if there is no Chairman or if he is not present within fifteen minutes after the time appointed for holding the meeting, or if he is unable to act as Chairman of the meeting, the directors present should elect one of themselves to be the Chairman of the meeting. If the directors are unable to do so or if no Director is willing to take the chair, the members present shall elect one of themselves to be the Chairman of the meeting.
In the absence of any express provision contained in the Articles, the members personally present at the meeting shall elect one of themselves to be the Chairman of the meeting.
Power and Duties
The Chairman should ensure that the meeting is duly constituted in accordance with the Act and the Articles or any other applicable laws, before it proceeds to transact business. The Chairman should then conduct the meeting in a fair and impartial manner and ensure that only such business as has been set out in the Notice is transacted.
The Chairman should explain the object and implications of each Resolution before the Resolution is put to vote.
The Chairman should provide a fair opportunity to members who are entitled to vote to raise questions and/or offer comments and ensure that these are answered.
The Chairman should not propose any Resolution in which he is deemed to be concerned or interested nor should he participate in the discussion or vote on any such Resolution.
If the Chairman is interested in any item of business, he should entrust the conduct of the proceedings in respect of such item to the Vice-Chairman, if there is one, or to any dis-interested Director or to a Member and resume the Chair after that item of business has been transacted. A person who so takes the Chair can exercise his casting vote in the event that a vote on such item of business results in a tie.
CASTING VOTE
If the Articles so provide, the Chairman shall have a casting vote.
CONDUCT OF POLL
When a poll is demanded on any Resolution, the Chairman should get the validity of the demand verified and should order the poll forthwith if it is demanded on the question of appointment of the Chairman or adjournment of the meeting and, in any other case, within forty-eight hours of the demand for poll.
In the case of a poll which is not taken forthwith, the Chairman should announce at the meeting the date, venue and time of taking the poll to enable members to have adequate and convenient opportunity to exercise their vote. The chairman should also announce that any member who so desires may be present at the time of counting of votes.
ADJOURNMENT OF MEETINGS
A duly convened meeting should not be adjourned arbitrarily by the Chairman.
The Chairman may adjourn a meeting with the consent of the members and shall adjourn a meeting if so decided by the members.
Meetings may be adjourned for want of requisite Quorum. The Chairman may adjourn a meeting in the event of disorder or other like causes, where it becomes impossible to conduct the meeting and complete its business.
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
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;
(c) has not been an executive of the company in the immediately preceding three financial years;
(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.
CHAIRMAN
Appointment
Where the Articles so provides, the Chairman of the Board should take the chair and conduct the meeting.
However if there is no Chairman or if he is not present within fifteen minutes after the time appointed for holding the meeting, or if he is unable to act as Chairman of the meeting, the directors present should elect one of themselves to be the Chairman of the meeting. If the directors are unable to do so or if no Director is willing to take the chair, the members present shall elect one of themselves to be the Chairman of the meeting.
In the absence of any express provision contained in the Articles, the members personally present at the meeting shall elect one of themselves to be the Chairman of the meeting.
Power and Duties
The Chairman should ensure that the meeting is duly constituted in accordance with the Act and the Articles or any other applicable laws, before it proceeds to transact business. The Chairman should then conduct the meeting in a fair and impartial manner and ensure that only such business as has been set out in the Notice is transacted.
The Chairman should explain the object and implications of each Resolution before the Resolution is put to vote.
The Chairman should provide a fair opportunity to members who are entitled to vote to raise questions and/or offer comments and ensure that these are answered.
The Chairman should not propose any Resolution in which he is deemed to be concerned or interested nor should he participate in the discussion or vote on any such Resolution.
If the Chairman is interested in any item of business, he should entrust the conduct of the proceedings in respect of such item to the Vice-Chairman, if there is one, or to any dis-interested Director or to a Member and resume the Chair after that item of business has been transacted. A person who so takes the Chair can exercise his casting vote in the event that a vote on such item of business results in a tie.
CASTING VOTE
If the Articles so provide, the Chairman shall have a casting vote.
CONDUCT OF POLL
When a poll is demanded on any Resolution, the Chairman should get the validity of the demand verified and should order the poll forthwith if it is demanded on the question of appointment of the Chairman or adjournment of the meeting and, in any other case, within forty-eight hours of the demand for poll.
In the case of a poll which is not taken forthwith, the Chairman should announce at the meeting the date, venue and time of taking the poll to enable members to have adequate and convenient opportunity to exercise their vote. The chairman should also announce that any member who so desires may be present at the time of counting of votes.
ADJOURNMENT OF MEETINGS
A duly convened meeting should not be adjourned arbitrarily by the Chairman.
The Chairman may adjourn a meeting with the consent of the members and shall adjourn a meeting if so decided by the members.
Meetings may be adjourned for want of requisite Quorum. The Chairman may adjourn a meeting in the event of disorder or other like causes, where it becomes impossible to conduct the meeting and complete its business.
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