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Director if not a Board Member - Please advise
Human Resources » Organization Development

Chrm Message From: jigar Total Posts: 61 Join Date: 24/08/2006
Rank: Manager Post Date: 03/11/2012 23:35:09 Points: 305 Location: Australia

Dear All,
Can we designate a peson as a Director of a function, if he is not a board members as per the company law? 

Please share your thoughts.


Chrm Message From: kaushik Total Posts: 61 Join Date: 24/08/2006  
Rank: Manager Post Date: 03/11/2012 23:45:05 Points: 305 Location: Australia

Dear Jigar, 

As per the Companies Law, the director is that person who is nominated on a board.

As per the Companies Act 1956 :- Section 2(13) of the Companies Act, 1956, defines a Director as any person, occupying the position of Director, by whatever name called. They are professional men, hired by the company to direct its affairs. But, they are not the servants of the company. They are rather the officers of the company.

However the law doesn’t mention that if anybody is designated as a Director for specific function should be the member of the board. And hence companies started to give the designation as Directors who is handling the particular functions. Due to this the common man may mislead that the Director designated is an authority and responsible under the Companies Act. Considering this fact Directororate of company affairs had issued a circular (Not a notification) to Association of Industries (CII etc) that as the designation may mislead the common man, the companies should desist to give such designations. These circulars were issued in 1983 and 1990. After 1990 no such circular was issued. 

Would appreciate if you can add something.



Chrm Message From: Total Posts: 7 Join Date: 24/08/2006  
Rank: Beginner Post Date: 24/11/2012 00:18:59 Points: 35 Location: Australia

As per CLB, you are not supposed to misguide your shareholders by appointing Directors as 'executives' or 'managers'. They are administrators to the company affairs and accountable to the shareholders. Respect your investors need to fix accountability.