Corporate Law Assignment

Corporate Law Assignment

Submitted By: Sumeet Pradhan (10532)

Discuss the role of directors and their position in a company along with the formation of board of directors, meeting, power, function, duties of directors individually and collectively.

Board of director is a group of directors elected by the shareholders to run a company. It is the executive body to apply the decisions made by the general meeting as well as day to day functions as per the Memorandum of Association, Article of Association and Company Act. It is the agent of the company as company is not a natural person. Hence, somebody needs to act on behalf of the company.

A corporate board of directors oversees numerous aspects of a corporation. Legally, the board must act on behalf of the shareholders and make decisions based on shareholder benefit. Although some board members are typically company employees, others are outside directors---sometimes vendors or investors.

Boards of directors evolved as a response to the system, peculiar to corporations, of separating ownership from control. Corporate ownership is held by shareholders, but most shareholders do not take an active role in managing the corporation and so are not in an effective position to protect their own interests. The primary function of the corporate board is to watch over the corporation with the shareholders' interests in mind. Modern corporate case law equates shareholder interest with shareholder profit; the corporate board must manage the business so as to maximize each shareholder's return. However, the typical board function can always be altered if the shareholders should decide to change the corporation's articles of incorporation or bylaws.

The Company Act 2063 of Nepal has discussed about the formation, duties and responsibilities, meeting power, function, duties of Board of Directors in detail in Chapter 6.

As per section 86, chapter 6 of the Company Act, Board of directors and number of directors in the company are to be as follows:

(1) The appointment and number of directors of a private company shall be as provided in its articles of association.

(2) Every public company shall have a board of directors consisting of a minimum of three and a maximum of eleven directors.

(3) In forming the board of directors pursuant to Sub-section (2), at least one independent director, in the case of the number of directors not exceeding seven, and at least two independent directors, in the case of the number of directors exceeding seven, shall be appointed from amongst the persons who have the knowledge as prescribed in the articles of association of the company and gained knowledge and experience in the subject related with the business of the company concerned.

(4) Any one director selected by the directors from amongst themselves shall be the Chairperson of the board of directors.

Section 87 in this Act deals about the appointment of directors of a company as follows

(1) The directors of a company shall be appointed by the general meeting of the company, subject to the provisions contained in Section 89 and the articles of association.

Provided however, that:

(1) The directors shall be appointed by the promoters pending the holding of the first annual general meeting of the company.

(2) If the office of any director appointed by the annual general meeting is vacated for any reason, the board of directors shall appoint another director in that vacancy.

(2) Notwithstanding anything contained in Sub-section (1), in the case of a company any shares in which a corporate body has subscribed, the corporate body may appoint a director in proportion of the total number of directors of the company and the number of shares subscribed by such body and also an alternate director to attend and vote in a meeting of the board of instead of every such director in cases where such director will not be in a position to attend the meeting of the board for any reason.

(3) Where any director appointed pursuant to Sub-section (2) is not able to attend a meeting of the board of directors, such director shall give information thereof to his/her alternate director and the board of directors. In such case, the alternate director shall be entitled to attend, and vote in, the meeting of the board of directors.

(4) Except in the case referred to in Sub-section (1), any alternate director appointed pursuant to Sub-section (2) shall not be entitled to attend, and vote in, a meeting of the board of directors.

Further in section