Justify the following statements.
1) Directors exercise their powers and authorities collectively as a Board.
1) Although the shareholders are the owners they cannot manage their company. Following the principle of democracy, they elect their representatives from amongst them, called the Directors, at the Annual General Meeting.
2) They vest the Directors with the powers of managing the affairs of the company. Directors are the men of commercial skill and business tact. They are authorised by the shareholders to utilize the capital, acquire the assets, and appoint the personnel to conduct the affairs of the company for the benefit of the shareholders of the company.
3) The directors exercise their powers and take decisions collectively as a Board. They cannot exercise their powers and take decisions in their individual capacity. The Board of Directors is the policy-framing and decision-making organ of the company.
4) As agents of the company, the directors must act within the scope of their authority and in the name of the principal, i.e. company. They would be personally liable if they take decisions in their own name and in their individual capacity. Their acts are not binding on the shareholders or on each other unless the Articles provide so.
2) The Secretary should take certain precautions while corresponding with Directors.
The points to be considered by a secretary while corresponding with the directors.
1) Prompt reply: The secretary should give a prompt reply to the questions or queries raised by the directors. A prompt reply is very important and necessary in every correspondence. A prompt and complete reply to the director’s letters or queries shows gentle and polite behaviour on the part of the secretary.
2) Politeness: A courteous (polite) letters show empathy, respect, and mutual understanding. The language of the letter drafted to the directors must be polite and courteous. The approach of the letters should be friendly, skillful, submissive, and natural. It helps to get a prompt and favourable reply and also helps to build up the goodwill for the organisation.
3) Initiative: An initiative means the start of something with the hope that it will continue. It is an ability to assess and initiate things independently. In a company, the secretary is required to take initiative in making arrangements for the board meetings and shareholders’ meetings. The secretary informs the directors to convene general meetings of the company on schedule time.
4) Accuracy: The secretary must furnish accurate, complete, up-to-date, true, and error-free information about every aspect of the business to the directors. The correct numerical, factual presentation about the business activities helps the directors to take accurate, appropriate, and wise decisions. (5) Brevity: The letter written by the Secretary to the directors should be precise, brief, and to the point. Unnecessary information, irrelevant message or explanation, lengthy paragraphs, etc. should not be included in the letters. The secretary should provide maximum information in minimum words. He should provide all the information in a concise or compact manner.
3) The Board of Directors are the elected representatives of the shareholders.
1) In a joint stock company, there is a separation of ownership from the management. Although the shareholders are the owners of the company, they never participate in the management. The shareholders elect their representatives from amongst themselves.
2) The elected representatives are called ‘directors’. The directors form themselves into a body called a Board of Directors. Thus, the Board of Directors is the elected representatives of the shareholders.
3) The shareholders delegate their powers of management to the Board. The Board after discussion decides the matters frame the policies and takes policy decisions. The managing Directors with the help of the managerial staff implements the policies.
4) The Secretary has to correspond with Directors on important occasions.
Circumstances under which the secretary correspond with a director:
1) Sending notices and Agenda of the Board Meetings, Annual General Meeting and Extraordinary General Meeting as per the rules of the Articles of Association of the Company.
2) Asking a director to disclose his personal interest, if any in a contract as required under Section 184 of the Companies Act, 2013.
3) If any director remains absent in the Board Meeting, then as per his request, the secretary sends a letter to the concerned director to give important details of the Board Meeting and draft minutes of that meeting for his kind information.
4) Reminding the director of provisions made under Section 167 (1) (b) of the Companies Act. 2013 regarding absenteeism of all the meetings of the Board, held during a period of 12 months with or Without the leave of absence from the Board. In such a case the concerned director is required to vacate his office.
5) Requesting a director to be present at a meeting as an expert.
6) Informing a director in respect of his premature removal or retirement from the post of the director of the company.