Is it compulsory for companies to appoint a Managing Director? [May, 1991J

1. (a) Define a ‘Director.’ When is a person “deemed to be a director”?

(b) Can a firm or a body corporate be appointed director of a company?

jfns.

(a) Definition of a Director

Section 2(13) of the Companies Act, 1956 defines a ‘director’ as “any person occupying the position of a director by whatever name called.” Thus, itis not

the name by which a person

. is called but the position he occupies and the functions and duties which he discharges that determine whether in fact he is a director or not. In re, Forest

of Dean Coal Mining Co., it was stated that function is everything; name matters nothing. So long as a person is duly appointed by the company to control

the company’s business and authorised by the Articles to contract in the company’s name and on its behalf, he functions as a director.

The Articles of a company may, therefore, designate its Directors as governors, members of the governing council or the board of management, or give

them any other title, but so far as the law is concerned they are simply directors:

Similarly, in the case of associations or other bodies registered as companies under Section2S (that is companies whose object is not profit-maldng but

furtherance of art, science, commerce, culture, etc.), the members of the executive committee or other governing body are Directors for purposes of the

Act, though they are not called by that name.

Deemed Director [Section 7]. For certain purposes, the Companies Act, 1956 treats as director the person in accordance with whose directions or

instructions the Board of Directors of a company is accustomed to act. This widened definition of a director, however, merely operateSio impose liabilities

or prohibition on a person who would not otherwise be cla as a Director. But, before a person can be deemed as a Director and his liability invoked, it

shall have to be categorically established that the Board of Directors werENlccustomed to act according to his directions and instructions. Acting casually

or once jn a while on certain instructions cannot be considered as sufficient evidence to this effect. A ‘deemed Director’ under English Law is called as