Whole-time Director – One Person Company Registration
Period of Appointment
It is a point worth noting here that while in the case of a managing director Section 317 restricts the period for which he may be appointed at a time up to five years, there is no such restriction on the appointment of a whole-time director of the company, so that he may be appointed for a longer period without the necessity for renewal every five years, provided, however, that his office of director is not one, which is subject to retirement of directors by rotation.
Whole-time director is virtually managing director
A whole-time director for the purpose of Section 269 or 309 is a director rendering his services whole time to the management of the company and, therefore, he is virtually a managing director though not so designated. A ‘director-in-charge’ also stands in the same position as a managing director, even if he does not give his whole-time to management of the company. Whether a whole-time employee is a whole time director. A, ‘whole-time employee of a company also appointed as a director of the Company is in the position of a whole time’ director. The view is equally applicable in the case of an alternate director. Accordingly the appointment of an employee as an alternate director will be governed by the provisions of Sections 314, 269, 309 and 198 of the Companies Act, 1956.
Branch manager if appointed director would be whole-time director
The Department is of the view that when a branch manager who is apparently a whole-time employee, is appointed, as director, he will be in the position of a whole-time director of the company and the appointment would require the approval of the Central Government under Section 269 if it is not in accordance with Schedule 13.
Role and Powers of Executive / Whole-time Director
The executive director of a company is duty bound to execute the policies laid down and decision taken by the Board of directors at their various meetings. He has to co-ordinate activities of various divisions and departments of the company and ensures that the short-term and long-term policies and plans of the company are executed and implemented as per the time schedule fixed by the Board. In the event of any delay in the implementation of the policies and plans chalked out by the Board of directors, he is duty bound to bring the fact to the notice of the Board so that causes of the delay may be analyzed and remedial action can be taken, if any, and future plans and policies be modified in the light of the experience gained.
The whole-time director is normally entrusted with the responsibility of one particular department or division of the company. If he is appointed for looking after the work of procurement of raw materials, stores, spares, plants and machines, jigs tools, fixtures, oils lubricants etc., it is his duty to establish proper coordination with the production and marketing departments to ensure procurement of all the inventory in such a way that unwanted inventory is not built up, non-moving items are disposed of and productions not hampered on account of non-availability of necessary inputs. If he is in charge of production, he has to coordinate the activities of his department with the marketing and procurement divisions so that right quality goods are produced in right quantity and in right time to execute the various sale orders in time. He should ensure that no sale orders are allowed to remain in the pipeline for a long time and at the same time unnecessary stock of semi-finished and finished goods are not build up. If he is in charge of marketing the product of the company, he has to keep the marketing team in absolute readiness since the market is very competitive and aggressive salesmanship is required. The sales team must make all possible efforts to keep the order book always full. The whole-time director in charge of marketing has to coordinate the marketing activities with the production and with the Transport in charge/Transport Companies so that the orders booked by the sales team are dispatched in time and the quality and quantity of the goods dispatched remain perfect to avoid all chances of complaints on their account and also sales accounts department for timely realization of sales proceeds in time. Similarly, if the whole-time director is in charge of finance, he has to make sure that sufficient funds are available to the company to keep all the divisions to their optimum use. Funds should be managed in such a way that they are turned over in the quickest possible time thereby reducing interest burden to the minimum and at the same time the funds should never be in short supply lest the production program is held up for want of funds or unnecessarily huge funds are laying in the current accounts of the company without earning any interest, whereas in certain other accounts the company has to pay heavy amounts in the form of interest and service charge because of huge debit balance in cash credit accounts, overdraft and other interest bearing accounts. He should also ensure timely sales realization as to avoid long debtors’ position. It is possible by coordination with the marketing head. Such a situation should be avoided by judiciously planning funds management
Duties of a whole-time director
The duties and responsibilities of an executive director or whole-time director are governed by the terms and conditions of their appointment and also by powers and authorities given to them and responsibilities entrusted to them by the Board of directors from time to time or by the shareholders at their general meetings. Unlike the managing director of a company, an executive director or a whole-time director is not entrusted by the company with substantial powers of management of the business and affairs of the company. They are bound to act in strict compliance with duties and powers entrusted to them under the overall direction of the managing director, if any.
Liabilities of whole-time director
An executive director and a whole-time director are not personally liable on the contracts made by them for the company with the third parties. Even where a contract is ultra-vires their powers, meaning thereby that where they have no authority to contract, they are not personally liable on the contracts. They may, however, be liable for damages for acting without authority or in excess of authority if they can be deemed to have given out to outsiders that they had authority to act on behalf of the company. However, if they contract in their own names without disclosing that they are acting for the company, they may be personally liable to third parties. They are personally liable to the injured party for any fraudulent act on their part as no contract or agency or other service can impose upon the agent any obligation to commit or procure any fraud or any other wrong. Therefore, where a wrongful act such as libel or trespass, infringement of a patent or trade mark etc. is committed by an executive director or a whole-time director, they are liable along with the company.