To protect the interests of the company and of the shareholder, the Companies Act has imposed certain restrictions on the directors. These are as follow:
1. Delegation of Power:
As a general rule, directors cannot delegate their powers to anyone else unless they are expressly authorised by the Articles to do so (delegatus non- protest delegate).
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2. Assignment of Office:
ADVERTISEMENTS:
A director cannot assign his office to another person. Assignment of office by a director of a company to any other person shall be absolutely void (Sec. 312).
3. Exemption from Liability in Respect of Negligence Etc:
A director of a company is not entitled to claim any exemption from or indemnify against any liability which by virtue of any rule of law would attach to him in respect of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty.
A company, however, in pursuance of any such provision can indemnify him against any liability incurred by him in defending any legal proceedings, civil or criminal in which he has succeeded.
4. Holding of Office of Profit (Sec. 314):
Except with the consent of the company accorded by a special resolution passed at the general meeting-
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(a) No director of a company shall hold any office or place of profit; and
(b) No partner, or relative of such a director; no firm in which such a director or relative is a partner; no private company of which such director is a director, or member; and no director or manager of such a private company shall hold any office or place of profit carrying a total monthly remuneration of such sum as may be prescribed.
Special resolution may be passed either before or after the appointment to the office/place of office of profit. If consent is given after appointment, the special resolution must be passed at the general meeting of the company held for the first time after the holding of such office or place of profit.
However, the offices of managing director, manager, banker or trustee for the holders of debentures of the company have been excluded from the purview of this section. Similarly, persons appearing in a court as Advocate or Solicitor and receiving fee thereof, does not amount to holding of an office or place of profit. However, appointment as a Solicitor/Advocate on a regular/retainer basis for rendering legal advice does amount to holding an office of profit under this section.
ADVERTISEMENTS:
Any office or place shall be deemed to be an office or place of profit.
(i) if it is held by a director, who obtains from the company anything by way of remuneration over and above the remuneration to which he is entitled as such director, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.
(ii) if it is held by an individual other than a director or any firm, private company or other body corporate, such individual firm or body corporate obtains from the company anything by way of remuneration, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.
If any office or place of profit is held in contravention of the provisions of this section, the director, partner, relative, firm, private company or the manager concerned shall be deemed to have vacated his or its office with immediate effect.
The person concerned will also have to refund to the company all remuneration received or monetary equivalent of any perquisite or advantage enjoyed in the meantime in respect of such office or place Or profit. The company shall not waive the recovery of such sums unless permitted to do so by the Central Government.
This section is applicable to all companies under the Act whether public or private. However, the provisions of this section are not applicable to a person who, being the holder of any office of profit in the company, is appointed by the Central Government under section 408 for the prevention of oppression and mismanagement as a director of the company.
5. Restriction on the Number of Directorships:
No person can hold office, at the same time, as a director in more than 15 public limited companies, formed to carry on business for profit (Sec. 275).