India follows the democratic pattern for management of a Company. The shareholders are the owners of the company who elects the Board of Directors for conducting the management of the Company. The directors act in a fiduciary capacity for the Company and its shareholders.

Shareholders:

Shares held by shareholders represent their interest in the company. A share can be sold or transferred in a manner as provided in the Articles of Association of the company. A Share in a company is also a property of the shareholder and dealing in the same also attracts provision of Indian Contract Act 1872 and Transfer of Properties Act 1882.

Though the shareholders appoints directors to conduct day to day affairs of the Company, there are certain major decisions which have to be approved by the shareholders by way of passing resolutions in their general meeting. Such as appoint and remove directors, sale of undertaking, managerial remuneration, borrowing power and investment limits, alteration in memorandum of Association or Articles of Association, issue of shares etc.

Board of Directors:

The Management of the company is entrusted with the Board of Directors which is elected by the shareholders of the company. First Directors are required to be named in the Articles of Association of the company. The Board becomes the working organ of the company. No body corporate, associations or firms can be appointed as directors. A foreign national can become director of the Indian company on obtaining Director’s Identification Number (DIN). Every change in constitution of the Board is required to be notified to ROC. A director can draw remuneration from the Company and also entitle to sitting fees for attending the Board Meetings.

The Articles of Association governs general powers of the Board which are required to run the company on day to day basis. The Board is required to meet once in every three calendar months. Board meetings can be held anywhere in India or overseas. The directors must act by resolutions at a Board Meeting duly convened and constituted. Proceedings of all Board Meetings are required to be entered in a minute book.

Funding options:

A Company can meet its financial requirements from raising fresh share capital, loans from directors, shareholders, corporate, banks or financial institutions and from internal accruals or any other special purpose vehicle (SPV) subject to compliance of relevant Rules and Regulations in that respect.

Accounts:

The Financials of a Company are required to be audited by the statutory auditors duly elected by the shareholders in their general meeting and the said accounts are required to be adopted and approved by the shareholders in their Annual General Meeting. Directors are answerable to shareholders for any type of irregularity in the management of the Company. A company is required to convene an Annual General Meeting (AGM) in each calendar year within the prescribed period as laid down in the relevant provisions The Companies Act. Periodic returns are required to be filed with ROC.

Profit distribution:

The Company can distribute its profits among the shareholders by declaring dividend in the Annual General Meetings after payment of necessary dividend distribution taxes. The dividend is free from taxation in the hand of shareholder. There are certain parameters prescribed in the relevant provision of the Companies Act 1956 for declaration and distribution of dividend which have to be followed.

Registers:

A Company is required to maintain following various registers which are open for inspection to shareholders and Government Authorities.

1. Register of Members
2. Register of Directors
3. Register of Directors’ shareholding
4. Register of Investment
5. Board Meeting Minutes and General Meeting Minutes
6. Register of Charges
7. Register of Share Transfer
8. Register of Duplicate Shares
9. Register of Contracts
10. Register of Disclosures
11. Register of Balance Sheet and Annual Returns
    

In addition to the above, certain circumstances in the life of a corporate governed by specific Court Judgments which are not explicitly covered in the Companies Act.

Management deadlock

At times there may be a situation wherein the decision making process comes to stand still for the want of requisite majority. In such situation there is a deadlock in the company and no decisions are taken which adversely affects the interest of stake holders. In these circumstances the Directors themselves or one of the stake holders approach the Government Authority like Company Law Board (CLB) for resolving the deadlock. This is more of arbitration process and most of the matters are resolved through out of court settlement. The Companies Act 1956 also contains strong provisions for necessary relief for minority shareholders in case there is injustice.