Role of Board of Directors in Company

Since the company is an immaterial, artificial and legal entity created by human beings, it is operated by natural persons. Even if the shareholder establishes the company, he must do the management work in the company.  This work is done by a person or a group chosen by the shareholder. These groups are called the 'Board of Directors. All the work, duties, and rights to be done by the company under the Articles of Association (AOA) and regulations are vested in the board of directors. The board of directors operates the company in the interests of shareholders, invests, manages employees, creates and implements necessary regulations, guidelines, and procedures, prepares and implements internal control systems and risk management standards, and makes necessary policy arrangements for and regularly monitors operations. It makes it run in an orderly and prudent manner. Similarly, the Board of Directors prepares the organizational structure, formulates and implements policies, and submits the audit report and annual report to the annual general meeting.

Regarding the number of the board of directors, in the case of a private company, there is a rule that the number shall be as specified in the Regulations. In a public company, there is a provision to have a minimum of three people and a maximum of Eleven people on the board of directors. In the case of insurance companies, banks, and financial institutions, there is a rule that the board of directors shall consist of a minimum of five and a maximum of seven directors, including one independent director. Although the board of directors is responsible for the company's management, the board of directors appoints a managing director or executive head to regulate and monitor the day-to-day management. The Central Bank regulates particular purpose-registered companies, such as banks and financial institutions; the Insurance Authority regulates insurance companies. If the company cannot be operated orderly, the company may incur losses, and the shareholders' investment may sink. It is necessary to make various plans to run the company, make it profitable, and decide which person is appropriate to appoint as managing director or executive head. The board of directors has the following role in management.

1) Profits and returns

 The Board of Directors has the responsibility of making the business successful and making the company profitable. The shareholder invests in the hope of dividends or bonus shares as the return on his investment. Protecting the shareholder's investment and providing returns rests with the Board of Directors.

2) Exercising duties, duties, and rights

The board of directors is also responsible for implementing the charter and regulations. Some laws have made explicit provisions about the rights and duties of the board of directors. It is the responsibility of the board of directors to fulfill this duty. Section 95(1) of the Companies Act 2063 stipulates that the management of the entire business of the company, the exercise of rights, and compliance with the duties of the directors shall be done collectively through the board of directors, subject to the matters written in the Company Act and Regulations and subject to the decision of the General Meeting. Since insurance companies, banks, and financial institutions must follow special laws in addition to the Companies Act, these companies must follow the Insurance Act 2079 and the Banks and Financial Institutions Act 2073. Section 53 (1) of the Insurance Act stipulates that all the work, duties, and rights of the insurer shall be vested in the board of directors of the insurance company, except for the work performed by the general meeting of the insurance company, subject to the rules or regulations issued under the said Act, instructions, orders, memorandum of association (MOA), regulations and other prevailing laws.

Similarly, Section 22 (1) of the Bank and Financial Institutions Act stipulates that all work, duties, and powers to be performed by a bank or a financial institution under this Act, existing laws, Memorandum of Association, and Regulations shall be vested in the board of directors, except for the work performed by the general meeting of the bank or financial institution. The board of directors is responsible for running the company in an orderly manner according to the said legal provisions. Similarly, there is a provision that the Board of Directors will manage the company's entire business, use the rights and fulfill the duties under the decision of the general meeting.

3) Planning and selecting qualified personnel

The company's financial progress is possible only when the board of directors plans and implements the capital by its objectives and selects qualified personnel.

4) Appointment of Managing Director/Chief Executive

Section 96 of the Companies Act 2063 provides that the directors may appoint one of their number as a Managing Director subject to the regulations. He/She runs the day-to-day administration of the company. In recent days, instead of the managing director, the board of directors appoints the executive head to run the company and gives his authority to the administrative head to run the company in an orderly manner. Although there is no provision for the executive head in the Companies Act, the board of directors can appoint a person with specific qualifications to act as the executive head. Insurance companies in section 57 of the Insurance Act2079 and  Section 29(1) of Bank and Financial Institutions Act 2073 provide that the board of directors must appoint an executive head to manage the company. His duties and rights are also specified in the Act itself. In the said Act, there are provisions to use the powers granted by the Board of Directors to implement the decisions of the Board of Directors, supervise and control the activities and transactions of the company, etc.

5) Accountability to General Meetings and Regulatory Body

The Board of Directors has the authority to manage, monitor, supervise, control, and manage the day-to-day operations. Directors are individually and collectively responsible for the general meeting. The board of directors operates and implements the laws, regulations, regulations, decisions, and directives of the general meeting. Some insurance companies, insurance authorities, banks, and financial institutions have to follow the decisions and directives of the National Bank to operate and implement.

6) Delegation of Authority

According to section 95(3) of the Companies Act 2063, the Board of Directors may delegate all or some of the rights to any director or any employee of the company, alone or jointly, to do any business on behalf of the company, to conduct audits, to stamp on exchange certificates or checks, etc. can
In order to run the company in an orderly manner, the board of directors may delegate some of its powers to any director, sub-committee, managing director or executive head or any person acting as the executive head. Section 55 of the Insurance Act 2079, Section 55 of the Insurance Act 2079, Section 27 of the Bank and Financial Institutions Act 2073, and Section 27 of the Bank and Financial Institutions Act 2073 provide the justification and reason for the board of directors to work under its supervision and direction. It has been arranged that a person who works as a leader can be delegated.

7) Corporate governance

It is not enough to run the company orderly; the internal control system should also be strengthened. Under the recognition of corporate governance, it should be implemented only by the decision of the General Assembly on matters that are intertwined with the directors' private interests, affecting the company's rights and interests. Directors should refrain from taking personal benefits from the company. Also, the board of directors should be ready to take legal action if any employee acts against the rights and interests of the company. To maintain corporate governance, the board of directors also has some responsibilities, which include making business policies and implementing them, and conducting internal and external audits of the company. If the annual general meeting approves, the shareholders will receive dividends; as per the provisions of the Company Act, the board of directors shall audit the annual accounts within six months of the completion of the financial year and call the annual general meeting and submit the profit and loss account to the meeting for approval.

As some companies, such as insurance companies and banking companies, have to follow special laws, Section 57 of the Insurance Act 2079 and Section 30(1) of the Bank and Financial Institutions Act 2073 have regulated the duties, duties, and rights of the executive head. It has provisions for using the powers granted by the board of directors, implementing the board of directors' decisions, and supervising and controlling the operations and transactions of the bank or financial institution. Although there is a provision in the said Act that the management authority is vested in the Board of Directors, the legal provisions of the Act stipulate that the management authority of the Board of Directors is to be delegated to the Executive Head. If these laws reduce the authority of the board of directors, the entire management authority is vested in the board of directors in companies that do not have to follow the said special law.
 
To consult or get legal advice from our expert  about the Company laws  in Nepal/  Company Laws Expert  in Nepal/Corporate Lawyer in Nepal, Company Lawyer ;
Contact us at 977-01-4102849/977-9851059026, Prime Law Associates, Anamnagar, Kathmandu, info@primelawnepal.com, www.primelawnepal.com
 
This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation, or inducement of any sort from the firm or any of its members. The law office shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.
 

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