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The operators are not only agents but in some ways they are also the trustees of the company. Explain clearly

“The operators are not only agents but in some ways they are also the trustees of the company. Explain clearly.

[“Directors are not only agents, but are also in some sense trustees of the company.” Explain clearly.]

Legal Position of Directors of a Company

The legal status of the directors has not been clarified under the Companies Act. The Director is recognized as an ‘Officer’ under the Articles of Association of the Company. They are not considered servants of the company. Lord Justice Bowen has explained the legal position of the operators as follows

 

“Operators are sometimes described as agents, sometimes as trustees and sometimes as managing partners, but each of these expressions is not used in an exhaustive manner to refer to the full rights and responsibilities of these persons, Rather, they are used at any one time or for some purpose. Supreme Court of India Ramchandra & Sons Sugar Mills Pvt. Ltd. Vs. Kanhaiya Lal has expressed an unwritten view about the position of the operators.

Companies Act |

127

It is indisputable that the company and the director of the company are different legal persons. The company derives its powers from the Councilor Memorandum, some of these powers are delegated to the directors. For some purposes they are called trustees of the company and for others they are called agents or managers of the company.”

Thus, the actual position of the director of the company is not only that of the agent or the trustee or the managing partner but a combination of all these.

(1) The status of operators as operating agents is similar to the status of agents. Contract on behalf of the company as Day Agent. The company is responsible for these contracts. Directors are not personally liable. They can do many things that the company has the right to do, but if they act outside the rights, they will be liable to third parties. Operators cannot be called agents in their entirety because in some cases the operators have wider powers than the agents. The operators cannot be termed as agents of the individual shareholders.

(II) As managing partner, the directors are appointed for the management of the company and at the same time they have to buy the shares of the company. In this way, the managing directors of the company are considered as partners, but there are many differences between the partners and the directors, such as the liability of the partners is unlimited and that of the directors is limited. If the operators misuse their rights, they will be liable for the damage caused by them.

(III) Directors as trustees are not treated as trustees of the company, but they are deemed to be trustees for all the property which comes in their possession on behalf of the company. Directors are paid servants of the company and cannot be prosecuted or covenanted in their name. If the directors misuse the property of the company, they will be held liable like the trustees. Even after the status of the directors is different from that of the trustee, they are considered trustees for the property and money of the company under their control. These trustees are for the company and not the shareholders. If the directors represent the interests of the shareholders, they shall be liable to the shareholders. If the directors use the company’s money for outside purposes, then they will be personally responsible for that. The directors are considered to be the trustees for the following rights of the company

(i) the right to use the company’s money in the interest of the company (ii) the right to use the company’s property in the business.

(iii) Right to declare dividend in general assembly.

(iv) Right to allot shares

(v) Right to accept transfer of shares.

(vi) Right to accept the surrender of shares.

(IV) Director as an Officer of the Company According to the Companies Act, the director is an officer of the company. Therefore, if he violates the provisions of the Companies Act, then he can be punished with imprisonment or with fine or with both.

(V) Director as an Employee of the Company – There is a contract between the operator and the company regarding their appointment, on the basis of which the directors dedicate their services to the company for a certain period of time. And

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