Duties and liability of the Chairman
Guest
(Querist) 28 May 2010
This query is : Resolved
Respected Experts...Whether the chairman of company is necessary party in civil suit/consumer suit? If mis joinder of the Chairman can be deleted by appropriate application.Whats the difference between the Managing director and Chairman?
A V Vishal
(Expert) 28 May 2010
A managing director, as defined in Section 2(26), means a director who is encrusted with substantial powers of management which would not otherwise be exercisable by him. The "substantial powers" of management may be conferred upon him by virtue of an agreement with the company, or by a resolution of the company or the Board or by virtue of its memorandum and articles. The powers so conferred are alterable by the company. He is also removable the same way as he was appointed irrespective of the fact that his appointment has been approved by the Central Government. But if he is prematurely removed from office he is entitled to compensation. A managing director is an employee of the company, but not to the extent so as to be entitled to preferential payments.
A V Vishal
(Expert) 28 May 2010
There is no statutory provision in the Companies Act, 1956 for every company to have a chairman. Under Section 269 of the Act, companies having a paid-up capital of such sum as may be prescribed (which is Rs 5 crore at present) must have a managing director, whole-time director or manager. Section 252 mandates that every public company shall have at least three directors. Section 383A mandates the appointment of a company secretary in certain cases. Section 224 obligates every company to appoint an auditor. There is no such provision with regard to the appointment of a chairman.
Table A of the Act under regulation 76 (1) says that the board may elect a chairman of its meetings and determine the period for which he is to hold office and if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the meetings, the directors present may chose one of the members to chair the meeting.
Some of the companies appoint such chairman on rotational basis or until otherwise resolved. Regulation 56 of Table A provides that “the chairman, if any, of the board shall preside as chairman at every general meeting of the company Regulation 51 of Section 175 of the Act empowers the members present at a general meeting to elect a chairman, and this has application only if there is no chairman to the board or no director is willing to chair the meeting or if no director is present or if shareholders have no confidence in such a chairman and want someone else to preside over the meeting.
There is no such mandate that every company should appoint a chairman. As per Section 175 of the Companies Act, the board can appoint a chairman amongst themselves. Such chairman can be appointed for each meeting of the board or for a specified period. Some companies’ Articles of Association (AoA) provide that a chairman shall be appointed by the board to hold office from one annual general meeting (AGM) to another. Nowhere in the Companies Act have the powers, duties and responsibilities of the chairman been defined. The Act only delegates the following powers:
In the event of equality of the board, the chairman can exercise a casting vote if so provided in the AoA of the company.
Surrender K Singal
(Expert) 29 May 2010
The querist is really lucky to have such detailed opinion from Mr. Vishal; May Almighty bless all with peaceful happiness;
Jai Shree Ram !
Guest
(Querist) 29 May 2010
thank you very much Mr Vishaal ji to give us such a detailed reply, thanks again sir.
Guest
(Querist) 29 May 2010
yes i am really lucky one. Mr Singhal is right
