Board reolution vs general power of attorney
P.C. Joshi
(Querist) 23 February 2012
This query is : Resolved
DEAR FRIENDS,
THE DIRECTOR/MD OF A COMPANY USUALLY HAS TO SIGN NUMBER OF DOCUMENTS INCLUDING BANK OPERATIONS, DELAING WITH GOVT. DEPARTMENTS ETC. FOR WICH BANKS AND OTHER AGENCIES INSIST FOR A BOARD RESOLUTION.
MY MD ALWAYS QUESTIONS WHY HE HAS TO GIVE A BOARD RESOLUTION FOR EVERYTHING SUCH AS BANKING OPERATIONS ETC. WHY CAN N'T A GPA WORK FOR THAT. THOUGH HE IS CORRECT BUT BANKS AND OTHER GOVT. AGENCIES DO NOT ACCEPT GPA.
THOUGH IT IS A ACADEMIC QUESTION. BUT STILL IF ANYONE CAN THROUGH SOME LIGHT WHETEHR A COMPANY CAN GIVE A GPA TO ITS MD/CHAIRMAN INSTEAD OF A BOARD REOLUTION.
THANKS
P.C. JOSHI
Guest
(Expert) 23 February 2012
Dear Joshi,
I hope, you being a company secretary, yourself has the better answer to this question, as company secretaries are better equipped to practically deal with such type of problems.
However, I may simply say that if your MD believes in using a POA/GPA, more particularly in banking operations, he is not fit to hold such a post, as he cannot be graded less than an idiot.
About your question, "whether a company can give a GPA to its MD/ Chairman instead of a Board Resolution," the question arises, who is expected to give the GPA to the Chairman/MD, whether the Board, or mutually by the Chairman and MD themselves to each other?
This clearly reveals that the Memorandum and Articles of Association (MAA) of the company is defective which does not allow the MD to transact business by himself and he has to seek Board Meeting for Board Resolution or ask for GPA every time for every business. In that case, better review the MAA and get that amended appropriately by Board/AGM or otherwise get some powers delegated by the Board to the MD. That delegation/MAA can bring an ease in working of MD suitably.
Raj Kumar Makkad
(Expert) 23 February 2012
I think the common sense shall prevail by way of the detailed reply of Dhingra.
P.C. Joshi
(Querist) 23 February 2012
Thanks to both of you for sharing knowledge. I appreciate Mr Dhingra's views.
But other than general administartive functions, an MD is suppose to act on the authority of the Board i.e. through Board resolution and moreover, any outside agency is not bound by the AOA of the company, they can seek board resolution. But in case of comapy all commercial transactions are performed by director/officers by Board Resolution even courts also accept BR.
GPA is required in case of delegation of authority by individual or firm.
Thanks
Guest
(Expert) 23 February 2012
Dear Shri Joshi,
It is a matter of commonsense that any outside agency/organisation dealing with your company (a legal body) may like to ensure legally secure business deals with the company. A company's true representative is duly elected Board only, not an individual or employee whom such organisations can be expected to transact or enter in to a business deal.
So, if the MD is unable to get Board meetings conducted at the time of need, the Board should delegate certain categories of powers to the MD by passing a common resolution in such cases which need Board Resolution to transact any business with the Banks/ Government Organisations/ PSUs and other important organisations. Copy of the same can be used at the time of need. However, even if some organisation still desires individual Board Resolution for some particular transaction, they have the right to seek such resolution before entering in to a deal with the company to ensure a legally secure business deal in the interest of their own organisation..
PLEASE DON'T FORGET, GPA's ARE PRONE TO THE DANGER OF MISUSE AT CERTAIN OCCASIONS, MORE PARTICULARLY IN BANKING TRANSACTIONS.
Shailesh Kr. Shah
(Expert) 27 February 2012
Dear Mr.PC Joshi,
I suggest you to go through the following sections of the Companies Act, 1956 for satisfaction of your query:-
48. Execution of deeds
(1) A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place either in or outside India.
(2) A deed signed by such an attorney on behalf of the company and under his seal where sealing is required, shall bind the company and have the same effect as if it were under its common seal.
54. Authentication of documents and proceedings
Save as otherwise expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed by a director, 21[***] the manager, the secretary or other authorised officer of the company, and need not be under its common seal.
