Upgrad LLM

director of company


in case a person is director of company and he is only passive one .the MD is issuing the cheques which are bounced time and again. now what should be done by the director being passive in action.

pls suggest

 
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Advocate

Rajiv,

You have to first go through the MOA and AOA of the company. If there is any such clause indicating that the cheques drawn by the MD is bound by the Directors of the company, then , even if the Director is a passive one, he is entitled to get notice for the same and have to represent the case.

And if there is no such clause, then the Director is not bound by the actions of the MD.

 
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THANKS SUCHITRA G FOR UR VALUABLE SUGGGESTION ,I AM RAJVINDER NOT RAJIV.

I WANT TO KNOW THAT SHOULD WE RESIGN FROM COMPANY AND IF WE RESIGN FROM COMPANY THEN WHAT PROCEDURE SHOULD WE FOLLOW. AFTER GIVING RESIGANATION TO COMPANY SHOULD I HAVE PROCEED FOR FILING INJUCNTION SUIT TO RESTRAIN THE MD OF COMPANY FROM ISSUING ANY CHEQUE.

 
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Advocate

Mr. Rajvinder,

It is not that easy to give resignation for a director. What about the shares he is holding in the company? And I dont understand how MD can issue cheques without getting approval in the minutes of meeting? Even if he has done it,  how a Director who has not issued the cheque become liable ?

Pl go through the MOA and AOA of the company to know more about the case. And if the director wants to resign, he has to submit his resignation to the Registrar of Companies.

 
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Lawyer

Dear Rajvinder,

An act of a in the ordinary course of business of the company makes the other directors equally liable as the one acting. this is based on the principle of fiduciary relationship and agent relationship. the other directors of the company are equally liable with the acting director generally. however, there is an expection, if it can be established that the consent of the director was given to the said act and the same was done without his knowledge and accent.

 

further regarding resignation, the procedure is generally given in the Articles of Association of the company and in case it is silent on the resignation, a director can resign by sending a resignation to the chairman of the board of directors. the intimation of the resignation to the registrar is to be filed by the company by way of filing E-form 32 within 30 days from the date of resignation. it is suggested that you first check the Articles of Association of the company if there is any clause as to resignation by the directors ans in case it is silent then you should send a resignation letter to the chairman of the board of directors at the registered office of the company stating that he (director) hereby resigns from the post of directorship with immediate effect i.e. date of resignation. the letter should be sent by registeres post A/D or if given by hand then a receipt of the same should be taken (signature of the person authorised to receive mails in the company and receipt stamp of the company). thereafter the director shall be liable only for the actions taken by the company till the time he submitted his resignation which can further be defended as said above on the grounds of consent and knowledge of the action.

 

i hope this answers your concern.

 
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Lawyer

Further, it is also suggested that you should send a copy of your resignatino letter to ROC where the company is registered with a forwarding letter indicating that you have resigned from the company from directorship. again the same should be sent through regd. A/D and UPC..

 
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