Criminal Trident Pack: IPC, CrPC and IEA by Sr. Adv. G.S Shukla and Adv. Raghav Arora
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ravi   31 January 2018

Selfappointment as md

 I am in the process of beginning operations within a new company. The company has 3 directors with 1/3 of the shares each. Apart from us we also have appointed a working executive director. However we are facing certain issues in regards to decisions to be made and there are few conflicts arising.
The working executive director has self proclaimed himself as the Managing Director of the company.Is this legally acceptable?
Also, he is taking decisions/signing checks etc without the consent of all the three directors.
There is one catch though,2 of the directors apart from me are from his family. In this case is it possible for them to take decisions without my consent?
Please advise as this needs to be sorted out urgently.



Learning

 4 Replies

Smreti Sharma   31 January 2018

MD can not be appointed without the consent of shareholders and majority of Directors.

G.L.N. Prasad (Retired employee.)     01 February 2018

In case of company, powers/ Authority  are well defined and reduced in writing both in Memorandum and Articles of Association.  Study them properly and consult any local advocate cum Company secretary for further guidance.  Also purchase Companies Act and go through all relevant legal issues concerned with company.

BRISK ADVISORY SERVICES LLP   02 February 2018

As you written that existing director have appointed one director as working executive director so he can do the work in the ordinary course of business i.e day to day affairs of the compeny but their power can be confined through the Board Meeting and AGM where resolution can be passed according to the companies act 2013.

 

So, kindly read the provision of giving power to director on behalf of board.

Dr. MPS RAMANI Ph.D.[Tech.] (Scientist/Engineer)     05 February 2018

It is presumed from what you have reported that the Working Executive Director is not a shareholder of the Company. He is calling himself  Managing Director. A person can be appointed as Managing Director of a Company, whether a shareholder or otherwise, and his remuneration fixed by the shareholders of the company by a majority vote. Such appointment can be approved post facto also.  As 2/3rds of the votes are within the family, approval of his appointment is a foregone conclusion. As regards authority to sign cheques, it also depends on the articles of association. In fact banks will not honor his cheques if he did not have the necessary authority. You should have thought twice before associating yourself with a family concern, which is not your family. As a 1/3 shareholder you are just an investor.


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