Private limited company

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Querist : Anonymous

Querist : Anonymous (Querist)

11 July 2010 In a two member board of a pvt ltd company what are the powers of a MD(one of the director) and other director? If the MD does not follow the advice or take consent of the other director in running the company ,what steps the other director can take to restrain the MD?

DR GAURAV GUPTA FCA, FCS, LL.B

DR GAURAV GUPTA FCA, FCS, LL.B (Expert)
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12 July 2010 HERE POWER OF MD IS NOT SIGNIFICANT BOTH HAS TO WORK COLLECTIVELY ONE HAS NOT MORE POWER

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Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2010 Can you please be more specific in ur answer about the second part of my query

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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10 August 2024 In a private limited company with a two-member board where one director is designated as the Managing Director (MD), the roles, powers, and responsibilities of each director are as follows:

### Powers and Responsibilities:

**1. Managing Director (MD):**
- **Operational Authority**: The MD typically has the authority to manage the day-to-day operations of the company, make executive decisions, and represent the company in its dealings.
- **Decision-Making**: The MD can make decisions regarding the company's business operations, strategy, and implementation of policies, subject to the limits set by the board or the company’s articles of association.
- **Delegation**: The MD can delegate responsibilities and powers to other officers or employees of the company as deemed necessary.
- **Reporting**: The MD must report to the board of directors on the company’s performance and other significant matters.

**2. Other Director:**
- **Limited Operational Role**: In the absence of specific designations or powers, the other director typically has a more passive role, with responsibilities focused on oversight and governance rather than day-to-day management.
- **Board Meetings**: The other director participates in board meetings, votes on resolutions, and provides input on major decisions.

### Steps to Address Issues with the MD:

If the MD does not follow the advice or seek the consent of the other director, the following steps can be taken:

1. **Review the Articles of Association**:
- Check the company’s Articles of Association (AoA) to understand the powers and limitations of the MD and the board. The AoA often outlines the authority of the MD and the procedures for board decisions.

2. **Board Meetings**:
- **Request a Board Meeting**: The other director can call a board meeting to discuss the issues. Both directors should address their concerns and seek a resolution through the board meeting.
- **Document Decisions**: Ensure that decisions and discussions are documented in the meeting minutes.

3. **Special Resolution**:
- If necessary, a special resolution can be passed by the board to address specific issues with the MD. This might involve re-evaluating the MD’s authority or making changes to the company’s operational strategies.

4. **Consult the Shareholders**:
- If the conflict persists, it might be necessary to involve the shareholders. Shareholders can exercise their powers to address the issue, which might include removing or changing the MD, depending on the company’s structure and shareholding agreements.

5. **Legal Recourse**:
- **Seek Legal Advice**: If the MD’s actions are detrimental to the company and cannot be resolved through internal mechanisms, consulting a legal professional is advisable. They can provide guidance on potential legal actions, such as filing a complaint with the National Company Law Tribunal (NCLT) if there are breaches of fiduciary duties or other legal violations.
- **NCLT**: As a last resort, the NCLT can be approached for disputes involving management and governance issues.

6. **Documentation and Evidence**:
- **Maintain Records**: Keep detailed records of all board meetings, communications, and actions taken. This documentation is crucial in any legal proceedings or formal complaints.

7. **Amendments to Articles of Association**:
- **Change in Governance Structure**: If ongoing issues arise, it may be beneficial to amend the AoA to clarify the roles, responsibilities, and decision-making processes within the company.

### Summary:

In a two-member board, the MD typically has substantial operational control, but both directors should work collaboratively to address any issues. The other director’s recourse includes using board meetings to resolve disputes, involving shareholders if necessary, and seeking legal advice if internal resolutions are not effective. Ensuring that the company’s governance documents and processes are clear can help mitigate conflicts and ensure smooth operations.