05 July 2012
CASE STUDY There is a company in which there are two promoters which are brothers X and Y. X is MD of the Company and Y is WTD of the Company. Company is private listed company and the main business of company is PCB, Telecom and infrastructure is operated on minor scale. There are 6 directors in the company including X, Y and 2 independent directors. The Shareholding of X and Y is equal i.e. 33% in the Company. There was a board meeting in the company on 30/05/2012 in which the following resolution is passed “X will see business of PCB, Telecom and Y will handle business of infrastructure. Further, Y will report to X performance of business.” The above resolution is passed in the absence of Y and from the other items in the agenda. Y objected the resolution and the resolution is passed again in duly convened Board Meeting on 18/06/2012in the items of agenda. There is a problem of control switch over between two brothers and Y wants that control should not be diluted. The two independent directors are not independent in the real sense and they have financial interest in the company.
Now the Question is; 1. There is urgent need for reconstitution of Board. 2. Who may call the Board Meeting? Can Y call the meeting…. Or secretary can call the meeting? 3. If Board meeting is convened how the resolution will be passed because almost all directors are in favour of X. 4. EGM………….. 5. There is no way of court/CLB? Possible legal way of reconstitution of Board is required.
I would like to bring in your kind notice the provisions of section 292 of the Companies Act 1956 according to which certain powers can only be exercised by Board Only in their Board meeting meaning therefore it does not mean that you have given powers to one Director and he is authorized to do any thing.even your dissent will be recorded in Minutes of Board.
Second you can stop any special resolution to be passed in general meetings because you have requisite majority to prevent any special resolution.
Third if you consider any things to be wrong done by Mr. X then there are forum Company Law board to be approached.section 397 and 398 of the Companies Act 1956 provides you to approach Company Law board and be sure that if any thing done by Mr.X which you consider wrong Just file petition in Company Law Board for Oppression and Mismanagement and you can request for Interim Injunction or for Status Quo.
The Other way is Like Complaint to RD or grievance cell of Ministry of Corporate Affairs.
Thus it does not mean any body with a resolution can take away your right of shareholder.
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