Nominee Director

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Anubha (Querist)
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20 November 2007 Can a nominee director be appointed as a managing director of the Company? If yes, than he must be in the employement with the company, after that what happens to his status with the company vis a vis with the instiution which has nominated him on the Board of Company?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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20 November 2007 There is no category of director called nominee directors separately categorised, under the companies Act. You are probably referring to persons whom the financial institutions want to be appointed as their representatives on the Board as long as there is financial assistance of the istitutions are continued. The terms of appointment is on the basis of what the financial institutions have stipulated and agreed to by the company. The company has to strictly follow the contractual obligation they have agreed to while accepting assistance under the agreed terms.

The person so nominated will also have a code of conduct with the appointing istitution and he will have to observe that. Such code may include restriction on his appointment as MD or WTD nless consented to by the institution and even if appointed with cosent, the remuneration, if any, paid will have to be made over to the institution etc.

Viewing with these, while there is no bar in company law, it may be subject to the terms the company agrees with the institution.