Nominee director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 November 2010 Ours is a private company. In shareholders agreement, there is a clause for appointment of one representative of Investor Company as director. Accordingly Mr.X has been appointed. Now the investor company wants to replace Mr.Y in place of Mr.X. what procedures is to be followed here? Whether shareholders approval is necessary for replacement of nominee director?

udit sharma

udit sharma (Expert)
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04 November 2010 Hi...

In my opinion provisions of section 284 ofthe Companies Act, 1956 are applicable to both Private Limited as well as Public Limited Company. Hence, to remove a Director before the expiry of his term of office, every Company whether public or private is required to follow the procedure prescribed by section 284 of the Companies Act, 1956. Hence, for removing Mr. X you will have to follow the provisions of section 284.

Either Mr. Y can be appointed at the same General Meeting in which Mr. X is removed or can be appointed later by the Board of Directors to fill in the casual vacancy caused due to removal of Mr. X.

To conclude, in my opinion for removing Mr.X approval of the shareholders is must and either Mr. Y can be appointed at the same General meeting or can be appointed later by the Board as a Director appointed to fill in the casual vacancy caused due to the removal of Mr. X!

This is my understanding of the Companies Act, 1956 and the views of other eminent experts are always welcome:-)

Querist : Anonymous

Querist : Anonymous (Querist)

08 November 2010 Dear Sir,

But the nominee director is appointed by investor company as per the shareholders agreement. Now the investor company itself replacing its nominee director.Now also shareholders approval is required?

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Ankur Garg

Ankur Garg (Expert)
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08 November 2010 No section 284 is not required to be followed at all n there is no need to go for shareholders approval.

Simply take resignation frm the concerned director and file form 32 accordingly.

After this resignation appoint new director as recommended by financial institution as an additional director and file form 32 for appointment.

Later on rgularise the same in next AGM.

Thanks

udit sharma

udit sharma (Expert)
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08 November 2010 Ankur Sir!

With due regards kindly clarify that approval of the shareholders is not required for removing the Nominee Director appointed by the Investor Company then why will the approvalof the shareholders be required for appointment of Mr. Y in place of Mr.X.? Why is there a need to appoint Mr. Y as an Additional Director? Can't you directly appoint him on the Board of Directors if the Shareholders Agreement so provides?????

Querist : Anonymous

Querist : Anonymous (Querist)

09 November 2010 Actually in our company we have appointed the nominee director in BM directly(not as a additional director) as it was provided in shareholders agreement. Is this leads to non-compliance?

Ajay Mishra

Ajay Mishra (Expert)
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09 November 2010 Hi

There is no need to take shareholders approval for appointment of Nominee director and for replacing them. Board Meeting generally take note of appointment of nominee director.

Regards