nominee director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2011 My Co. had an optimum composition of BOD as per the requirement of clause 49 of the listing agreement including a nominee independent director.

However, five months ago the nominee director resigned from the Board and the financial institution is yet to nominate their official in our Board.

Listing agreement provides a timeline of 6 months for filling up the vacancy created by resignation or removal of an independent director.

Now the F .I is not clear of its intention to nominate any of their official as director and at the same time my deadline for filling up the vacancy is near by. My queries are:

1. Can i fill up the vacancy by appointing any other independent director to comply with the requirement of Listing agreement?
2. As i dont want to increase the size of my Board any further, what will happen if the F.I asks us to appoint any of their representative once i have appointed somebody else in the vacant position?
3. Can i take recourse to the fact that the F.I has failed to nominate their representative in our Board? (The agreement entered between the Company and the F.I does not contain any such clause)
4. What is the correct course of action under a circumstance where the F .I is not co-operating?
5. Can i demand a NOC from the F.I stating that they have no objection in inducting any other person as director instead of their nominee?
6. What are the rights of the F.I and the co. in this regard.

Well i know my question is quite long but i will surely appreciate your comments and opinion in this matter.

regards....

Jayashree S Iyer

Jayashree S Iyer (Expert)
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07 January 2011 You can appoint another director treating it as a casual vacancy and as and when the FI nominates a director, the person appointed in casual vacancy can be removed.

However since the reduction in number of directors is due to non-replacement of the nominee director by FI, stock exchanges may not take it a serious violation.

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udit sharma

udit sharma (Expert)
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08 January 2011 Hi..

To the best of my knowledge, as long as the requirement of having specfied minimum number of Independent Directors on the Board of Directors of your company is met, the period of 180 days for filing up the vacancy caused due to the vacancy of Independent Director shall not apply.

In case, it is not met:

1. You can appoint an Independent Director to fulfil the conditions of Listing Agreement,

2.As and when the F.I. nominates its representative to be appointed as Director in your company, you can seek resignation from the Director appointed by you or remove him with the consent of the members in accordance with the provisions of section 284 of the Companies Act,1956 as the Board may decide, and appoint the representative of the FI.

I differ from what the expert has opined that since the reduction in number of directors is due to non-replacement of the nominee director by FI, stock exchanges may not take it a serious violation.

The non-appointment of Independent Directors within 180 days is a violation of the Listing Agreement and will be taken very seriously by SEBI.

Regards

CS Udit Sharma

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Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2011 i agree to your opinion Udit and feel this is the only solution left so as to avoid any chances of non-compliance with the provisions of the Listing Agreement.

But i am still unsure of the situation wherein an already appointed independent director will be asked to resign or the Board decides to remove him........

Whatever it is, i will proceed with appointment of another Independent Director.

Regards....