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Addressing an issue with adding directors

Tony K (Shareholder) (51 Points)

08 April 2019

Here is the case detail

- Privately held Pvt. company with 2 directors, one of them expired (my family member who had bank signing authority)

- The second director who is outsider does not want to support / cooperate with shareholders

- Family controls 99.85% shares of company and remaining 0.15% shares are owned by 9 different outsiders.

- We are seeing issues with running company operations and even operating the bank account as nobody has signing authority other then my family member who passed away.

Question is - What will be fastest and easiest way for us to take control of the board back especially when current director is not cooperating?

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8 Replies

Kala Kiran (464 Points)
Replied 08 April 2019

pls give Cal to 7204908392 for suggestions

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Chirag (Professional) (1979 Points)
Replied 09 April 2019

Go with the AOA of company, that what procedure is laid down in case of such situation arises, When one director dies..

If AOA are silent ,then Meeting can be called by requisitionist itself, With compliance of applicable provision, Regarding notice etc.. As Board is not in full capacity as well remaining director isn't interested then after expiry of 21 days... You can proceed to call Extra ordinary meeting and appoint another director(s) and also pass a resolution to remove non incroprating director with due process of law...

Disclaimer : Please don't consider it as an expert advice, The information which I have shared above is just a one way of Calling EGM with the relevant provision of laws for educational purpose only ,any decision in the matters of companies is lot of deliberation and reading past history and AOA/MOA ...I am disclaiming any loss/ harm arises due to action taken on this reply to any person /s.

Tony K (Shareholder) (51 Points)
Replied 09 April 2019

Hello - Thank you for your message. The AOA is silent on this type of situation. I have been contemplating calling EGM. Because I and my family member have 99.85% shares and other 9 shareholders including this director has 0.15% shares, I had some other questions to make sure we are appointing the people we like

1) How much notice needs to be given for calling EGM ?

2) Do all Directors and Shareholders need to be called for EGM?

3) How do we ensure we do voting that it goes in our favor ? We are 3 people with total 99.85%. Is each person have a vote or each person can have votes depending on number of shares held?

4) Any risks I should keep in mind of doing this ?

Regards

Sanjay

Chirag (Professional) (1979 Points)
Replied 09 April 2019

Hi!

In this case, first the requisition will be made to company ( U/S 169) ,with proposed resolutions ( Better not to include removal of non -incorporating director) ...It should be given by Members who are holding not less than 1/10 of paid up equity...

Company Have total time period of 45 days to call meeting, but proceed to call meeting is 21 days ( As Notice compliances also to be followed) ...

Then Requsitionist themselves proceed to call meeting within 45 days after expiry of company's timeline of 45 days

Here You need to comply all requirements like Sending a Notice to all shareholders,Secretary ,Auditors,directors etc.

So You can proceed to call meeting only when Board / Director fails to call meeting .

Meeting may also be called at shorter notice, if 95% of member entitled to vote give their consent..

Director who is going to be Appointed should have valid DIN, DSC ,Give consent in DIR-2,Interest in MBP-1.

At the first instance voting is on "Show Of Hands " but before or after voting Poll may demanded by any shareholder present at meeting, Where voting rights are based on holding in paid up equity/ no of shares held...

This is a brief idea about your issue ,otherwise you can convince director by showing his fiduciary duty and he can appoint " additional director " or proceed to call General meeting to increase no of director...

Always seek professional advice before going further...

Tony K (Shareholder) (51 Points)
Replied 14 April 2019

Dear Chirag ji - Thank you for your guidance. Does the below process look right based on what we are trying to accomplish here (add three directors to the board who are also majority shareholders). Please correct me on any of these if I should correct:

1) 2nd Director (who holds 4 out of 10000 shares) was asked to add Director since Oct 2018 (as 1st Director was on death bed) but he refused and continues to refuse. These is documented email proof that requests were made by the shareholders holding more than 1/10 shares. Meantime the 1st Director expired end of February, 2019.

2) As second step, since more than 45 days (several months) have elapsed, we (majority shareholders) are going to provide proposed resolutions to add 3 new directors (again by shareholders holding more than 1/10 shares) to this 2nd Director calling EGM in 21 days (3 shareholders with 99.82% shares are prepared to do this meeting sooner). We will send notices to available addresses of Auditor (CA), 2nd Director and all shareholders with receipts of post mailing of invitation to attend EGM.

3) Depending on shareholders that show in meeting (and this 2nd Director); we will do voting by show of hands but at the same time demand proxy voting to be done based on number of shares.

Only question is - who will preside this meeting? (who will be chairman) and also when voting by proxy results in addition of director; does that mean resolution is passed? If at that time the only Director refuses to sign that; what do we need to do?

Am I missing anything here ? I want to move ahead with the plan and get this rolling over next 2-3 days; so any guidance is really appreciated.

Regards

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Chirag (Professional) (1979 Points)
Replied 14 April 2019

Hi!

As the first valid requistion was made at the end of Feb '2019 ,and three months are not yet expired, and assuming the situation when 45 Days are expired from the date of making valid requisition, So you can proceed to call meeting without any Further requisition to second director/ company ... As majority shareholders are in favour of Proposed resolution...You can take their consent to call meeting at shorter notice ( here consent of members who holds 95% in total paid up equity of voting rights) ...Complete all requirements of sending notices, notes, agenda items to be discussed at meeting .....At meeting Yes after show of hands ( if majority is not in favour)., anyone shareholder who is present at the meeting or by proxy may immediately after or before voting by show of hands demand for Poll.....In case of chairman ( Members may also choose one of themselves as chairman....Resolution is not required to be signed & With the special majority it will be deemed as passed? Proper minutes are also maintained as only sole eveidence of all resolution passed at meeting ....

Disclaimer prevails..

Tony K (Shareholder) (51 Points)
Replied 14 April 2019

Dear Chirag ji

The director was first sent a written note with copy of resolutions in Aug 2018 to which he did not respond. There after he was reminded via written email in March (30 days ago) to proceed with director addition work. Several requests were made and meetings were held but he continues to not respond or practically show no-cooperation with the shareholders.

Based on your note, can we now move forward with 21 day notice for a EGM or a sooner meeting ? The three majority shareholders want to move fast. We will ensure shareholders are present in the meeting to ask for voting by poll if required.

Please do let me know and if you have any other advice for me.

Regards

Sanjay