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Converting a Member to Director

ArchAngel (Corporate Affairs Enthusiast) (118 Points)

21 May 2011

Dear Experts,

A company had 3 directors(A,B,C) at the time of registration.There were only these 3 members in the company.

Now, Mr. A had transferred some of his shares to D. So now, there are 4 members in total.

The transfer has noted in the share register and minutes. The share certificate is also issued to D.

But RoC is not yet aware of the transfer.

Now, the company would like to make Mr. D as one of its directors. Is it all fine to appoint Mr.D a whole time director in the AGM or EGM and later submit the new director form to Roc? Or we need to somehow register the transfer in Roc First so that RoC will know that D is also a member and then conduct the EGM to appoint the person D as director?

Can anbody advice me?

Thanks and Regards,

ArchAngel

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5 Replies

CA Vidish Kumar Gupta (Chartered Accountant) (136 Points)
Replied 21 May 2011

There is no requirement in the Companies Act, 1956 to intimate members to Registrar, only updating the members register will do.

If it is a public company the following procedure is required to be followed:

257. Right of persons other than retiring directors to stand for directorship.—

(1) A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be, ¹[along with a deposit of five hundred rupees which shall be refunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as a director].

[(1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting:

Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.]

(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.

Whereas the appointment of a director for a private company can directly start at the AGM or EGM

also the company is required to file form-32 with ROC for the change in directors

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 21 May 2011

First of all, there is no requirement in the Companies Act to intimate the transfer of shares to the ROC, only updating the members register is requrired. The details of members and the details of transfer is submitted to ROC in Annual Return.

Secondly, if you want ot add him as director, then simply appoint him as Additional Director in the Board Meeing and file form 32 then regularise him as Director in AGM or EGM and then also file form 32.

ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 21 May 2011

Dear Vidish and Ankur,

Thank you for your help. So we can straight away make the director D to a whole time director directly in the AGM..right?

1) If we need to make a director in AGM, should we add it in AGM Agenda?

2) If we need to add then, the agenda need to be first approved in a board meeting? Can the Chairman of the company just send out an agenda without the approval of board?

Thanks and Regards,

ArchAngel

Jaideep (Service) (1368 Points)
Replied 22 May 2011

Ans is as below

1) If we need to make a director in AGM, should we add it in AGM Agenda? Yes

2) If we need to add then, the agenda need to be first approved in a board meeting? Can the Chairman of the company just send out an agenda without the approval of board? No it has to be approved by Board, Also if you are appointing WTD, then initially he will be appointed by Board and then proposal will be forwarded to members for their approval

Regards

ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 23 May 2011

Dear Jaideep,

Thanks for your reply.

But what if the majority of members are in favour of making the Mr. D a director[Means he'll surely get a simple majority in EGM/AGM], but some of the existing board members are against making Mr. D a director(He may not get the board majority)?

In this case how can we make Mr. D a director as the general interest in in favour of D, but since the agenda for AGM/EGM may not be approved by board majority? What can Mr. D do in this case.

Is it mandatory board to approve such an agenda?

Thanks and Regards,

ArchAngel