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MLA - prmoter /director

Neeta (Finance) (345 Points)

20 April 2010

Hello members !

Query : Is there any restriction in the Companies Act on the MLAs to be the promoter or director or both of a Public/Private or govt company.

As far i know there isn't any such restriction, infact there are instances where political persons are the directors ( but don't know whether they can be promoter also however i didn't find any restriction ). but still i want to confirm with the learned members.

There again raises a question on the incorporation of a govt company : who would be the promoters apart from the state government ?

if possible plz give some cases.

Plz reply asap.

thanks and regards

Neeta

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6 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 20 April 2010

In company law there is no restriction at all and MLA or other political leaders can be director or promoter. However certain times special activity or industry norms can restrict a political person to remain on board as a director.

For example if your company going to be a media company and launch a News channel --- than you have to follow Ministry of Information and broadcasting (MIB) guidelines for news channel which puts a strict restriction as mentioned above. I have experienced all this.

Regards

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Neeta (Finance) (345 Points)
Replied 20 April 2010

thanx for the reply sir . yes , companies act doesn't provide any specification for MLAs. But still i doubt : can they be the promoters . I think this matter might have been given in the Code of Conduct of MLAs.

doubt : imagine in a govt co , 51% shares are with the govt , and the person being the director,promoter and shareholder manages to acquire majority of remaining 49% shares and thus becomes the prominent shareholder in the company. Later , after his term he resigns , still he is the prominent member of that company . So we should conclude that its possible !!! i do understand that there would be issues on tax and other on the fund arrrangments ! but still what i doubt is legally its possible !

Neeta (Finance) (345 Points)
Replied 21 April 2010

Hello sir ,

wanna share that MLAs can be director but not promoter.

As we suspected , MLAs or any govt employee is not allowed to hold any office of profit .its prohibited under our constitution . And also the code of conduct or the legislative member regulations prohibits it .

In most of govt companies . IAS officers wud be promoting , as far i know .

So MLAs can be director but not promoter. So an MLA can't hold shares in a company !!!!!

and we can further search on the matter from the recent news !

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 21 April 2010

Thanks very much for this vital information !!!

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Muruganandhan (Trainee) (35 Points)
Replied 21 April 2010

Having only one Director on Board, is there any minimum period the Private Limited Company to have only one Director in the Board? If yes, what is the time period? If the default contiunes more than the said time, what would be the penalty under which provision for both penalty and minimum time?

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 21 April 2010

Originally posted by : Muruganandhan
	Having only one Director on Board, is there any minimum period the Private Limited Company to have only one Director in the Board? If yes, what is the time period? If the default contiunes more than the said time, what would be the penalty under which provision for both penalty and minimum time?

Nothing specified by law about the time period. Appoint the new director as early as possible. You may also appoint him from back date and file form 32 with ROC with late fee.

Provisions for minimum number of directors are governed by section 252 for the violation of which penalty mentioned u/s 629A would be leviable.