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Nominee Director.........Urgent

02 November 2010

A Pvt. Co. has taken loan from bank on Nov, 2009 and bank has appointed its nominee director “say Y” on the Board of the Company the same was confirmed in EGM and Form 32 was filed.

On Mar, 2010 the bank has changed its nominee and “say Z” was appointed as its nominee director in the Board of the Company and no EGM was held but Board meeting only, and Form 32 was filed as nominee Director due to change in nomination by the bank.

However as per the article the director should be appointed in GM. The status of directors as per MCA21 portal is shown as “Z - - - nominee director - - - date of appointment Mar, 2010.”

Now in the AGM "Z" appointed as nominee director.

Should we file Form 32 again? If yes then why as there is no change in the Board.

regards,

Vikram

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7 Replies

Ajay Mishra (Company Secretary) (74337 Points)
Replied 02 November 2010

Nominee Director

The article of association of many companies provide that financial institutions and banks which lend money or other financial assistance to the company shall have the right to nominate one or more directors on the Board of the company. These are called nominee directors.

The appointment of nominee director shall take effect depending on the provisions in the articles of association of the company concerned. Generally if the nominee are appointed by the SBI, LIC nationalized bank, the nominee take effect from the communication nominating the director received from the respective institutions and banks or the date mentioned in the letter of nomination whichever is earlier. Formal acceptance of the nomination by the Board is not necessary to give effect to such appointment. British Murac Syndicate V. Alperton Rubber co. (1915).

However, if the power to appoint nominee director is exercised by other institution/bank, the Board of Directors of the assisted company have to co-opt the nominee director in the Board Meeting or by passing a circular resolution. Thus such appointment take effect from the date of resolution co-opting him on the Board.

A nominee director has to file consent for acting as director of a public company and Form 32 will be filed with ROC within 30 days from the date of appointment.

Consent letter should be attached in Form 32 for appointment of Nominee Director.

Regards

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Vikram Yadav (CS) (53 Points)
Replied 02 November 2010

Thank you Sir,

But my questions are whether we required to file form 32 again or not.

Is it necessary to pass resolution in GM, too, for appointement of Nominee Director already appointed in BM?

Ajay Mishra (Company Secretary) (74337 Points)
Replied 02 November 2010

It is not required to take General Meeting permission for nominee director for which a Board have already take note of such appointment.

Regards

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Preety (Company Secretary) (96 Points)
Replied 23 December 2010

Hello Mr Ajay

My query is whether firm can be appointed as Director of Company through its representative. If yes, then in which category will he be appointed . Whether he will be apppointed as Nominee Director. If yes, then AOA of my Company does not provide appointment of Nominee Director. It is silent on this issue.Also, My Company does not have any contractual agreement with the firm. Can it still appoint its representative as Nomineee Director on the Board of Company.

Also, What will be the liability of the Nomineee Director ?

Also do I have to amnend my AOA first for his appointment?

Pl reply asap

Thanks & Regards

Kamal

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 23 December 2010

As per Section 253 only individuals can be appointed as Directors. A firm cannot be appointed as Director. Nominee directors are appointed generally by the financial institutions who have lent money to the company to protect their interests. Your case will not fall under the category of Nominee Director.

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Preety (Company Secretary) (96 Points)
Replied 23 December 2010

Thanks Jayashree

I know that as per Sec253 only individuals can be appted as Director . But in Ramaiya, there is a decided case of 'Motion Pictures Assn. Re (1984)' which cites that the representative of the firm may be elected or nominated as Director.PL comment on this. Also u have written that nominee Directors are generally appted by F.I. but this is not necessary. Nomineee dIrector can be appted if there is financial stake in the Company like major shareholding or some contractual agreement is there .

Regards

KAMAL