murphy (CA) (30 Points)
04 June 2008We have a Pvt Ltd company with 3 directors. 1 director is holding 50 % shares and other 2 hold 25 % each. One of the directors holding 25 % shares is creating trouble in business. Is it possbile to -
1) Remove this director by simple majority or a special resolution?
2) Can his share holding be diluted by issuing additional shares to one of the remaining 2 directors? If yes what is the procedure and does this require a simple majority or special resolution?
sudarshan
(CA)
(745 Points)
Replied 05 June 2008
In private ltd companies, articles need to be checked for the removal. If it is silent, then he can be removed only in a General meeting by majority of shareholders. caution : he may use the weapon oppression. Additional shares can be issued. refer to rights share issue with particular reference to private limited companies.
CA NP Mathi Lingan
(Practising Chartered Accountant)
(98 Points)
Replied 06 June 2008
As per the provisions of Sec 284 of the Co's Act, a director can be removed by ordinary resolution and by giving a special notice both for appointment and removal, the representation if any made by the expelled director have to be brought out and read in the GM.
Provisions of Sec 81 are not applicable to a Pvt Co and hence it can make preferential allottment of shares. Hence ordinary or special resolution is not required, board resolution is enough for alloting shares preferentially.
sudarshan
(CA)
(745 Points)
Replied 07 June 2008
even though sec 81 is not applicable to private limited companies, in I.T.Cube india p ltd v I.T . cube inc. (2006) 69 SCL 319(kar) it was held that even though private limited companies are not under an obligation to follow precedures prescribed under sec 81 this does not mean that board of directors can adopt any procedure they like. In the absence of statutory power to issue shares, they are governed by section 291,292, MoA, AoA. If articles are silent, then the shares should be issued in Board meetings.
In Sushma harish sharma & anr v Hotel Horizon p ltd& ors( 2007)79 CLA 73(CLB) it was held that in Dale and Carrington Investment p ltd v P.K.Prathapan (2004) 62 CLA 245, the supreme court held that articles of private company vest absolute discretion to allot shares. Even though section 81 is not applicable to private companies, the directors in private companies, are expected to make a disclosure to shareholders when further shares are being issued. It should be acted on good faith.
hit narayan
(service)
(24 Points)
Replied 12 June 2008
IS PVT COMPANY DIRECTOR IS EMPLOYEE OF COMPANY UNDER PROVIDEND FUND ACT.
CA Vivek Jain
(SERVICE)
(1550 Points)
Replied 18 June 2008
As per the provisions of Sec 284 of the Co's Act, a director can be removed by ordinary resolution and by giving a special notice for removal, the representation if any made by the expelled director have to be brought out and read in the GM.
Provisions of Sec 81 are not applicable to a Pvt Co and hence it can make preferential allottment of shares. Hence ordinary or special resolution is not required, board resolution is enough for alloting shares preferentially.
sudarshan
(CA)
(745 Points)
Replied 19 June 2008
The reply sent by Mr.Mathi dada is repeated by Mr.vivek why?
Naga subrahmanyaM
(artcle student)
(254 Points)
Replied 15 August 2017
i had a company of 3 directors. 1 director resigned. wha are the forms i need to file with mca & what is the process of change share holding possisson of other directors
CAclubindia
