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Restrain a director from exercising certain activities

Rahul D (Executive) (39 Points)

09 January 2012

Hi,

Happy new year to all. I wanted to know one thing about a matter I am looking into.

A company has two directors. Is it possible to restrict one of the directors from

1. making any banking transaction from bank account of the company,

2. sell/purchase/gift property or shares of the company?

Only the other director can carry out the above 2 operations.

Thanks.

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11 Replies

Shruti_D (ACS) (453 Points)
Replied 10 January 2012

Though I am not absolutely sure about this. Still in my opinion I don't think you can restain a director from doing any act. He has all the rights to do acts, for and on behalf of the company. Having said that, perhaps you can limit the authority given to him in the resolution. So, even though he has the right, he is not authorised to do that act by Board. Other views solicitated.

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HONEY AHUJA (cs) (104 Points)
Replied 10 January 2012

Hold GM and pass the resolution to authorise only one Director for the said purpose. EGM is must because of interest of Director and for the purpose of making qourum.

Charu Srivastava (Company Secretary) (4210 Points)
Replied 10 January 2012

For that pass a resolution authorising one Director.

Rahul D (Executive) (39 Points)
Replied 10 January 2012

Thanks all for your response. I understand that passing a resolution under a GM does the work. But in that case it is only in the knowledge of the company. The bank authorities, ROC offices, Registrar offices, etc are not in knowledge of the same and hence may still execute transanction from the restricted director?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 10 January 2012

Putting restriction on one director is possible in certain cases. However this is not the practical and real solution of your problem. You may feel administrative inconvenience by doing so.

Rgds

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 10 January 2012

Dear Rahul,

I'll tell you the exact solution for the same.

Specifically authorised only one director for bank transactions and for transactions in relation to the shares of the Company. Do not mention that such director is not authorised. Just mention that this director is authorised for the same.

This will serve your purpose.

Rahul D (Executive) (39 Points)
Replied 10 January 2012

Originally posted by : CS Ankur Srivastava
	Dear Rahul, I'll tell you the exact solution for the same. Specifically authorised only one director for bank transactions and for transactions in relation to the shares of the Company. Do not mention that such director is not authorised. Just mention that this director is authorised for the same. This will serve your purpose.

Dear Ankur,

Thanks for your reply. I understand your point. But my question remains that this would be an internal matter/communication of the company. How will the bank, ROC, etc come to know of this. The restricted director may engage in a transaction with the bank, ROC, etc without them knowing that he is barred to take such actions and we will come to know only after the action.

Is there any provision in banking operation, ROC, etc where we can mention that such a director is restricted to take certain actions.

Thanks.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 13 January 2012

For e filing in relation to MCA / ROC, you have to give one time authority to specifically one director for signing of the forms and then he will sing on behalf of that authority. In this case other director is not authorise to sing on the e forms. But this is to be noted by the company only ROC office will not note the same.

Shruti_D (ACS) (453 Points)
Replied 13 January 2012

Agreed with Ankur Sir.

Rahul D (Executive) (39 Points)
Replied 13 January 2012

Originally posted by : CS Ankur Srivastava

This will be sufficient for the bank transactions, banks are only directed by the certified copy of the resoluion and no sign can be honored by the bank except previsiouly authorised by the Board Resolution. So it will serve your purpose of bank transactions.

For e filing in relation to MCA / ROC, you have to give one time authority to specifically one director for signing of the forms and then he will sing on behalf of that authority. In this case other director is not authorise to sing on the e forms. But this is to be noted by the company only ROC office will not note the same.

Thanks for your confirmation Mr. Ankur. Appreciate the same.