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when one of two directors walk away from the business

Sanoj Kr. Sharma (accountant) (159 Points)

17 December 2008

A business have a two directors both have some contribution as capital in the business, 1st director contribute 85000/- and 15000/- the 2nd one.

After few years the 2nd director cheat the business and make lossess in that run away, no any step taken by the 1st one. His contributin is in the accounts ei. rs. 15000/-, how it is deal with. And after one year another director come in to take the 2nd director's place without any contribution to the business.

Pls tell me how this matter is shorted out.

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2 Replies

CA. Dashrath Maheshwari (TaXpert) (15103 Points)
Replied 17 December 2008

File the cheating case, report to ROC about that Director, Block that person's DIN

Give the public notice in Local paper + national daily.

You can adjust the capital as compensation, if cheat vetted by court, as per courts instruction. Even the personal assets of that director can be sealed, if the capital is insufficient against the cheat.

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Arul Ganesh (Company Secretary) (98 Points)
Replied 02 January 2009

Is that u are talking abt a limited company organisation? it looks as if it is a partnership business. Laws governes these two types of organisation in different ways. In Ltd companies, the amount contributed by director 2, would stands as SHARES in his name. The shares, cannot be transferred to other unless director 2 signs the transfer form, and other rules comes into play. Any person(say director 3) can join the management. No capital contribution is requried in the nature of qualification shares or otherwise. But he cannot be treated as the owner of the share held by director 2. director 2, is a member of the company as far as the shares stands in his name.