Is the director of a defaulting public company elgible for reappointment in such public company on his retirement while the default continue?
Please provide the answer with explaination.
Suraj S
(Audit Executive)
(335 Points)
Replied 10 February 2012
In my view such a director would be eligible for reappointment. Its only that such a case should be reported by the auditor in his report as required under CARO, 2003.
Expert views are always recommended for this.
Ajay Mishra
(Company Secretary)
(74337 Points)
Replied 10 February 2012
Hi
You can reappoint the retiring director in the same company, but in case of default, the director of defaulting company cannot reappoint in other company. The provision of appointment or reappointment will not apply for the same company.
Regards
CS Ajay Mishra
prakash
(Company Secretary)
(1352 Points)
Replied 10 February 2012
As per my view the director can be reappointed in same defaulted public company but he shall not be appointed as director in any other public company
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 10 February 2012
Hi,
Yes I agree with Ajay Mishra that a defaulting director can continue his directorship in defaulting company.
As we all know a person who is disqualified to become a director of a public company under section 274(1)(g) does not automatically vacates his office as section-283 is silent in this regard. So in my opinion he can continue to act as a director in all Public Companies (including the defaulting company) until the expiry of his respective term in each company.
|
Kindly note that he will not be eligible to be freshly appointed as a director of any other Public company.
Now observe carefully: However, the same does not apply in case of the defaulting company as the words used in section 274(1)(g) are: “such person shall not be eligible to be appointed as a Director of any other public company” Hence to conclude I would say he will be eligible to be re-appointed as a director of the defaulting company or any other public company of which he was a director.
|
In other words or may be other interpretation:
He may be appointed in the same defaulting company. Reason being he is no more a director of the same company. Law says he cannot be appointed as a director of any 'other PLC'.
However, if you go by the literal interpretation of the proviso to section 274(1)(g) then you’ll be surprised to know he may be appointed as a director of any other PLC if he leave the defaulting Co. before the default commence. Reason being it is mentioned in the proviso that such person shall not be allowed to appoint in other PLC for 5 years if he is still a director of a defaulting Co. (i.e. still working in the defaulting co. {Present tense}.
|
In simple words if he leaves the company before default then there will be no question of application of the proviso. |
However during my analysis of Disqualification of Director Rules, 2003 with section 274, I found that there is a contradiction regarding re-appointment in the same defaulting company.
Proviso to Rule 3(b) of Disqualification of Director Rules, 2003 provides that both the disqualifications as mentioned in Section 274(1)(g)(A) & (B) would apply to the re-appointment of a director also. But here I would like to add that a rule cannot provide a more stringent condition than under the Act and as such this rule is ultra-vires the powers of Government and Act and is bad in law.
Hope that the discussion would be off some help to you.
Best Regards
Ankur Garg
Thanks Ankur for such a wonderful explanation.
Reading this, one thought is striking in my mind that if director of a defaulting public company are not elgible for reappointment in such public company on his retirement while the default continues then the directorship of that public company will be practically zero at the time of default. Hence in my opinion if defaulting directors are not reappointed in the defaulting company then its directorship will fall to zero which is not possible under Companies Act.
Regards,
Neha
GOPAL AGGARWAL
(DOING NOTHING)
(1339 Points)
Replied 11 February 2012
| Originally posted by : Ajay Mishra | ||
 |
Hi You can reappoint the retiring director in the same company, but in case of default, the director of defaulting company cannot reappoint in other company. The provision of appointment or reappointment will not apply for the same company. Regards CS Ajay Mishra |
 |
I ALSO AGREE
Anshul
(CA Final Aspirant)
(42 Points)
Replied 11 February 2012
I agree with Ajay Sir.
As per my view , the section restricts appointments in other public companies , but the director can continue in the defaulting company as a Director. He is not required to vacate the office. Retirement itself vacates the office.
The section is confined to continuance in the office & not for reappoinment.
CAclubindia
