Why the companies Act, 1956 provide the Retire by Rotation system?
What is the Reason behind that?
Reason for Retire by Rotation System
(Guest)
Why the companies Act, 1956 provide the Retire by Rotation system?
What is the Reason behind that?
The Reason for Director, to be retire by rotations are many But I would cite only 1 Example to explain the concept, because it is sufficient.
Suppose, Company has appointed some Expert person as a director in the company for the period of 5 Years by entering into agreement with him. Later on the company realized that The company realized that the Expert's value addition is not as per the Company's Requirement.
At that time Company has 2 options are Available.
Option 1: Carry on the Expert as a director.
Option 2: Remove him the Directorship from the company & pay some compensation money for breach of the contract.
In both the option the company has to give certain amount as money. Which would be total loss to the company.
Now, If the retire by rotation system is present in the company, then what happened:
The company will remove the expert after the 2 years & The system would be fruitful to the company as It would save company's money.
Note: If You feel that more reasons are also required to understand the concept in deep than, please let me know, I will do that for You.
If you want to understand the company Law fully, then
One thing should be kept in mind that
Every section of the company's act is made on the basis of Logic.
Your duty is to discover that logic & I f you can discover that Logic, You can easily interpret the Company Law.
Ankur Shah (Practicing Company Secretary)
“Guru Gautam” Bungalow, Inside Parshwa Tower,
Nr. Shyamal Cross Road, 132ft. Ring Road,
Satellite, Ahmedabad – 15
Contact: + 91-9427633901
E-mail: ankurjewel @ gmail.com
Blog: csankur.blogspot.com
Manmohan ACA, CS
(Chartered Accountant )
(14243 Points)
Replied 22 September 2009
| Originally posted by :Ankur Shah (PCS) | ||
| " |
Suppose, Company has appointed some Expert person as a director in the company for the period of 5 Years by entering into agreement with him. Later on the company realized that The company realized that the Expert's value addition is not as per the Company's Requirement. |
" |
agree
Ashish
(CS)
(32 Points)
Replied 03 October 2009
Dear Mr. Ankur,
On the First place Mr. Ankur, let me ask you that if the Company is not sure of the person capibility then why he would be appointed for 5 years on first place and also if he is appointed for your information, also if he is not re-elected he would continue to be a employee of the Company and the terms and conditions of his employment would subsist. In Company wants to fire a director then Company would not wait for his rotation to come. In most of the contracts one months notice is there.
Regards,
Ashish K Bhatt
Dear Mr. Ankur,
On the First place Mr. Ankur, let me ask you that if the Company is not sure of the person capibility then why he would be appointed for 5 years on first place and also if he is appointed for your information, also if he is not re-elected he would continue to be a employee of the Company and the terms and conditions of his employment would subsist. In Company wants to fire a director then Company would not wait for his rotation to come. In most of the contracts one months notice is there.
Regards,
Ashish K Bhatt
I can understand that, You have gone made.
Because again you have shown your foolishness, by oppsing my post.
However, I will give reply to your question also.
Don't you have a little bit practical experience?
In the listed companies, experts are chosen as the Independent and sometimes as working director.
However, they failed many times to reach the company's expectations.
e.g.
Laloo Prasad Yadav, is considered as the great politician because, he has made the railway profitable & IIM Ahmedabad also invites him to deliver the lecture.
Then, In such a situation I would considered the Director of IIM & other person as most foolish person in the world.
Because, Laloo doesn't reduced the expenditure, he only increases charges
like Tatakal charge was increased to Rs. 150
Reservation charge from another station increased to 40 against the earlier Rs. 20
He starts the "Garibrath", which is failed in the eastern states as the Train couldn't cover only 10% of total expenditure.
He increases the freight duties.
Another one reason for increase in revnue was selling the scrap of Railway of last more than 50 years.
The list is endless.
Now, Mamta Banerjee is showing the world, hoe Laloo has manipulated the figures.
Laloo can succeed in the Govt. only & not in the Private corporate sector as, the executives can find out his cheatings easily.
And, The listed companies are hiring the experts like Laloo, but later on they discovered that, they were fooled.
So, they have to remove them.
e.g. Latest example was (Mr. Malvinder Singh) MD of One of the biggest Pharma company (Ranbaxy) of India.
They were removed as MD earlier than the contract terms and by paying the Huge compensation Money
if he is not re-elected he would continue to be a employee of the Company and the terms and conditions of his employment would subsist
Who says to you that If person is removed from the Director's place they will become the Employee of the company.
There is no provision like that in any law.
Visit to the
Neurosurgeon and analyse your brain.
Ashish
(CS)
(32 Points)
Replied 07 October 2009
First of all, mind your language. I have not said anything personal to you. I can also abuse you, but I suppose you lack professinalism and etiquettes. The Example quoted by you above of ranbaxy, in that case why they didn't wait to let him retire by rotation.
Think and don't apply absurd logic. You seems to be recently passed out, thus you need some brushing of your knowledge. You sick. Ask someone, senior in your profession that what would happens to the employement status of a whole-time Director, if he is not re-elected. And don't come back unless you have some senior colleges opinion also, otherwise the entire exercise is a waste.
And stop using such type of language. It shows your upbringing..........It is a platform to discuss not abuse................... If you want to be happy in your own knit of self-made knowledge .... then I can't do anything.
Ask someone, senior in your profession that what would happens to the employement status of a whole-time Director, if he is not re-elected. And don't come back unless you have some senior colleges opinion also,
First tell me how, the Independent Director becomes the Whole-time director than question me.
And
By the way Whole-time director is not liable to retire by rotation also.
So, Check your mind and then write anything.
Which law says that Independent director is the employee of the company?
And Understand one thing, Never oppose my post, for which you don’t have any strong reasons, otherwise you would be considered as Idiot.
And, Though I am of 21 Years only, But My Knowledge is not poor & doesn't require the brushing up also. Those are Idiots which says that Newcomers dont have the Knwoledge.
Because they forgot that One Newcomer Bill Gates has started Microsoft and became world's richest person for over 15 years.
And I would give another example of Indian History also,
When The Kashmir King is on visit, he found a small boy of 6 years writing sanskrit poem in the Sand.
The king came to him and said to the boy that, Do you what are you writing?
The boy replied that Yes, I Knew.
Then King questioned again, I don't think so, Because You are only 6 years old and How did you knew the Sanskrit?
Then boy replied that, "Rajan", This poem is written by me. Though I am Small But My saraswati is not small.
And The King appreciated Him.
After the years passed on and the Boy became the First Shanakaracharya of India.
So, I am saying the same thing to you that, Though I am of only 21, But My saraswati has Magnanimous amount of Knowledge and Experience.
The Example quoted by you above of ranbaxy, in that case why they didn't wait to let him retire by rotation. Think and don't apply absurd logic.
If the Company didn't retire the Malvinder Singh from the MD job, then they would have to pay much more salary than the Compensation.
As Malvinder Singh has still 3.5 years to left from the MD Position.
I have given the name so, that Youcan check the case, But Without checking the Case of Malvindersingh, You directly comment on me, That I have used absured logic.
Dont misguides the people By your follish post.
If you came back and comment on my post without applying any logic then I will directly report to Admin.
Nobody have till date commented on my post, So, Dont understand that You are the Only Intelligent person of CAClubIndia, Who knows the Law.
If others didn't have commented that means they knew that My Logic is perfect.
Ashish
(CS)
(32 Points)
Replied 12 October 2009
By the way Whole-time director is not liable to retire by rotation also???
Who told you this??
Buddy, there is no need arguing. I am sorry. I will never reply to your posts. But, some day if you discover that you were wrong, please do reply and ofcourse I would do the same. Atleast be that humble.
Take Care.
Bye
Ashish
(CS)
(32 Points)
Replied 12 October 2009
And also I am not here for points. You take good care of your points. I am damn bothered about them.
Regards,
No offences.
Bye
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