Holding of office or place of profit
1) For an ordinary director: - 314 will not apply for payment of
-sitting fees,
-expenses reimbursement for attending board meeting
- 1%, 3% commission of profit,
since they are paid in capacity of director
2) For M D / WTD Sec 314 will not apply for remuneration under Schedule XIII in case
of loss or payment of 5% or 10% commission of profit in case of profit.
In other words, merely because a person holds any position under the company he is not any
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Director
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Relatives, Partner , Firm & private Co.
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Monthly Pay < Rs. 10000 (up to 9999)
Sec 314 Will not apply
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Sec 314 Irrespective of amount. Special
Resolution. No prior /first GM
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Monthly Pay >Rs. 10000 or more < Rs. 50000(up to 49999) Special resolution. no prior /first GM
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Monthly Pay Rs. 50000 or more prior Special resolution, and prior central government approval
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The three officers are exempted. -The three officers are not exempted
-Under the subsidiary is not covered
Managers
Debenture trustees
Bankers of the F I
Under the Company
Under the subsidiary is also covered
Board Meeting
Supposed Board meeting convened on 26th December 2007
Could not be held for want of quorum
Adjourned meeting held on 1st January 2008
Whether the adjourned meeting held on 1st January 2008 is treated as meeting for the first quarter of 2008
Answer:- No, the meeting is not considered as meeting for the First Quarter
Notice sent by E-mail or even by SMS is equivalent to writing under Iformation Technology Act.
Quorum for Board meeting Sec 287
When is the quorum in the following cases?
Total Director Quorum
12 4
11 4
10 4
09 3
08 3
07 3
06 2
05 2
04 2
03 2
02 2
Case I
Calculate the quorum in the following case
Total Interested
Director Director
Total Director 12 7
Director attending 8 5
Is the quorum present in the meeting?
Quorum = 1/3 of 12 = 4 Director
Director Present = 8 - 5 = 3
Hence, No quorum in meeting.
Case II
Calculate the quorum in the following case
Total Interested
Director Director
Total Director 12 8
Director attending 8 5
Is the quorum present in the meeting?
Quorum = 1/3 of 12 = 4 Director
Director Present = 8 - 5 = 3
Hence, No quorum in meeting.
The no of interest director exceeds or is equal to 2/3 of such total strength, the no of remaining director present at the meeting not less than 2 shall be the quorum.
Hence the quorum is present.
Case III
What will be your answer if in first case the company is private company?
Quorum = 1/3 of 12 = Director
Director present = 8 director
Hence, the quorum is present in the meeting.
When the quorum should present
- Not only at the commencement but through out the meeting and every item of the meeting.
The resolution shall be approved
- All the director who are in India or
- A majority of all the director
Who are entitled to vote on the resolution? Thus an interested director shall not be entitled to vote.
Issue in circular resolution
Director outside India can vote on circular resolution.
If alternate director is appointment for original director who has gone out of country.
Sole selling Agent Sec 294, 294A, 294AA
- Only section in the Act which speaks on business related areas.
- Principle- agent relationship- differs other market intermediaries on this count.
- Agent for sale of company goods.
- Section applies if he is a sale selling agent.
- Sale distributors come under this section, if, principle agent relationship exist and exclusive right to section is given.
Appointment of sole selling agent
Provision relating to appointment_ Sec 294(1), 294(2), 294AA (1), 294AA (2), 294AA(3),
Appointment by whom
Ø Board shall appoint.
Ø Either at the board meeting by circulation
Ø MD/ Marketing manager cannot appoint.
Situation -1
Ø Board of Director – Appointment
Ø Condition – Not mentioned
Ø First general meeting – Approved
What are the consequences?
ü Appointment – Void
ü Acts Done – Void
ü Vacation of office – Does not arise
ü Remuneration received – Has to be refund
ü Compensation for loss of office – Does not arise
Situation -II
Ø Board of Director – Appointment
Ø Condition – Mentioned
Ø First general meeting – Did not Approved
What are the consequences?
ü Appointment – Starts as a Valid appointment
ü Acts Done – Valid
ü Vacation of office – Has to vacate
ü Remuneration received – Valid
ü Compensation for loss of office – Does not arise
Situation -III
Ø Board of Director – Appointment
Ø Condition – Mentioned
Ø First general meeting – Did not Approved
Ø Subsequent GM – Approved
What are the consequences?
ü Appointment – Starts as a Valid appointment
ü Acts Done – Valid
ü Vacation of office – Has to vacate after 1st GM
ü Remuneration received – Valid
ü Approval at subsequent GM – No relevance
ü Compensation for loss of office – Does not arise
Situation -IV
Ø Board of Director – Appointment
Ø Condition – Mentioned
Ø First general meeting – Matter was not put up Did not Approved
What are the consequences?
ü Appointment – Starts as a Valid appointment
ü Acts Done – Valid.
ü Vacation of office – Has to vacate after 1st GM.
ü Remuneration received – Valid.
ü Compensation for loss of office – Eligible.
Substantial Interest
¨ In case of Individual
Individual + Relatives
¨ In case of firm Paid up share capital of Rs.
Partner + Relatives 50000/- or 5% of paid up
Capital whichever is lower.
¨ In case of body corporate
Body corporate + Director + Relatives
Special points
Body corporate Paid up capital No free reserve Both equity& preference shares Whichever is less Beneficial interest Exceeds 5 lakes / 5% , therefore, if exactly 5 lakes /5% No substantially interested Relatives of such individual/partner/directors.Section 294AA will not apply, if substantial interest after his appointment.
Section294AA (3) will not apply, if paid up capital was increased to 50 lakes or more after his appointment.
Examination question
6 1) Only section 294(2) will apply
2) Appointment starts as void appointment
3)
7 No question of compensation because the appointment itself is void
8 The offer is equivalent to appointment. Therefore no compensation when he refuses to accept the appointment on amalgamation.
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