22 November 2014
our company is a public limitd company(PSC>10crore) & NBFC We have 5 directors at present out of 5 one is MD 3 are whole time director for a period of Five years and 1 Additional Director(executive). All are drawing renumeration. Now since Add. Director can not draw remuneration without shareholder approval therefore we want to appoint him as WTD.
Can we appoint him as WTD since in that case all director will become executive and non-rotational director and in that case who will retire by rotation in next AGM.if yes what is the procedure for the appointment since we have already file DIR-12 for his appointment as Add. Director (executive)
14 July 2024
In your scenario, you have an Additional Director (executive) who currently cannot draw remuneration without shareholder approval. You are considering appointing this Additional Director as a Whole-Time Director (WTD), which raises questions about the composition of executive and non-rotational directors in your company. Here’s how you can approach this situation:
### Appointment as Whole-Time Director (WTD)
1. **Eligibility and Shareholder Approval:** - As per the Companies Act, 2013, an Additional Director (executive) can be appointed as a Whole-Time Director with the approval of the shareholders in a General Meeting. - Since the Additional Director is already appointed (through DIR-12), the next step would be to convene a General Meeting to seek approval from the shareholders for his appointment as a Whole-Time Director.
2. **Procedure:** - **Board Resolution:** The Board of Directors should pass a resolution recommending the appointment of the Additional Director as a Whole-Time Director. - **Notice of General Meeting:** Issue notices of the General Meeting to all shareholders, along with the agenda and relevant documents, including the proposed resolution for his appointment as a WTD. - **Shareholder Approval:** Obtain approval from the shareholders by passing a special resolution (if required as per your Articles of Association) or an ordinary resolution, depending on the specific circumstances and the shareholding structure.
3. **Effect on Directorship Composition:** - By appointing the Additional Director as a Whole-Time Director, all directors would indeed become executive and non-rotational. - This may impact the rotation of directors by making all directors subject to reappointment in the next Annual General Meeting (AGM). The Articles of Association of the company typically outline the rotation of directors, and adjustments may be necessary to comply with legal requirements.
4. **Compliance and Documentation:** - Ensure compliance with all regulatory requirements, including filing necessary forms with the Registrar of Companies (ROC) post-shareholder approval. - Update the company’s registers, including the Register of Directors and Key Managerial Personnel, to reflect the changes in directorship.
5. **Legal and Advisory Support:** - Consider consulting with a legal advisor or corporate governance expert to ensure all steps are in accordance with the Companies Act and other applicable laws.
### Conclusion
Appointing the Additional Director as a Whole-Time Director requires shareholder approval through a General Meeting. Ensure all procedural formalities are followed meticulously to avoid any legal complications. By adhering to the Companies Act guidelines and seeking professional advice where necessary, you can effectively manage the appointment process and maintain compliance with regulatory frameworks.
If you have specific nuances in your company’s Articles of Association or require further clarification, consulting with a professional advisor would be beneficial.
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