Director's appointment in a family owned business

Even if they are related to each other, all the membes can vote for resolution of regularisation of additional director. They can participate in the meeting. Such exemption has been given to Private Limited company.

Thanks Pratik and Rakumarudu

your answers lead to a lot of clarity on this.

But i want answers to the ques raised by me with reasons. i will try and answer them myself and maybe the two of you could correct me

i want to modify Q3 and there is one more ques on this issue. Also, i forgot to mention, all regularised directors except one and the additional director are shareholders of the company.

Q5. Does this appointee director count as quorum for the resolution to regularise the additional director if that person is a member too?

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Q1. Whether it should be mentioned in the explanatory statement u/s 102 that all are interested persons for this resolution?

Ans 1. Yes. Mention that all directors are interested.

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Q2. In such a case, during AGM, who will take the chair for this resolution since all are interested parties?

Ans 2. The original chairman, who was in the chair for other resolutions, continues. No change of chairman for this resolution.

because ???

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i will take up Q5. here.

Q5. Does this appointee director count as quorum for the resolution to regularise the additional director if that additional director is a member too?

Ans 5. Yes, in a pvt company, the additional director is a part of the quorum for the resolution to regularise her/his appointment in the AGM if that additional director is a member because ????

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modified Q3.

Q3.  Who will propose and second the resolution ? What if the appointee is a member too?

Ans 3. The one who is proposing the other resolutions proposes this too and will be seconded by all members. The apppointee, even if he is a member, cannot second the proposal.

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Q4. Can the appointee also vote on the proposal?

Ans 5. Since this is a pvt company, the appointee can vote.

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Regards,

Geetha

Sorry, I missed to mention that even if your company is Public Company, any member who is interested in such resoltuion can vote for it.

In Companies Act, 2013, only Section 188 has a provision wherein Interested Members can not participate in the voting of special resoltuion to be passed in GM. So, you can understand that restriction is only for special resolution to be passed as per Section 188. Regularisation of Director is not a special resolution nor it comes under the purview of Section 188.

Furthermore, such provision of Section 188 has been exempted for Private Limited company vide Notification dated 05th June, 2016.

Following are the answers to your questions.

Ans 1: Yes, you can mention that other directors/relatives are interested to the extend of their shareholding. You can refer Explanatory statement of RIL AGM Notice for wordings.

https://www.ril.com/ar2014-15/reports/RIL%20AR%202014%20-15%20Notice.pdf

Ans 2: Change of Chairman of meeting is required only when he is not allowed to participate for a particular resolution. Hence, you do not need to change chairman since all members are allowed to participate and vote.

Ans 5: Even if an additional director is member, in ALL COMPANIES, such members can be considerd as quorum for the purpose of passing resolution of regularisation.

I guess, you will get answers to all your questions from above.

Vide notification dated 5/6/2015  private companies have been exempted from requirement of explanatory statement u/s 102 unless the articles provide otherwise.

Dear Agrawal Sir, in this notification, it has mentioned for 'Section 101 to 107 and 109', that "shall apply unless otherwise specified in respective sections or the AOA provide otherwise"

As per my opinion, above sentence does not exempt Private Companies from its applicability, unless AOA has specifically mentioned otherwise (Above sentence has not mentioned the word 'NOT' in it). Kindly advise if my understanding is correct or not. 

Thanks Pratik for your detailed reply

Thanks Aggarwal ji for your help

One final ques - 

Q6. Pvt companies need not file MGT 14 for appointing a Director any more. Correct?

Regards

Yes, no need to file MGT-14 in your case, even if your company is public limited company.

Yes Mr Pratik you are correct.  In fact in our group companies we have provided in our articles for exemption from this section and hence it was ignored.

Thank you sir for clarification.

Thanks once again, Pratik & RaKumarudu

Regards,

Geetha