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Restrain a director from exercising certain activities

Rahul D (Executive) (39 Points)

10 January 2012

Hi,

Happy new year to all. I wanted to know one thing about a matter I am looking into.

A company has two directors. Is it possible to restrict one of the directors from

1. making any banking transaction from bank account of the company,

2. sell/purchase/gift property or shares of the company?

Only the other director can carry out the above 2 operations. Can this be done through a resolution or some other way?

Thanks.

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2 Replies

Anjali Kapoor (Self) (33 Points)
Replied 10 January 2012

The board authorises a Director to sign any document ( any govt document, taxation, lease, gft, bank, POA) etc.

You have to go through the ARTICLES for any special provisions for similar situation. Otherwise,

If the Director A is authorised by the board than he can liase with the bank. However, if there is sa situation where Director B feels that the company's fund may be misused than he can approach the Sharehodlers for EGM and also till the EGM is called restrict the bank through sending a letter to the bank for stop payment for any cheque till the issue is resolved.

The director who is authorised by the Shareholders can also sign documents in special circumstances.

Selling, transferring, gifting can only be done by shareholders and not directors, Plz go through Articles and memorandum. A definate percentage of shareholder/s is required for different decisions.

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Rahul D (Executive) (39 Points)
Replied 10 January 2012

Hi Anjali,

Thanks for your response. I understand that throgh EGM the board can restrict the director from taking banking actions. But this is only internal to the company. How will the bank know that the particular diretcor is restrained from making any financial transaction in the company account? Is there any provision in banking operations to restrict a director from making financial transactions for his entire tenure.

Your point for selling, transferring, gifting by shareholers only is well taken. So you are saying that for carrying out these transaction on the company property or shares, a particular shareholder percentage acceptance is required. So by keeping the shareholding of the director whom we do not want to be able to sell, transfer, etc as a minority shareholder would serve the purpose? But again how will the ROC or registrar come to know of this? The director may execute the transaction without the knowledge of ROC or registrar that he is barred to do so and then only afterwards we come to know.

The above may be trivial question, and so I appreciate your cooperation more.