Stalemate in management

Dear Mr. Sharma

She can be removed under Section 283(1)(g)  and  the male Shareholder can transfer his share , so that the requirement of quorum can be fullfilled and AGM can sucessfully convened.

Dear Smrutiji, The situation under Section 283(1)(g) is called as 'Vacation" and not 'Removal' and it is automatic. Further, how can the the company get rid of this director if she has yet not contravened the provisions of  Section 283(1)(g) ? (the querist has not mentioned about this) Smritiji, please answer. Regards... 

Mr. Sharma as mentioned in the query that Lady Director is not attending any Board Meeting. Under 283(1)(g) she will  ceases to hold office as Director of the Company .

Dear Smrutiji, The querist has still not given us necessary facts, by which we can ascertain whether the lady contravenes provision under Sec 283(1)(g). If he had given us those facts, the knowledge of which we could have ascertained the contravention, then obviously her office would vacate automatically.

Originally posted by : Veeral Gandhi
	Dear Mr. Harji,   Constant infighting provides jurisdiction to CLB under section 397/398. If the directors keep on fighting, then, the interests of the shareholders or the Company will be at stake. When the disputes become irreconcilable, the litigation comes to Court and the aggrieved director or his group can either approach a Civil Court, Company Court on just and equitable clause or can even approach the Company Law Board under section 397/398 of the Companies Act, 1956. If the director or his group is qualified under section 399 of the Act, normally the Company Court may feel that the issues are to be settled by the Company Law Board under section 397/398 of the Companies Act, 1956. There should be oppression and mismanagement by a group of shareholders against other for approaching the CLB under section 397/398 of the Companies Act, 1956. But, the constant infighting too provides jurisdiction to the CLB to look into the disputes if a petition is filed. Dealing with the issue of constant infighting, the Delhi High Court in Chander Krishan Gupta vs Pannalal Girdhari Lal Pvt. Ltd. And Ors, 1984 55 Comp Cas 702 Delhi, 1982 (3) DRJ 295, was pleased to observe that: “(10) Section 398 has two facts. The first is that positive acts are done by the management which results in prejudice being caused to the company. Secondly section 398 may be attracted even where no action at all is taken by the management and such non action results in prejudice being caused to the company. The management of the company has miserably failed in protecting the Company's records and this failure results in prejudice being caused to the company. Moreover, the constant fight amongst the directors who were also the shareholders of the company had certainly adverse effect on the conduct of the company's business with the result that the company started incurring losses. To my mind, therefore, this by itself would justify appropriate orders being passed under section 398 of the Act.”   Directors’ dispute resolution would be complicated. When there exist serious disputes between or among directors or their groups, dispute resolution is not easy and its complicated exercise. If the issues of directorship are to be decided by the CLB under section 397/398 of Companies Act, 1956, the CLB may consider plethora of issues while passing appropriate orders and the CLB is normally driven by the object that it should put an end to the matters complained of and regulating the affairs of the Company. CLB may not look into the procedural irregularities at times in view of other facts and may look into the technicalities strictly at times. Despite the prevalent majority rule, the CLB may appoint someone as director even against the wish and will of majority shareholders in the Company. In view of the fact that actual power is exercised by the Directors in any Company, a dispute among shareholders will have an inevitable reference to the action or inaction of the directors of the Company.   So, Mr. Harji, the decision now rests with you. My personal advice to you is to settle the matter amicably.   Regards, Veeral Gandhi

Agree with Veeral Sir  . He has perfectly explained everything.
 

Yes, that's right Renuji, that is what I am trying to convey to Smrutiji !

If she  absents herself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board  then she will cease to hold office as Director under sec 283. 

Mr. Harji Kindly clear the number of board meeting she is continuously absent and the time duration till date when she last attended BM.

Dear Friends,

Why to make the situation complicated, there is provision to appoint an additional director for want of quorum. Appoint him hold board meeting and do suitable changes.

For vacation of office, it is to be noted and accordingly form 32 is to be filed for her.

The situation will be redressed.

Righty said by Mr. Ankur 

Originally posted by : CS Ankur Srivastava
	Dear Friends,   Why to make the situation complicated, there is provision to appoint an additional director for want of quorum. Appoint him hold board meeting and do suitable changes.   For vacation of office, it is to be noted and accordingly form 32 is to be filed for her.   The situation will be redressed.

Dear Sir, Please make me understand how a sole director can appoint an additional director in the Board Meeting conducted without quorum even when the discussed Regulation of Table A provides for such appointment only in case of vacancy caused by death, insolvency or resignation ? It does not provide for appointment of a director in the case of the current situation. Even if  2 directors are appointed, they can not remove the lady director as a director can only be removed by shareholder in a general meeting convened duly as per quorum . Even if the GM is convened, the quorum would not be sufficient to take any valid decision.

Dear learned members,

I am grateful for all the valuable suggestions.

I think the advice of Shri Veeral Gandhi is the most appropriate, even though the procedure is long drawn and cumbersome.

I would like to add some more points, to clarify some of the points raised.

1. The clause about continuous absence from three board meetings or for three months, whichever is longer, does not apply in this case.

2. I agree a quorum of minimum two is required for all meetings (except for a directive from Government or a Tribunal) and that is a serious stumbling block for any constructive action. This also can be overcome by going to court, saying the interest of the majority shareholder is being hampered by minority using the simple technical issue of quorum, but that again is a long drawn and cumbersome procedure.

3. While votes are initially cast on one vote per head basis, if the Chairman of the meeting feels that that is leading to a verdict against majority shareholding, he may ask for a poll to be conducted at the same meeting. In a poll the votes are counted as per shareholding of each member present (or by proxy) and that verdict prevails. Section 87 clearly lays down that the shareholders have ultimate control and each vote as per shareholding ensures that.

I hope this helps.

I have since learnt that actually there is another shareholder, with 1% votes. So the shareholding actually is Mr (director) 54%, Mrs (director) 45%, third shareholder (an employee of the company) 1%.

So if the third shareholder cooperates, then there is a ready solution in calling for an EGM, getting the quorum with the help of the 1% shareholder, and passing an ordinary resolution appointing another director, and with the help of that director passing accounts as well as getting the AGM done.

If there is a counter view please let me know.

Thanks again for all your help.

Harji

Dear Mr. Hariji, The best option here is to win the favour of the third shareholder and convene the EGM. In this EGM, remove the lady director by passing vote by show of hands. I think that you will be able to convince the third shareholder to join the male director by promising him the seat of directorship in the company and paying other remuneration as a director.