There are 3 directors in a Pvt Ltd company and there is a mandatory signature of one director and any one of two directors signature is required in Bank transactions. All are having equal shares (33.33% each) and recently two directors enhanced their salary without enhancement to one director whose signature is mandatory in Bank and increase in salary for 2 directors has been informed to 3rd Director through note 20days in advance. He is stopped to coming to office without information after salary day i.e 7th of every month and cheque signed by other 2 directors of their enhanced salary has been passed by Bank. Now the questions are as below 1) Two directors called for board meeting to change Authorized signatory from Mandatory of one director to signature of any 2 directors and board meeting notice has been sent to him to change authorized signatory 2) He has informed that he is unable to attend the meeting. Shall two directors pass the resolution to change the authorized signatory in his absence for meeting? 3) Further he has given notice to Banks that he is not accepting to change mandatory signature and claiming that other directors have taken excess amount by mismanaged Bank operations without 3rd Director consent. Is Banks accept it?
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1)2 directors can pass resolution to change authorised signatory as third director in spite of notice has refused to attend the meeting
2)bank would insist on resolution passed in board meeting to change the mandatory signature
3) if resolution is passed bank would accept it
He is attended office only 2 days in last 12 working days and operations / responsibilities handled by him are got affected and other 2 directors are forced to spend extra time to handle day-to-day activities and there is no communication from the director when will come to attend office. The question is 1) with this ground shall we pass the resolution to remove other director from the board in same meeting?
Under no circumstances should you remove the director in next board meeting
2) he holds 33 per cent share in company
3) continue to call him for all meetings of board of directors
4) in the event he files petition in company law tribunal alleging oppression and mis management he would not succeed
A resolution by the quorum is enough to take the decision and implement the decision.
The increase of salary and change in signatory in the bank which is passed by the board resolution dully called for this purpose is not illegal.
The decision of director not coming to office should be dealt with the provisions of Articles of association if it is provided so.
Bank will have no objection to pass a valid cheque signed by the authorised signatories.
1. It is a internal dispute between the directors.
2. Bank is bound by resolution of board of directors.
3. You may pass a resolution accordingly but other suggestions as to removal of other director cannot be spell out without looking into articles of association and memorandum of association.
1) Two directors called for board meeting to change Authorized signatory from Mandatory of one director to signature of any 2 directors and board meeting notice has been sent to him to change authorized signatory -- Irregular procedure, complain to registrar/company law board.
2) He has informed that he is unable to attend the meeting. Shall two directors pass the resolution to change the authorized signatory in his absence for meeting? -- If he has allowed proxy.
3) Further he has given notice to Banks that he is not accepting to change mandatory signature and claiming that other directors have taken excess amount by mismanaged Bank operations without 3rd Director consent. Is Banks accept it? - - Any intimation by the company binding on bank.
Precise can be advice on perusal of AOA.
Hello,
Bank will ask for the resolution (board) with regards to the change in the signature.
If their is a board resolution then the bank will change the signature.
2 directors can pass a resolution to this effect since the third director is not coming even after repeated calls.
Regards
1) with this ground shall we pass the resolution to remove other director from the board in same meeting?
I would not advise you to do the same.
Removing him at this stage might backfire you since he has a share holding in the company.
Regards
If there are only three directors and two are of single opinion and a resolution has been passed based on the majority decision then this will be valid.
However what are the rules or conditions as mentioned in the article of association?
The board of directors should meet at least once in three months to comply with the requirements of law. S.292 specifies certain matters that can be transacted only at a meeting of the board of directors. Rest of the procedures can be carried out by a committee constituted by the board of directors or by way of a circular resolution.
There should be a reasonable number of persons to deliberate and take decisions at meetings. The number of persons to be present in person to constitute a valid meeting is called a quorum. The Articles of Association of the company generally contains a clause regarding the quorum. The chairman of the meeting should wait for a reasonable time for quorum before calling the meeting to order
A resolution is the legal form of a decision taken at a meeting.
If a resolution has been passed in a meeting of the board of directors as mandated in the article of association, then the bank is obliged to accept the resolution to change the authorised signatory.
The third director cannot dictate the bank to not to accept the decision taken by a body and properly communicated to the bank about this.
He is attended office only 2 days in last 12 working days and operations / responsibilities handled by him are got affected and other 2 directors are forced to spend extra time to handle day-to-day activities and there is no communication from the director when will come to attend office.
The question is 1) with this ground shall we pass the resolution to remove other director from the board in same meeting?
A company director can be appointed at any time after incorporation. Likewise, a director can resign or be removed by members (shareholders or guarantors) at any time, providing such actions do not contravene any provisions in the Companies Act 2006, the articles of association or a director's service contract.
If a director fails to maintain his or her statutory duties and responsibilities, or his or her conduct is deemed ‘unfit’ for any other reason, an official complaint can be made to the Insolvency Service by any member of the company or public. A director can also be disqualified by the Court, Companies House, HMRC, the Competition and Markets Authority, the Financial Conduct Authority, or a company insolvency practitioner.
If a director fails to meet the legal requirements of his or her role as outlined in the Companies Act 2006 and the articles of association, he or she can be removed from a company and disqualified as a director. Any person who is a disqualified company director is prohibited from holding such a position in any other company for the duration of the ban.
Details of disqualified directors are added to the Disqualified Directors Register by Companies House.
A whole time Director with 33% share holding is acting irresponsible due to not enhanced his salary on account of poor performance and informed that till salary is enhanced, he will not own any liabilities and responsibilities of the company in the board meeting and he is not attending office from last 20days and no communication from him. What is the action can be initiated against this director by other 2 directors. AOA says that quorum of meeting is 2 members and through ordinary resolution, a director can be removed. Can we do it and is there any consequences if he go to company law board. Increase Remuneration taken by other directors will have any implications? If he want to settlement, what is the method to calculate the settlement amount?
First you may initiate action to remove him from the office as per the rules as envisaged in the AOA, by first issuing notice and then by next steps.
Let him go to CLB with his grievances and invoke the provisions of law for his claim.
You can challenge the same on merits and as per provisions of company law in this regard as well as the conditions in the AOA.
The settlement calculation can be done as per prevailing situation or circumstance at the time of necessity.
1) send him emails requesting him to attend office and be present for nahi rd meetings
2) inform him that if he dies not attend the company would be forced to remove him from board
3) if he does not attend inspite of reminders pass resolution fir his removal from board
4) if director challenges his removal he would not succeed as sufficient time was given to him to make amends and attend office
5) if he wants to sell his share then get valuation of his share done by company auditors
The Director has not come to office till Jan 21st without any communication from Jan 2nd. Further he is coming from 22nd Jan'18 and simply sitting & going. Sending mails to us that he will not own any responsibility on liability of company and asking Bank to stop the company transactions as there is a salary dispute between Directors.There is a board resolution with majority of Directors approval with one director against resolution. He is withdrawn personal guarantee given to Bank for company OD account and Term loan. The question is 1) to remove him from Director on the Board, any explanation is to be given and reasons for his removal or not required. Just pass the resolution based on majority. As per AOA, he is a permanent director. Normally removal is to be done as per AOA or companies Act. 2) During notice period for his removal, can he go to company law board and get stay for his removal 3) What is the best procedure to get rid of him from the board.
give reasons for his removal as director
2) director can go to Tribunal and seek stay
3)you have to make out a case as to why stay should not be granted
If a board member is caught behaving in an unethical manner, customers, shareholders and employees may feel uncomfortable having him remain an adviser to the company.
If a board member skips meetings and related commitments, he’s not doing his part to contribute anything to the company.
According to section 166 of the Indian Companies Act, 2013, there are several duties that he has to perform but when they fail to perform their duties with reasonable care and because of them if any loss or damage is caused to the company, the directors shall be held liable.
When a director does something which is against the interests of the company and towards the benefit of a particular employee, it is held to be a wrongful act of a director on account of fiduciary trust.
Section 169 of the Indian Companies Act, 2013 states the procedure for the removal of the director.
The company should give intimation to the concerned director about his removal by sending the copy of the resolution which is sought to be passed.
Directors are the trustees for money and property of the company. If they dishonestly make the misuse of the property and money of the company for their own interests and make any secret profit in the performance of their duties, the directors having no other choice will have to compensate the company for whatever loss they have incurred to the company.