Korgaonkar K A
Asso.prof.(commerce & Management) Pg
Head Hr - Mahindra Aerospace
It is possible. Many Public ( limited) and pvt limited companies have this practices.
Usually a senior most executive like president/ Senior Vice president/ CEO of a company will be a director on the board of the smaller group company or a subsidiary of the parent company.
His appointment will be governed by the processes under the companies act and as per the proceedings of the board . In many companies, the person will be on the board as a whole time director as well.
Dayanand L Guddin
7th June 2013 From Singapore, Singapore
Appointment of Directors are under Companies Act and there is no provision in Companies Act which restricts any employee to become a Director of his parent company or sister concern or associate company or group company. There is no provision that Director can not be an employee of any parent company or sister concern or associate company or group company.
This is not my subject. Experts can comment on it or correct me if I am wrong.
7th June 2013 From India, Mumbai
As far as I see it, the only note of caution in this scenario is whether the terms of employment, of the company in which this person is employed, restricts him from taking up any other job/office of remuneration. Generally employment contracts prevent an employee from taking up any other full time/part time job/assignments else where. If this is the case, management can give a specific no objection to the employee that the management is ok with he taking up a director role in the sister concern.
7th June 2013 From India, Bangalore
Appointment of the directors are governed by companies act 1956, as such there is no restriction on any person to become a director in any company even if he or she is working.
But this thing applies only in case of director who normally takes part in the board meeting and another meetings as per his/ her nomination in the committees.
In case of an executive director (means a director who is involved in day to day activities of a company) he/ she cannot be an employee of any other company other than the company who has appointed him as an executive director.
so you have to check that person who is appointed as an director is an executive director or not, if he/ she is an executive director than the appointment is null and void and if he/ she is appointed as a director in professional category than it is completely acceptable as per law.
7th June 2013 From India, Alwar
May I know under which provision the ED can not be an employee elsewhere?
To my knowledge there is no such provision. I may be wrong.
According to me ED is whole time director and by virtue of his nature of responsibility he can not be in employment elsewhere.
Please correct me if I am wrong.
7th June 2013 From India, Mumbai
Please read Section 275 read with section 277 and 278 of companies act. (Refer book Ramaiya on companies act for better understanding on Company Law).
You may also check ruling of Bombay High Court which will clear aspects on directorship of a person as a WTD, ruling was provided in the case named
Ramaben A Thanawala V Jyoti Ltd (1957) 27 Comp Cas 105 (Bom)
8th June 2013 From India, Alwar
Thank you very much for your reply which helped me in enhancing my knowledge.
In-fact, as I said, Companies Act is not my subject. But still I gone through the sections 275, 277 and 278 of Companies Act. I have also gone through the case law of Ramaben A Thanawala V Jyoti Ltd., which is very old one. I could not refer the book by Ramaiya on Companies Act.
To clear certain doubts in my mind, I would like to submit as under:
In response to the query what I said is, there is no provision in Companies Act which restricts any employee to become a Director of his parent company or sister concern or associate company or group company. There is no provision that Director can not be an employee of any parent company or sister concern or associate company or group company.
However, the sections quoted by you deals with or debars any person to hold office of Directorship of more than 15 companies simultaneously and does not deal with Director can not be employed or employed person can not be on Directorship of any company.
Ramaben A Thanawala case is pertaining to remuneration to Directors which has no relevance to our discussion. Incidentally this case is very old and their is an amendment in limit of remuneration of Directors which may be a separate subject for discussion.
The above submission by me is with the intention to express my views so that we can exchange / share and enhance the knowledge and nothing else.
8th June 2013 From India, Mumbai
No doubt they can be appointed as Directors, except when not disqualified to become a Director. Pl.read attachment.
Like Ministers, Politicians etc. apptt.of directors of a co. is so simple as you could see from the notes attached. This is for general reading and if any specific issues have to be examined and advised as per settled cases.
10th June 2013 From India, Bangalore
Thanks for the reading the case law and Sections.
I would like clarify that those section are to be read along with the commentary which will not be available on net or in bare act. Mere reading of section will not clear the aspects, further the case law which i have quoted explains that which remuneration can be accepted as WTD.
Any ways to make it more specific i am attaching Essence of Ramaiya scanned it will give a clear view in the above discussion.
10th June 2013 From India, Alwar
Thank you very much for your attachment supporting my comments. In fact, company law is not my subject, which I repeat here.
The right and specific answer to querist would be:
It is possible that a person who is an employee of an organization can be one of the Directors of a sister concern(a wing) of the same company at the same time, but not whole time Director or Managing Director.
10th June 2013 From India, Mumbai
we, a batch of 33 people, joined Govt. Transport Corporation, accepting the offer letter on dated 28.08.2011 & there after signing the appointment letter on 12.10.2011 on purely contract basis with certain terms & conditions.
At the time of joining we were not asked to execute any contract agreement on judicial E- stamp paper.it continued as an oral agreement for TWO & HALF years.
Now suddenly, One month back, management has started a communication to all of us contractual employees to furnish a contract agreement on Judicial E-stamp paper of Rs.50/-.
The important thing is that the terms of contract has been changed from the original at the time of offer letter & appointment letter. This change of contractual terms is against us. In protest to it, We all contractual employees have refused to sign this changed contract agreement and filed a case in Central Administrative Tribunal.
Now in this scenario I want to Know the following points:-
1. What is our Job Status as there is no Formal Contract agreement signed between Us & Corporation??
2. Are we bind to the rules & regulations of Corporation, in absence of any formal Contract agreement signed between Us & Corporation??
3. One of us was issued chargesheet few months back, is that chargesheed valid in case of no formal Contract agreement signed between him & Corporation??
4. If one of us get good job opportunity somewhere else then in that case, does one need to Resign from this job properly??
5. In one case, one of us has resigned by serving Notice period properly but management has not accepted his resignation, What should he do??
Kindly reply these questions, as we are all in the very nascent stage of our career..
29th May 2014 From India, Delhi