Issue Relating To Employment & Directorship - DOCX Download - CiteHR
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Dear Seniors,
Please let me know whether it is possible for a person who is an employee of an organization to be one of the Director of a sister concern(a wing) of the same company at the same time?
Regards,
Gargi

Hi,
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.
Kind regards
Dayanand L Guddin

Dear Gargi ji,
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.

Hi Gargi,
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.
Regards,
Sreejith

Dear Gargi,
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.
Regards
Vinay Somani

Dear Vinay ji,
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.

Dear Keshav,
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)
Regards
Vinay Somani

Dear Vinay ji,

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.

Dear friends,
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.
Regards.


Attached Files
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File Type: docx Appointment Of Directors.docx (17.8 KB, 166 views)

Dear Keshav,
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.
Regards
Vinay


Attached Files
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File Type: pdf 20130610152436.pdf (1.09 MB, 43 views)


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