Can a U.S.-Based Executive Be Chairman in India? Seeking Insights on Company Law

Hello Seniors, Requesting your knowledge on the Company Law side. Please shed some light on these questions:

1. Can a person currently in the U.S. be the Chairman of a company in India (the person is employed in a high-profile bank in NY)?

2. Does the Chairman need to hold the majority shares to be eligible for the post (Pvt. Ltd Company, India)?

3. If a Director holds 80% of shares of a Pvt. Limited Company, will he be liable for 80% of liabilities?

4. Would it be an unusual practice to appoint someone as the 'Chairman and CEO' in a director board with a strength of 2 (or 3) members? Normally, we see it as M.D & CEO.

Thanks for your kind advice and time in advance.

As far as the provisions of the Companies Act, 1956 go, the replies are as follows:

1. Can a person currently in the U.S. be the Chairman of a company in India (the person is employed in a high-profile bank in NY)?

Ans: Yes, a person currently in the U.S. can be a Chairman of the Company in India.

2. Does the Chairman need to hold the majority shares to be eligible for the post (Pvt. Ltd Company, India)?

Ans: No, the Chairman need not hold the majority shares to be eligible for the post unless the Articles of Association of the Company have prescribed this condition.

3. If a Director holds 80% of shares of a Pvt. Limited Company, will he be liable for 80% of liabilities?

Ans: No, in a Company limited by shares, the liability of the Director holding 80% shares shall be only liable to pay for the amount of shares he holds.

4. Will it be an odd measure to appoint someone as the 'Chairman and CEO', in a director board with a strength of 2 (or 3) members? I ask because normally we see it as M.D & CEO?

Ans: It will not be odd. However, a CEO needs to be a person available at the Company who can take care of the day-to-day affairs of the Company. As you said, the person being appointed as Chairman is in the U.S., it will be advisable to appoint someone in India as the CEO.

I hope it answers your queries.

Thanks & Regards,

Avika

Thank you very much, Avika, for providing exact and precise answers to my queries. I need a little more clarity just to be sure, and maybe you could shed some more light if I were to put them in figures.

Liability Aspect

Regarding the liability aspect, suppose a Director holds 800 equity shares (out of 1000 total shares) in a company with 2 partners, and the company eventually defaults on a 10 lakh loan. Will the company be responsible for the full 10 lakh amount, with the partners sharing 50% of the responsibility? Or is the person holding 80% of the shares personally liable to answer for 80% of the amount?

From your response, I understood that the Director would be liable for 80% of the defaulted amount corresponding to the number of shares he holds. Am I correct?

Thanks again for your time and concern.

Liability of Directors in a Company

If it is a company, the partners (directors) can have an inter-se adjustment for liabilities. In law, it is the company that is liable to the outside party, and directors will not be personally liable unless they have given personal guarantees or are acting as surety for the loan.

I hope this helps.

Regards,