Re-appointment of rotational Director, who is also an Executive Director, at AGM and voting by related parties thereon.

Provisions of Section 188 (1)(f) are applicable to this transaction as this involves “such related party’s appointment to any office or place of profit in the company”; related party includes Director and his relatives. It applies even to the appointment of Director who retires by rotation during his tenure as Executive Director. 

Explanation (a) to this sub section defines “office or place of profit” to mean, ‘(1) where such office or place is held by director, if the director holding it receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent free accommodation, or otherwise;’. Here in this case the Director is getting remuneration as a whole time director of the company, so he is holding the ‘office’ from the view point of this explanation. 

Second proviso to sub section 1 of section 188 says “Provided further that no member of the company shall vote on such resolution, to approve any contract or arrangement which may be entered into by the company if such member is a related party.” 

Therefore, by virtue of the combined reading of the provisions of Section 188 (1)(f), Second Proviso to Section 188 (1) and Explanation (a) to Section 188 (1), ‘no member of the company shall vote on such resolution, to approve any contract or arrangement which may be entered into by the company if such member is a related party’, and if they vote, such votes shall be invalid votes.
 
04/11/2017


 
     
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