Appointment of MD in listed Co.
Subrahmanyam
(Querist) 06 August 2008
This query is : Resolved
Say the position of MD is expiring in the middle of the year say on 1 Nov 2007, however no action is taken in this regard after that date. He is re-appointed in the share holders meeting conducted after 31 march 2008 with retrospective effect.
1) In such a case what is the law, is the appointment valid,
2)Are the transactions done in between 1 Nov 2007 and 31 March 2008 valid even if they are not specifically ratified
Dhrumil
(Expert) 07 August 2008
yes if it ratify by the shareholders of company then it is valid.provided CG approval is not required
Murali Krishna
(Expert) 07 August 2008
The appointment is valid, since it is done with retrospective effect.
Actions done by the MD are all have full effect, since his appointment by the share holders with retrospective effect, implies they have ratified his actions in the capacity of MD. It amounts to defacto doctrine.
Subrahmanyam
(Querist) 08 August 2008
But i had read previously that a MD cannot be appointed with retrospective effect. And the power exercised by him during such period is like authority exercised by a person who actually does not hold it.
Only actions of directors whos appointment is invalid due to technical reasons can be validated.
Is this true
Murali Krishna
(Expert) 08 August 2008
Section 2(26) defines managing director, who by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors ......entrusted with substantial powers of management.
He exercises the powers subject to the supreintendence/control/direction of Board of directors. He is appointed to carry out the duties which are assigned to him by the Board of Directors.
Here the question is his continuance as MD without authority, which was ratified later. As any ratification has the effect from the inception, the actions done by the MD during the interregnum are to be treated as valid.
