Panther (Self Employed) 17 June 2010

Legal Powers of Independent Director of a Pvt. Ltd. Co.

Hi,

We have a Limited company (Private, closely held). We are raising capital through debt financing from an individual. This individual has put 3 terms and conditions-

1) Mortgage land to him

2) Pledge some shares (just keep it with him, no need to transfer them)

3) To appoint himself as Independent Director in the company until company repays his investment.

I understand the first two conditions well.What are possible repercussions of appointing him as independent director. In case, we have a difference of opinion in future, I want to know what are his legal powers as an independent director? There are 1 CMD and 3 others director in the company( they all are family members).

Overall, what would you recommend I should do.

Thanks in Advance for your help.

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2 Replies

Jithesh (Company Secretary) 18 June 2010

Once you apoint him as a Director he will have same powers as that of others. But as the decisions in Board meetings are done on majority basis and it is a family concern, it is not a problem. Just enter into an agreement with that person on such terms and condtions, sothat in future he cannot do anything.

As this is a Private family based company the control with the family will lie as it is. He can be a director just to protect his debts. Once the debt is paidoff, remove him from the Director board

Regards

JIthesh

Company Secretary