Chandrasekaran (MD) 29 August 2014

One director involved in criminal activities

Dear Respected Lawyers,

We run a Pvt Ltd company with 70:30 share ratio between me and my chairman, the company has two directors my Chairman and me. My Chairman has been involved in some Ponzi scheme and is in the verge of facing legal problems, we formed the company in Aug 2012 and due to his actions was called for an interrogation in January 2013 by EOW of Tamilnadu police department. I presented my business model and was told I don't have any problem. Continuing which my chairman said he is out of that business, But he continued the business and is in the verge of getting arrested soon. Some of my friends say I may also be remanded since I have received investment from him, we share a personal relationship, some of his business sides and contacts know me as well. But I have never been informed of his business, while rising money form public they have used my company's name as well to lure investors. Will this create a problem to me? How can I prove my innocense and avoid legal procedures? Should I opt for a Anticipatory bail? Kindly advice.

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Ashok, Advocate (Lawyer at Delhi) 30 August 2014

You have not clarified, out of the two persons, who has 70% share and who the remaining 30% share in the company.

In the absence of full details, generally speaking, you may face problems since it is a company with only two shareholders and you are supposed to know about its activities. But, in case, you have never conducted the business of the company, never signed any documents, cheques, forms, etc., you can try to show all these aspects to the investigating officer saying that you were holding non-executive capacity and have never actually conducted any transactions. In some of such cases, the police can even make such a person an approver if you tell the full correct details.

If the FIR is already registered and is under investigation, and if the transactions of Ponzi scheme are done in the name of the company, it may perhaps be advisable to obtain anticipatory bail, though for getting a more a proper and well-informed advice I think you should contact some advocate and show all the relevant papers and discuss all the relevant facts with him.