As per the Companies Act, 2013, the board cannot appoint a person as an additional director who fails to be elected as a director in a general meeting.
Applying stringent norms, SEBI has said that a person dismissed by shareholders in a general meeting can be appointed or re-appointed as managing director or whole-time director or manager only after providing detailed justification and ensuring compliance with various conditions. can be appointed from
“The appointment or reappointment of any person, including a Managing Director (MD) or a Whole Time Director (WTD) or a Manager, who was earlier dismissed by the shareholders at a general meeting, shall be made only with the prior approval of the shareholders. Approval,” SEBI said in a notification on Monday, for considering the appointment or reappointment of a person who was earlier rejected by the shareholders, there should be detailed explanation and justification by the Nomination and Remuneration Committee and the Board of the company. of directors to recommend the person.
As per the Companies Act, 2013, the board cannot appoint a person as an additional director who fails to be elected as a director in a general meeting.
However, this does not expressly prevent the Board from re-appointing a person as MD or WTD, whose appointment was rejected by the shareholders at the general meeting.
Further, the board of a listed entity may continue to appoint such persons as WTDs or MDs even after their subsequent disapproval by the shareholders.
Experts are of the view that such appointments by the board are against the will of the shareholders, who are entrusted by law to approve the appointment of directors on the boards of companies, and also against the spirit of corporate governance.
SEBI has amended the List of Obligations and Disclosure Requirements (LODR) Regulations with respect to appointments.
Separately, the Securities and Exchange Board of India (SEBI) has amended the rules relating to credit rating agencies.
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