Proportional representation for appointment of directors

This is one of the method of electing a director in a company.. Previously it was oly for public cos. As per new Act, its applicable for all cos but still remains as non mandatory provision..
The rationale behind this section is to instill the democracy in corporates as well
Its genesis is from UK parliament and of course in our parliament.. And thereby they have incorporated the same in CA 1956 vide sec. 265..
Let me give eg to understand this..
As the section states there are 2 methods mainly- Single transferable voting and Cumulative voting.. U can also employ any other method but everything sld b authorised in articles..
Suppose if u hold 300 shares in a company and there are 4 directors to b elected.. Then you are eligible to put 300*4 = 1200 votes .. U can use all these votes for single candidate or u can divide ur votes among the candidates.. This is as per cumulative voting
So there is reduced scope for promoters or majority shareholders' clout to nominate their persons as directors..
As per single transferable voting u r eligible for 1 vote per person irrespective of shareholding..
: These methods can b done only once in 3 years and pls note that the respective director cannot b removed during his tenure..
So under single voting system , as stated earlier if there are 4 directors to be elected.. And there are 2 shareholders A and B in that company means A is eligible to appoint 2 directors and B is eligible to appoint 2 directors.. Under cumulative means if A holds 76% and B holds 24% means- A can appoint 3 directors and B can appoint 1 director..
: Thereby under both the methods the minority interests are protected n democracy is upheld..
Also pls note that the election sld b for minimum of 2-3 rds of directors..
Section 163 of the Companies Act, 2013.

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The above article is written by Mr.Annirudh, ACS, LLB, Corporate law expert from Chennai.

MEMBERSHIP OF THE COMPANY

A Company is composed of members,though it has its own entity distinct from members.The Members of a company are the persons who,for the time being,constitute the company, as a corporate entity.


According to section 41 of the Companies Act,1956 defines who are the members as follows:

(1) The Subscribers of the memorandum of a company shall be deemed to have agreed to become members of the Company, and on registration, shall be entered as members in its register of members;
(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall, be a member of the company;
(3) Every person holding equity share capital of a company and whose name is entered as beneficial owner in the records of a depository shall be deemed to be a member of the concerned company

In Case of a company limited by shares, the shareholders are the members.Generally speaking, every shareholder is a member and every member is a shareholder.But there is an exception to this statement,a person may be a holder of shares by transfer but would not become its member until the transfer is registered in the books of the company in his favour and his name is entered in the register of members.

Who can become a Member?

In Addition to an Individual, the following may also become a Member of the company

(i) A Company -it must have powers in MOA & AOA to make investments in other Body Corporates

(ii) A registered Co-operative Society

(iii) A Non-resident Indian- No shares can be  issued or transferred to him without the General or Special Approval of Reserve Bank of India and he cannot be admitted as Member of the Indian company without the General or Special Permission of the Reserve Bank of India.

(iv) Minor-Minor is incapable to enter into the contract for being a Member but the Guardian of the Minor could apply for the issue of shares on behalf of the Minor  and the company can allot shares to the guardian.When the minor attains the age of majority,he becomes entitled for the dividend and other benefits of the shareholder.

(v) HUF : Hindu Undivided Family is represented by its Karta.In case of HUF,the shares can be allotted to the name of the Karta in HUF.

(vi) Registered Trade Unions

(vii) Joint Shareholders


Who cannot become a Member?
1.Partnership Firm

2.Legal Representative

3.Pawnee

4.Public Office

5.Membership by a Subsidiary Company to its Holding Company


CESSATION OF MEMBERSHIP:

A person may cease to be a member on the following grounds:

(i) on surrender of shares

(ii) on transfer of shares

(iii) on Buyback of shares

(iv) on death of member

(v) By rescission  of contract of Membership on grounds of misrepresentation or mistake.

(vi) on forfeiture of shares

(vii) on bankrupcty of member/