REGULARISATION OF “ADDITIONAL” DIRECTOR ?

Appointed a Family member as Additional Director during the year ?

Query in your mind ? How to make this “Regular Director” …. or Normal Full time Director  ?

So, You thought this automatic ? No, that is not so

And this gets done in the next AGM  ? Yes… But what if somebody forgot ???

Should you conduct an EGM…. Does that solve things ? Faster ? Smoother ? for a MSME unit ? Yes, it works fine.

Q-  Additional Director is usually regularised in the next AGM ,but if the AGM is long time away then EGM a solution ?

Ans- Yes, an Extraordinary General Meeting (EGM) can be a solution for regularizing an Additional Director if the Annual General Meeting (AGM) is a long time away.

The Companies Act allows the board to appoint an additional director subject to shareholder ratification at a general meeting (https://taxguru.in/corporate-law/appointment-additional-director-prerequisites-procedure.html). This ratification typically happens at the AGM, but there is no prohibition on holding it at an EGM. In fact, holding an EGM specifically for this purpose can be a more efficient way to formalize the appointment if the AGM is far off.

Here are some additional points to consider:

• Notice requirements: As with any EGM, proper notice must be given to all shareholders in accordance with the company’s Articles of Association (AoA) and the Companies Act. The notice should include details about the EGM, including the purpose of the meeting, which is to regularize the appointment of the additional director.
• Proxy voting: Shareholders can appoint proxies to vote on their behalf at the EGM.
• Voting requirement: The resolution to regularize the appointment of the additional director typically requires a simple majority vote of the shareholders present and voting at the EGM.

• Faster process: You don’t have to wait for the AGM, which can be several months away.
• Flexibility: An EGM can be convened at any time to address urgent matters like director appointment.

However, there are also some things to keep in mind:

• Cost: Convening an EGM involves additional costs compared to piggybacking on the AGM.
• Notice period: There are specific notice requirements for EGMs that need to be followed.

Overall, holding an EGM is a viable option if you need to regularize the appointment of an additional director before the next AGM. Weigh the cost and inconvenience of the EGM against the urgency of regularizing the appointment.

Question:- Additional Director is usually regularised in the next AGM

but, if the AGM is long time away

is EGM a solution ?

Source:-CA final module of The Institute of Chartered Accountant of India

1. What is Additional director as per Companies Act,2013 ?

 Ans:-Though appointed on a temporary basis, an additional director is vested with the same powers of a director. Moreover, they are subject to all obligations and limitations of a director. They are also entitled to seek appointment as a permanent director at the Annual General Meeting. The additional director must utilize his/her powers in the best interest of the company and the shareholders.

2 .Term for Additional Director?

A person appointed as an additional director can occupy their post until the date of the next Annual General Meeting. In the absence of an Annual General Meeting, their term of appointment will conclude on the date on which the annual general meeting should have been held.

3.Additional director is usually regularized in the next AGM?

But ,if AGM is long time away ,is EGM a solution?

Yes, this is a Good Solution

What to do, if you have a Additional Director and the AGM is long Time away ? If you are a MSME unit. and closely held.

Try the EGM Route.