Legal Opinion regarding consent of candidate for directorship.

Mr. Z

Address….

Dear Sir,

Re: Legal Opinion regarding consent of candidate for directorship.

We refer to your letter Ref. ………….. dated 03 September 2007 on the above subject.

From perusal of your letter, it appears that you require our legal opinion on the following issues:

i) In case of a sponsor shareholder of Group A of the COMPANY 1 (“the Company”) being eligible to become a Director as per provision of Article 95 of the Articles of Association of the Company, whether it is necessary to obtain the consent of the candidate (Form – IX)  for directorship?

Section 93 of the Companies Act 1994 states as follows:

“93. Consent of candidate for directorship – (1) Every person, proposed as a candidate for the office of a director shall sign, and file with the company, his consent in writing to act as a director, if appointed.

(2) A person shall not act as a director of the company unless he has, within thirty days of his appointment, signed and field with the Registrar his consent in writing to act as such director.”

Therefore, the appointment of any director of a company is subject to above requirement. As prescribed by section 93 every person proposed to be appointed as a director has to file with the company a letter showing his consent to act as a director, if appointed. A similar consent has to be filed by the director within 30 days of appointment with the Registrar of Joint Stock Companies and Firm (“RJSC”) and unless he has filed it, he shall not act as a director of the Company.

The Above provision applies to every person proposed to be appointed as director of a company. Therefore, the appointment of sponsor shareholder of Group A of the Company is also governed by the above provisions. Therefore, we are of the opinion that it is necessary to obtain the two necessary consents of the sponsor shareholder in accordance with Section 93 of the Companies Act 1994, before he may act as director of the Company.

ii) If a Director of the Company is selected as the member of the Executive Committee by the Board of Directors according to Article 114 of the Articles of Association of the Company, whether any consent from that Director is necessary?

There is no requirement, either under the Companies Act 1994 or under Article 114 of the Articles of Association of the Company, that the consent of a Director has to be taken before the Board of Director selects him as a member of the Executive Committee. However, for practical purposes, it is better to obtain the consent of the respective director before or immediately after his appointment, so that he cannot dispute his appointment at a later date.

iii) If a sponsor shareholder of Group A of the Company is elected as a Director, but subsequently the sponsor shareholder does not agree to act as Director, what legal steps should be taken?

As stated above, every person proposed to be appointed as a director has to file with the company a letter showing his consent to act as a director, if appointed. Such consent has to be taken before electing him as a director.

A similar consent has to be filed by the director within 30 days of appointment with RJSC and unless he has filed it, he shall not act as a director of the Company.

Presuming that the sponsor shareholder of Group A of the Company was duly elected and his relevant consents regarding the appointment was obtained, if he subsequently does not agree to act as Director of the Company, the Company cannot take any legal steps forcing him to act as a director. However, according to Section 108 (f) of the Companies Act 1994, if the said director absents himself from three consecutive meeting of the directors or from all meetings of the directors for a continuous period of three months, whichever is the longer, without leave of absent from the Board of Directors, then his office of director shall be vacant. The casual vacancy occurring as a result thereof may be filled in by the Board of Directors by appointing a person who is qualified to be elected as a director in accordance with Section 91 (c) of the Act.

If you have any further query, please do not hesitate to contact the undersigned.

Thanking you.

Yours faithfully,

………………….

For: “The Lawyers & Jurists”

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