Prime Minister’s Relief Fund

A director failed to disclose his interest in a contract approved by the Board
meeting
(i)The Prime Minister’s Relief Fund is a fund notified under Section 293B of the Companies Act, 1956. The Board of Directors of any company, or any person, or an authority, exercising the powers of the Board of Directors of a company, or of the company in general may notwithstanding anything contained in Section 293 and 293A, or any other provisions of the Act or in the Memorandum, Articles, or any other instrument relating to the company, contribute such amount as it thinks fit. Therefore, the Board of Directors of the company can contribute Rs. 5 lakhs to the Prime Minister’s Relief Fund. However, as required by Section 293B(2), the company has to disclose in its profit and loss account the total amount contributed by it to the Fund during the financial year to which the amount relates.
(ii) X can be appointed as managing director by complying with the provisions of Section 316 of the Companies Act, 1956. Appointment can be made or approved by a resolution passed at the meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice should be given to all the
directors in India.Where the contract is entered under the purview of Section 299 any non
disclosure of interest by a director. will ake him liable to vacate his office a? per Section 283. On the other hand, if the contract is one under Section 297, default of action under the Section will render the contract voidable at the option of the Board.
Advise the chairman of your company on the following:
(i)A company has in its Articles of Association provided for appointment of not
less than two-thirds of the total number of its directors according to the principle
of proportional representation. Can the directors so appointed be removed by
the company in general meeting?
(ii) X company wants to increase the fee payable to directors for attending
committee meeting from Rs. 1,500 to Rs. 2,500. :(iiiX/Some urgent items are left over in the agenda of BoarQ meeting
and decision cannot be deferred till its next meeting.
(iv) Company Ywith a paid-up capital of Rs. 50 lakhs entered iA’to a’contract with ,
company Z in which a director of Y is holding equity shares of the nominal
value of Rs. 50,000. The director did not disclose his interest at the Board meeting under Section 299 of the Companies Act, 1956. Is the director liable for his act?
(v) A is proposed to be appointed as a marketing executive on a monthly salary
of Rs. 25,000 ina company in which his father is a director.
5tns.
(i)In terms of the provisions of Section 265 of the Companies Act, 1956/ the Articles of Association of a company may provide for the appointment of not less than two-thirds of the total number of directors of a public company, or a private company which is subsidiary of a public company, according to the
principle of proportional representatiq.o. The appointment of such ,diI%toff1?
is made for a period of three years. /The directors so aed ‘di11l1’Ot ‘be I
removed from their office before the ey of the tenure 0 ell’ appointment [Sec. 284].
This is so because the concept of proportional representation has been introduced in the Act to enable different groups among shareholders to have their ‘representatives on the Board. The above concept will lose its merit if any Director appointed on the basis of this principle can be removed by an ordinary resolution under Section 284 in a general meeting.
(ii) According to the provisions contained in Section 310 of the Companies Act, 1956/ any increase in the remuneration of a director by way of fee for each meeting of the Board of Directors of a company or a Committee thereof attended by him does not require approval of the Central Government, if the amount of such fee, after such increaserdoes not exceed such sum as may be prescribed by the Central Government. ‘\[he amount of fee presently prescribed by the Central Government for attending a meetin&. of the Board of Directors or a Committee thereof is Rs. 5,000 for each meeting, )ride Rule 10-B of the Companies (Central Government’s) General Rules and Froms, 1956. These provisions are applicable to a public company as well as a private company which is a subsidiary .9f a public company.
The proposal of /X Company/ to increase the fee payable to directors for ‘attending a meeting of the Committee of Directors from Rs. 1/500 to Rs. 2,500 would, therefore, not r
the approval of the Central Government under Section 310 of the Act as the amount proposed is within the
prescribed limit