Shareholders Approval Must to Reappoint MDs Above 70

Companies whose managing director, or wholetime director, has crossed the age of 70 will need shareholders' approval for reappointment. The Bombay High Court recently ruled that a managing director and whole-time director who crossed 70 will be automatically disqualified' and companies will have to call a general meeting of shareholders to pass a special resolution enabling them to stay on. More than 120 listed companies will have to approach minority investors in this regard, according to an ET study.

The Bombay High Court in the ruling earlier this month said managing or whole-time directors cannot continue if they have attained the age of 70 years even if they were appointed under the old Act, said experts.

“The Companies Act 2013 was very clear that a MDWTD cannot be appointed or continues after appointment if he has attained an age of 70 years. The confusion was whether this requirement will apply to appointments that were made prior to the Companies Act 2013 coming into force,“ said Dolphy D'Souza, partner in Indian member firm of EY Global.

The case was pertaining to a listed company Ultramarine & Pigments versus Sridhar Sundararajan, an investor. Sundararajan argued that Rangaswamy Sampath who was appointed as the chairman and managing director of the company on August 1, 2012 for a period of 5 ye ars, cannot continue as CMD upon completion of 70 years on 11November 2014.

The single bench of Bombay High Court in November 2015 ruled in favour of the compa ny. However, it was quashed by divisional bench of Bombay High Court on February 8, 2016. Companies will also need to justify the reappointment of these top officials beyond 70 years, as per the Companies Act 2013. Companies, including Auro bindo Pharma, Supreme Indu stries, Jagran Prakashan, Jy othy Laboratories, Gujarat Fluorochemicals, Vardhman Textile and Atul, among others, will soon have to pass a special resolution in this re gard.

MP Taparia, managing direc tor of Supreme Industies; N Srinivasan, MD of India Ce ments; Premchand Godha, CMD of IPCA Lab, and MP Ra machandran, CMD of Jyothy Laboratories and Nimesh Kampani of JM Financial are among the prominent compa ny heads who may need to app roach shareholders. “We shall take such action as may be ne cessary at appropriate time,“ said ML Bansal, company se cretary, Jyothy Laboratories whose chairman and MD MP Ramachandran is in his 70s.

“The provision of section 196 (3)(a) of CA, 2013 applies to those who were appointed as MD or whole-time director before or af ter 1 April 2014. The said provi sion does not permit passing of a special resolution prior to ex piry of the termduring the term, to ensure continuation beyond 70 years,“ said Yogesh Chande, partner, Shardul Amarchand Mangaldas & Co.

Let Them Rock The Boat

Activism is welcome. It will help corporate governance in India to get a boost. An independent director is obliged to look after the interests of all classes of shareholders. In fact, both the Naresh Chandra and the Narayana Murthy panels had envisaged a greater role for independent directors. They should be committed and ready to rock the boat in pursuit of management accountability to shareholders. But in the Indian context, many companies are compelled to fund political parties, but such is funding is kept off the books. This can be resolved only through political reform.

The Economic Times, New Delhi, 29th February 2016

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

CA Online

Search This Blog