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INCUBATION |
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NOMINEE DIRECTORS AND CONFLICT OF
INTEREST |
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There may be
occasions when directors represent
certain parties in the Board in addition
to their directorship. This usually
happens when foreign collaborators
holding companies etc. nominate a
director to represent them on the board. |
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The phenomenon
of nominee directors has an important
feature of the modern corporate
scenario. The background is the
financing methods. Companies have to
borrow amounts sometimes even larger
than the amount of paid--up share
capital. They have to depend for this
purpose on lending institutions like
Banks, Mutual Funds, Public Financial
Corporations etc. All such providers of
money stipulate for safeguarding their
financial involvement in the company
that the company should appoint as
members of its Board of Directors cine
or two persons nominated by them. This creates
an important problem as to the role of
such directors. |
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Liability
of nominee directors: Nominee
directors are in the same position and
they owe same duties to the companies as
any other director. |
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Nominee
directors right to corporate
information: A nominee director ,
like any other directors is bound by the
rules of confidentiality. He is not
allowed to make unauthorised disclosures
to his nominator. |
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Liabilities under Companies Act, 1956:
A nominee director like any other
director is liable for the default
committed in Companies Act. For example,
there are two basic documents, Balance
Sheet and Annual Return, are required to
be filed every year, with Registrar of
Companies (ROC), within stipulated time.
Apart from the fine, that shall be
charged by ROC, every director may also
be prosecuted. |
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