Chap:4 Cheif Executive And Other Officers Flashcards
Define Cheif Executive
Chief Executive means an individual who is given the whole or substantial powers of management of the affairs of the company, subject to control and directions of the directors. It includes a director or any other person by whatever name called (e.g. managing director or president).
Eligibility Criteria of chief executive
Companies Act does not specify qualification requirements for chief executive. A chief executive can be any person. He may or may not be a director, shareholder or employee of the company.
However, a company can fix some qualification requirements by including it in articles.
Ineligibility Criteria of chief executive
A person who is ineligible for appointment as director, is also ineligible for appointment or continue as chief executive.
(list the ineligibility Criteria of Directors underneath it)
Briefly explain the appointment and Tenure of First chief executive
First Chief Executive:
- First chief executive is appointed by subscribers of Memorandum, for a period upto first AGM (or for shorter period if fixed by subscribers).
- He may earlier resign or be removed.
- Particulars of first Chief Executive shall be submitted to registrar alongwith documents of incorporation.
Government shall have the power to nominate chief executive of a public sector company in such manner
as may be specified
Briefly explain the appointment and Tenure of Subsequent chief executive
Subsequent chief executive is appointed by directors within 14 days of election, for a period upto three years (or for shorter period).
- He may earlier resign or be removed.
Briefly explain the appointment and Tenure in case of casual vacancy
Casual vacancy is filled by directors within 14 days of its occurrence.
Such chief executive shall hold office till directors elected in next election appoint a new chief executive
Briefly explain Roles and Responsibility (or Terms of appointment) of chief executive:
Companies Act has not fixed role and responsibility of a chief executive.
The terms and conditions of appointment of a chief executive are determined by the directors or the company in general meeting in accordance with articles of company.
The terms and conditions of appointment of a chief executive nominated by government shall be determined by the Government, in such manner as may be specified
He reports to the board and cannot exceed his authority given by board.
If a non-director is appointed as chief executive, he will be deemed to be a director and shall have same rights and liabilities
Briefly explain Roles and Responsibility (or Terms of appointment) of chief executive:
- Retiring chief executive is eligible for reappointment.
- Retiring chief executive shall continue to perform his functions till his successor is appointed
Unless:
(i) his office was expressly on terminated, or
(ii) he is the cause of non-appointment of new chief executive
Briefly explain Removal of Chief Executive
Irrespective of any provision in articles or agreement with chief executive, Chief Executive of a company can be removed before expiry of his term:
⭕By directors with 3/4th majority of total number of directors, or By company through special resolution in general meeting. .
⭕Restriction on Chief Executive of a Public Company for Competing
Briefly explain Restriction on Chief Executive of a Public Company for Competing Business:
Chief executive of a public company (or his spouse or minor children) shall not directly or indirectly engage in (i.e. manage or own) any business which is of same nature AND directly competes with the business carried on by the company or its subsidiary.
At time of appointment, such Chief Executive shall disclose to company in writing nature of such businesses, and his interest therein
⭕Point to Note:
Chief Executive cannot engage in competing business, even after disclosure.
Briefly explain Powers of Federal Government to appoint/remove Chief Executive
Federal Government has power to:
- appoint chief executive if majority of directors are appointed by it.
- remove chief executive if more than 75% of the voting rights are held by it.
- determine terms and conditions of chief executive appointed by it.
state the time frame for chairman, his appointment, duration of office and responsibilities
Chairman of a listed company:
- Board of a listed companies shall appoint a Chairman among non-executive directors within
14 days of election of directors.
- Chairman shall hold office for 3 years. However, he may earlier resign, may be removed by
directors, or may otherwise cease to hold office. - Board shall define the respective roles and responsibilities of Chairman and Chief Executive. [Commission may specify class of companies for which the Chairman and Chief Executive shall be different individual.)
- Chairman shall be responsible for leadership and shall play an effective role in fulfilling responsibilities of board.
- Chairman shall prepare his report on overall performance of the board in achieving its objectives. This review report shall be included in annual financial statements.
State the provisions of Company’s Act regarding sole purchase, sale or distribution agent
A company carrying on a business in Pakistan shall not appoint any sole purchase, sale or distributior agent without approval of Commission.(to prevent creation of monopoly)
⭕Exception :
A company is not required to obtain approval of Commission if it is incorporated outside Pakistan and its major portion of business is conducted outside Pakistan.
Describe the role of Company Secretary of a Public Company
A company secretary” means an individual appointed to perform secretarial and other duties usually performed by a company secretary, having such qualification and experience as may be specified.
Company secretary shall be an employee of the company, and is responsible for advising the board on compliance of corporate laws and maintains relevant records and registers.
Describe the role of Share Registrar for Listed Companies
Every listed company shall have an independent share registrar, with such qualification and functions as may be specified.
Share registrar usually handles the transfer of shares and all other matters as an issuer. Applications of transfer of shares are sent to share registrar, instead of company. Name of share registrar is also mentioned in notice of general meeting.
