Chapter 4 Flashcards
What/Who is a Chief 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).
Every company shall have a chief executive, who is an agent of directors.
What is the eligibility criteria for a 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.
What is the ineligibility criteria for a chief executive?
A person who is ineligible for appointment as director, is also ineligible for appointment or continue as chief executive.
Discuss appointment and tenure of chief executive.
First Chief Executive:
1. First Chief Executive is appointed by subscribers of Memorandum for a period upto first AGM (or for a shorter period if fixed by subscribers).
2. He may earlier resign or be removed.
3. Particulars of the first Chief Executive shall be submitted to the registrar along with documents of incorporation.
Government shall have the power to nominate chief executive of a public sector company in such a manner as may be specified.
Subsequent Chief Executive:
1. Subsequent chief executive is appointed by directors within 14 days of election, for a period upto three years ( or for a shorter period).
2. He may earlier resign or be removed.
Casual vacancy:
1. Casual vacancy is filled by directors within 14 days of its occurrence.
2. Such chief executive shall hold office till directors elected in next elections appoint a new chief executive.
Discuss roles and responsibilities/terms of appointment of chief executive.
Companies Act has not fixed a role and responsibility of chief executive.
1. The Terms and conditions of appointment as chief executive are determined by the directors or the company in general meeting in accordance with the articles of the company.
2. Terms and conditions of appointment of a chief executive nominated by the government shall be determined by the government in such a manner as may be specified.
He reports to the board and cannot exceed his authority given by the 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.
What are the rights of a retiring chief executive?
- A retiring chief executive is eligible for reappointment.
- Retiring chief executive shall continue to perform his functions till his successor is appointed, unless:
• His office was expressly terminated, or
• He is the cause of non-appointment of new chief executive.
Discuss the removal of chief executive.
Irrespective of any provision in articles or agreement with the chief executive, chief executive of a company can be removed before the expiry of his term:
1. By directors with 3/4th majority of total number of directors, or
2. By company through special resolution in general meeting.
What is the restriction on chief executive of public company for competing businesses?
A 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 the same nature and directly competes with the business carried on by the company or its subsidiary.
At the time of appointment, such chief executive shall disclose to the company in writing nature of such businesses, and his interest therein.
Chief executive cannot engage in competing business, even after disclosure.
What are the powers of the Federal Government to appoint/remove chief executive?
Federal Government has the power to:
1. Appoint chief executive if majority of the directors are appointed by it.
2. Remove chief executive if more than 75% of the voting rights are held by it.
3. Determine terms and conditions of chief executive appointed by it.
Discuss chairman of a listed company.
• Board of a listed company 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 the class of companies for which chairman and chief executive shall be different individuals)
• Chairman shall be responsible for leadership and shall play an effective role in fulfilling responsibilities of the 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.
Discuss sole agent of a company.
A company carrying on a business in Pakistan shall not appoint any sole purchase, sale or distribution agent without the approval of the commission.
Exception:
A company is not required to obtain approval of the commission if it is incorporated outside Pakistan and its major portion of the business is outside Pakistan.
Discuss company secretary of a public company.
A “company secretary” means an individual who is appointed to perform secretarial and other duties usually performed by a company secretary, having such qualifications and experience as may be specified.
A 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.
Discuss share registrar of listed companies.
Every listed company shall have an independent share registrar, with such qualifications and functions as may be specified.
A share registrar usually handles the transfer of shares and all other matters as an issuer. Applications for transfer of shares are sent to share registrar instead of the company. Name of the share registrar is also mentioned in the notice of general meeting.
