How are chairman appointed

A chairman is not appointed, but is elected. In India, a chairman is generally elected from among the board members by the directors and you do not find non-board members chairing the meeting.

Even the table F to the Companies Act 2013 which deals with the Articles of Association of a company limited by shares states that the chairperson will be elected by the board.

Though there does not seem to be an express prohibition on a non-member charring a board meeting, non-members cannot cast a vote and therefore, there is not much more meaning in having a non-director as a chairman.

Alternatively, board can have a chairman who is one of the board members and a chairman emeritus, who is someone who probably used to be the chairman and has since retired, who will simply guide and direct the meeting, without using a vote.

The casting vote is a significant weapon in the hands of a chairman and if it is a given in the hands of a non-board member, it defeats the scheme of company law which gives the power of management of the company in the hands of the board of directors.

There is no specific agreement or contract for appointment as a chairman. If the article provides for a specific manner of appointment of a chairman, he must be appointed in that manner.

However, the mode of appointment is usually by a resolution at a meeting of the board of directors.

There are also no specific eligibility criteria for being appointed a chairman, except that:

•        A majority of the directors need to be willing to accept him as a chairman.

•        The chairman must not be interested in the matters being discussed at a meeting and for those matters where he is interested, he would need to vacate the chair.

•        A person who is also the Managing Director or CEO cannot also be appointed or re-appointed as a chairman unless the articles provide for this and the company is not engaged in multiple business, except for specific class of companies which has been notified, if they have CEO for each business.

•        The chairman of the board will usually chair general meetings also. However, where the chairman is not present at the general meeting, the directors present can elect one among themselves to chair the meeting and if none of the directors is present, the members can elect one among themselves to be the chairman.

•        This however rarely happens, since unless there is a sudden requirement, the annual meetings are usually planned keeping the chairman’s diary in mind. Not only this, the meetings are carefully planned in consultation with the chairman. 

 

SHARE