Minutes' mismatch on Vesuvius board hire

Sudipto Sarkar was appointed an ordinary & non-retiring director but minutes show a resolution appointing him an independent one for 5 years, probably invalidating this and bringing the MNC in bre

A mismatch between the agenda and minutes of the latest annual general meeting (AGM) of multinational corporation Vesuvius India is likely to render invalid its appointment last year of an independent director (ID).

This could mean the company could fail to comply with the statutory board composition requirement of 33 per cent directors being independent, unless it rectifies the move by the end of this month.

Vesuvius India, a subsidiary of Vesuvius Group Ltd, UK, had brought a resolution in the AGM of April 29, 2014, for appointing Kolkata-based senior advocate Sudipto Sarkar a director who “retired on rotation and being eligible, offered himself to be appointed as a director”.

This resolution was an ordinary one and was a matter of ordinary business.

It, however, did not mention that the appointment was for five years and that Sarkar was being appointed an ID, on a non-retiring basis. Therefore, when this resolution was adopted in the AGM, Sarkar was appointed a non-ID, on a retiring basis.

However, the AGM minutes stated something different. “RESOLVED that Mr Sudipto Sarkar, who retires from the board of directors under Article 101 of the company’s articles of association be and is hereby reappointed a director of the company... to hold office as an Independent Director, pursuant to the provisions of section 149(10) and other applicable provisions of the Companies Act, 2013, for a term of up to five consecutive years.”

This inconsistency means shareholders were neither told Sarkar was appointed an ID or that he was non-retiring and the tenure was five years. Therefore, the minutes do not reflect the correct proceedings of the AGM, as the outcome is different from what was sought from the shareholders.

Compliance experts said the company had not followed the proper procedure. The Companies Act of 2013 under Sections 149 and 152 prescribes specific requirements for appointment of an ID. These require that such appointment be on a non-retiring’ basis for a term of up to five years. An ID cannot have more than two terms and should meet the criteria for independence.

An email questionnaire sent to Vesuvius India and its company secretary did not elicit a response.

Proxy advisory firm Stakeholders’ Empowerment Services said, “SES is of the opinion that Mr Sarkar is not an ID and his current appointment is on a retiring basis. As a result, post this AGM, there will be only one ID as per Companies Act, constituting only 16 per cent as against the 33 per cent required under the Act. However, the company has time till March 31 to appoint IDs. (It) needs to explain to the authorities, as well as to shareholders, the discrepancy in AGM Minutes as compared to the notice for AGM.”