Chairman of a Company in India

Source: Article in The Business Line dated Thursday, Jun 28, 2007
Much is being made about the chairman of a company. As it stands, the company law does not
recognise the post of chairman. There are no mandatory provisions for such an office. The term
company chairman is an anachronism. The legal provisions reveal that at best such a person
can only be regarded as a ceremonial head.
Predictably, sans legal sanction, the powers of the chairman who presides over general meetings
are shaky, as such office is devoid of executive powers, unless of course, such chairman holds
an executive post in the company.
The legal position is as follows: There is no statutory provision in the Companies Act, 1956 for
every company to have a chairman. Under Section 269 of the Act, companies having a paid-up
capital of such sum as may be prescribed (which is Rs 5 crore at present) must have a managing
director, whole-time director or manager. Section 252 mandates that every public company shall
have at least three directors. Section 383A mandates the appointment of a company secretary in
certain cases. Section 224 obligates every company to appoint an auditor. There is no such
provision with regard to the appointment of a chairman.
Table A of the Act under regulation 76 (1) says that the board may elect a chairman of its
meetings and determine the period for which he is to hold office and if no such chairman is
elected, or if at any meeting the chairman is not present within five minutes after the time
appointed for holding the meetings, the directors present may chose one of the members to chair
the meeting.
Some of the companies appoint such chairman on rotational basis or until otherwise resolved.
Regulation 56 of Table A provides that the chairman, if any, of the board shall preside as
chairman at every general meeting of the company Regulation 51 of Section 175 of the Act
empowers the members present at a general meeting to elect a chairman, and this has
application only if there is no chairman to the board or no director is willing to chair the meeting
or if no director is present or if shareholders have no confidence in such a chairman and want
someone else to preside over the meeting.
There is no such mandate that every company should appoint a chairman. As per Section 175 of
the Companies Act, the board can appoint a chairman amongst themselves. Such chairman can
be appointed for each meeting of the board or for a specified period. Some companies Articles of
Association (AoA) provide that a chairman shall be appointed by the board to hold office from
one annual general meeting (AGM) to another. Nowhere in the Companies Act have the powers,
duties and responsibilities of the chairman been defined. The Act only delegates the following
powers:

In the event of equality of the board, the chairman can exercise a casting vote if so provided in
the AoA of the company.
Duties and responsibilities:
The chairman should make efforts to preserve order during the meeting.
He should ensure that all shades of opinion are given a firm and fair hearing so far as
practicable.
It is his duty to ensure that the sense of the meeting is accurately ascertained and recorded.
He should ensure that meeting starts and finishes on time.
He should see that the rules of standing orders are followed by the speaker and ensure that all
speeches are addressed to the chair and receive a fair hearing.
He must disallow points of order which attempts to bring up points of substance in disguise.
He should be impartial in the meeting and should see that the minority is not stifled or oppressed
in any way.
He has the responsibility of ascertaining the quorum and number of members prescribed as
competent to transact business.
Powers of the Chairman
The power of closure of meeting.
To bring the discussion on any question to close.
To decide upon points of order and any incidental questions which are to be taken as prima facie
correct
To adjourn the meeting.
To put an ordinary (when he is a member of the company) as well as casting vote.
His decision as to validity of proxies is final
To expel a member from the meeting if he seriously interferes with the conduct of the meeting
after warning the member.
In the event of equality of the board, the chairman can exercise a casting vote if so provided in
the AoA of the company. Though authorised to exercise a casting vote, this power is pointless as

directors (one who is a chairman) need not hold qualification shares so much so he is not a
member a paradox as he presides as a chairman of the meeting.
Chairman & Corporate Governance:
Source: http://en.wikipedia.org/wiki/Chairman
A chairman is selected by a companys board to lead the board of directors, preside over
meetings, and lead the board to consensus from the disparate points of view of its members. The
chairman is the presiding director over the other directors on the board and is expected to be fair,
a good listener, and a good communicator.
In public companies, the role of the chairman of the board is distinct from that of the companys
CEO or managing director. This point has more recently been brought into focus after corporate
governance shortcomings were observed in companies where the two roles are combined.