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CS Executive · Company Law and Practice · Directors

Arjun Steels Ltd, which does not carry multiple businesses and whose articles are silent on the point, appoints Mr. Rao as chairperson under its articles and also as Managing Director. Which statement is correct under the first proviso to section 203(1)?

The dual appointment is permitted because the company does not carry multiple businesses. The first proviso to section 203(1) lets the same person be chairperson and managing director if either the articles provide otherwise or the company does not carry multiple businesses; the two conditions are alternatives.

  1. AThe appointment is permitted because the company does not carry multiple businessesCorrect
  2. BThe appointment is barred because the articles do not expressly allow it
  3. CThe appointment needs a special resolution of members
  4. DThe appointment is permitted only if Mr. Rao holds no shares

Explanation

The proviso bars one individual being chairperson and MD or CEO at the same time unless (a) the articles provide otherwise or (b) the company does not carry multiple businesses. The conditions are alternatives, so the single-business position suffices. The barring view wrongly treats the articles condition as mandatory.

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