DETERMINATION OF POEM

• Board Meetings: The location where a company’s  Board regularly meets and makes decisions may be the company’s Place of Effective Management (POEM)provided, the Board-

(i)  retains and exercises its authority to govern the company; and

(ii) does,  in  substance,  make  the  key  management  and commercial decisions  necessary  for  the  conduct  of  the  company’s  business  as  a whole.

It may be mentioned that mere formal holding of board meetings at a place would by itself not be conclusive for determination of POEM being located  at that place. If the key decisions by the directors are in fact being taken in a place other than the place where the formal meetings are held then such other place would be relevant for POEM

• Committee Meetings: A company’s board may delegate some or all of its authority to one or more committees such as an executive committee consisting of key members of senior management.
• In  these  situations,  the  location  where  the  members  of  the executive  committee  are  based  and  where  that  committee  develops  and formulates  the  key  strategies  and  policies  for  mere  formal  approval  by  the  full board  will  often  be  considered  to  be  the  company’s  place  of  effective management.
• Modern Technology:  The use of modern technology impacts the Place of Effective Management (POEM)in many  ways.  It  is  no  longer  necessary  for  the  persons  taking  decision  to  be physically  present  at  a  particular  location.
• Therefore  physical  location  of  board meeting or executive committee meeting or meeting of senior management may not be where the key decisions are in substance being made. In such cases the place where the directors or the persons taking the decisions or majority of them usually reside may also be a relevant factor.
• Circular Resolution or round robin voting:  In  case  of  circular  resolution  or  round  robin  voting  the  factors  like,  the frequency with which it is used, the type of decisions made in that manner and where  the  parties  involved  in  those  decisions  are  located  etc.  are  to  be considered.
• It cannot be said that proposer of decision alone would be relevant but  based  on  past  practices  and  general  conduct;  it  would  be  required  to determine the person who has the authority and who exercises the authority to take decisions. The place of location of such person would be more important

Exclusions:

• Matter related to Shareholder decision are not relevant

However, the shareholder’s involvement can, in certain situations, turn into that of effective            management. Like  if  the  shareholders  limit  the  authority  of  board  and  senior managers  of  a  company  and  thereby  remove  the  company’s  real  authority  to make  decision  then  such  result in effective management being exercised by the shareholder.

• Day to day routine operational decisions undertaken by management shall  not  be  relevant  for  the  purpose  of determination of POEM..
• For Example, decisions  by  the  plant  manager  appointed  by  senior  management  to  run  that facility,  concerning  repairs  and  maintenance,  the  implementation  of  company wide  quality  controls  and  human  resources  policies,  would  be  examples  of routine  operational  decisions.

A person responsible for operational  decision  is  the  same person  who  is  responsible for the  key  management  and  commercial  decision.   In  such  cases  it  will  be necessary  to  distinguish  the  two  type  of  decisions  and  thereafter  assess  the location where the key management and commercial decisions are taken.