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.