16 August 2012
Dear Members, We have incorporated a public limited company (unlisted) in the year 2006, now we wish to appoint a nominee director from an organisation and further to appoint him as the chairman of the company. Please suggest me the steps to be followed and the necessary resolutions in this regard.
Nominees of certain Financial Institutions are not liable to retire under section 255 and 256:
Some of the public financial institutions were established under special statutes of Parliament like IDBI, LIC, UTI and SFCs. The respective Act gives the institution overriding power to nominate persons as directors on the Board of loanee companies and to withdraw them at any time. The provisions of the Companies Act, 1956 regarding appointment and removal of directors, share qualifications etc. do not apply to such nominee directors. Therefore, nominee directors of IDBI, LIC, UTI and SFCs are not liable to retirement by rotation in a public company and a private company which is a subsidiary of a public company.
Nominee director of ICICI and IFCI shall be rotational:
IFCI was also one such institution but after it has been converted as a company under the Companies Act, 1956, the special position that their nominees enjoyed earlier is no longer applicable. Therefore, the nominee of IFCI, ICICI and such other institutions, unless such nominees are appointed against one-third of total strength shall be liable to retirement as per section 255.