In a company, out of 3 directors 1 resigned in November, 2008 and we want to appoint the other one in feb, 09. Is it possible to run the public company with 2 directors for 4 months? Is there any provision stating time within which the vacancy should be filled.
In accordance with Section 252 of Indian Companies Act, 1956, a public company must have THREE directors and every private company must have at least TWO directors. Every company must have this minimum number of directors at all times during its existence starting from the date of incorporation.
The following contingencies are possible:
1.The number of directors reduces below the minimum number specified in the Act or the Articles of Association of the company though it does not go below the number required for the quorum.
2.The number of directors reduces below the minimum required to constitute a quorum for the Board Meetings
3.There does not remain a single director in the company
The following could be the solution in such situations.
If the Articles of Association has been well drafted, then there are provisions in the Articles to meet these eventualities. When the Company has adopted Table A, Regulation 75 of Table A provides that:
‘The continuing directors may act notwithstanding the vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose’
The first of this regulation contemplates continuation of at least two directors. Only one director cannot resort to this regulation. But where the number goes down below that required for a quorum, a meeting of the Board cannot be held unless the remaining directors co-opt one or more additional directors so that a quorum for meeting of the Board could be present. Even a single director can act for the limited purpose of increasing the number of directors to that fixed for the quorum. Alternatively the remaining directors should convene a general meeting to appoint directors so that the quorum could be made up (Bank of Syria, In re2 Ch 272)
Where all the directors of a company cease to occupy the office so that the company becomes directorless, the remedy lies in a member of the company making an application to the CLB under section 186 and get directors appointed thereat.
Where the company is directorless, in such a situation power of management would revert to the company in general meeting – Alexander Ward & Co Ltd V Samyang Navigation Co. Ltd. (1973) 3 LT (Notes) 80 approved in appeal by the House of Lords (1975) 1 WLR 673