Board of Governors of Section 25 Company

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2010 My client is a Section 25 Company. It has a board of governors to look after the management of the institute.

My query is whether a Board of Governors is equivalent to a Board of Directors.

I also wish to know whether all the members of the Board of Governors are required to be registered as Directors of the company. Or only the minimum number of members may be registered to fulfill the requirements of the statute.

Kindly clarify along with relevant sections or case laws to justify.

Ajay Mishra

Ajay Mishra (Expert)
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30 November 2010 Hi

No, Board of Governor is not equivalent to Board. The role and responsibility of Board of Directors are decided as per Companies Act, 1956.

It is not compulsion that all the members of Board of Governors should be director of such company.

There are following exemption regarding director to section 25 Companies:

 Appointment of Directors by Rotation and Filing of Vacancy: The provisions of section 255 and 256 relate to retirement of director by annual rotation and filing of vacancies. Section 25 can be exempt from the application of these provisions. There can be no objection to the nomination and election by a member company, which has not paid the subscription for the relevant year. (Department’s Circular No.23(29) dated 07-05-1964)
 Right of Persons other than Retiring Director to stand for Directorship: If the Articles of section 25 company provide for election of the Directors by ballot system then the provisions of section 257 will not apply to such a company and as a result a person who is not a retiring director and is intending to stand for directorship will not have to follow the procedure laid down by section 257. (Section 257)
 Increase in Number of directors: Section 25 companies are exempted from section 259 and are thus free to increase the number of its directors without seeking approval of Central Government. (Vide Notification No. 2767, dated 05-08-1964) (Section 259)
 Consent to Act as a Director: A person seeking appointment as a director for the first time need not file his consent in advance with the company for working as director if appointed in section 25 company.

Regards

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