Company law

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Praveen

Praveen (Querist)
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20 June 2013 APPOINTMENT OF DIRECTORS BY MEMBERS IN GENERAL MEETING
need explanation for sec.255 and 256

Praveen

Praveen (Querist)
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20 June 2013 APPOINTMENT OF DIRECTORS BY MEMBERS IN GENERAL MEETING need explanation for sec.255 and 256

Ajay Mishra

Ajay Mishra (Expert)
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21 June 2013
At an annual general meeting a director retiring by rotation is eligible for reappointment and may be re-appointed. But the company may appoint some other person in place of the retiring director. [Section 256(3)]

Section 256(4) provides for automatic re-appointment of retiring directors in certain circumstances. It will come into operation and consequently, a retiring director will get automatically re-appointed, unless certain positive act as prescribed in the sub-section, is done.
If the annual general meeting ends without filling the vacancy of a retiring director, either by re-appointing the retiring director or appointing some other person, that gives rise to the automatic re-appointment of the retiring director.

Ajay Mishra

Ajay Mishra (Expert)
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21 June 2013 Total number of directors shall be such whose period of office shall be subject to retirement by rotation.
The duration of office of remaining one-third of the total strength shall be as per the provisions in the Articles. In the absence of any such provision, the said remaining directors shall also be subject to retirement by rotation.
The directors in a private company, in case of default of any provision in the Articles, will also be appointed by the company in its general meeting.

In a public company or a private company which is a subsidiary of a public company, at every annual general meeting, one-third of the directors liable to retirement by rotation (namely one-third or two-thirds of the total directors and where there is no provision in the Articles, one-third of the remaining directors who are also subject to retirement) will retire but eligible for re-election.
Fraction if any, may be corrected to the nearest whole number for working out one-third. It is advisable to round off any fraction as one, irrespective of whether the fraction is half or less than half.

The directors to retire by rotation shall be those who have been longest in office. When some directors are appointed on the same day, then those who are to retire shall be subject to mutual agreement or shall be decided by way of lot.

Ajay Mishra

Ajay Mishra (Expert)
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21 June 2013
First directors shall act till the directors are appointed at a general meeting of the company:

When the said directors are named in the Articles or where the subscribers become directors, the said persons will act as directors till the directors are appointed at the first general meeting after incorporation of the company.
After the incorporation of a company, the first directors, who are subject to retirement as above, shall be appointed at the general meeting to be called and held after incorporation irrespective of the manner of their appointment. [Section 255]

Ajay Mishra

Ajay Mishra (Expert)
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21 June 2013
Appointment of directors in the case of a private company
In the case of a private company, which is not a subsidiary of a public company, the first directors assume the office from the date of incorporation. Therefore, a private company, which is not a subsidiary of a public company, can provide in its Articles of Association the manner of appointment of directors. The Articles can also provide that the first directors appointed by the Articles shall continue to hold office until their office become vacant by resignation, removal, death or otherwise, or they are superseded by appointing other directors in accordance with the provisions of the Articles.
It is permissible for a private company to provide in its Articles that none of its directors is liable to retire by rotation. In the absence of anything to the contrary in the Articles, however, all the first directors of such a private company who have been appointed under the Articles may hold office till the directors are
appointed in accordance with the provisions of section 255(2) at the first general meeting held after incorporation but before the holding of the first annual general meeting.
It is desirable to have an explicit and clear provision in the Articles of Association of a private company, which is not a subsidiary of a public company regarding the manner of appointment of directors. If the Articles are silent or do not specifically provide for appointment of directors otherwise than at a general meeting, then the directors of such a private company are to be appointed at general meetings. [Swapan Dasgupta v Navin Chand Suchanti (1988) 64 Comp Cas 562 (Cal)].
If appointment of directors is not in accordance with articles, they are not the directors. [Rajan Nagindas Doshi v British Burma Petroleum Co. Ltd. (1972) 42 Comp Cas 197 (Bom)].
Where the company has delegated power to appoint a director to the Board, in event of board being unable to function, the members have the power to appoint. [B.N. Viswanathan v Tiffin's Barytes Asbestos & Paints Ltd. (1953) 23 Comp Cas 29 (Mad.)].

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