Regulariastion of directors

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Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 Hello experts

Pls tell me how directors are regularised in case of a private company and what is the main diff between the procedure to be followed for regularisation in case of an public and private co. ?

Thanks

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

In a public or a private company, which is a subsidiary of a public company, not less than two-thirds of the 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.

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

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shall continue to hold office until their office become vacant by resignation, removal, death or otherwise, or they are superseded by appointing other directors in accordance with the provisions of the Articles.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.)].

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 Thnks very sir for your help.... but i want to know the procedure for regularisation of directors in public and private companes..

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

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.

Ascertainment of directors liable to retire by rotation
Let us assume that in a public company:—
Total strength of directors is 12
Nominee directors of LIC and UTI are 2
Total strength of directors for the purpose of section 255 10
2/3rd of total strength will be 7
1/3rd of Directors due to retirement will be 3 in the 1st year
2 in the 2nd year, and
2 in the 3rd year

If the Articles so provide, the remaining 3 directors will be non-retiring comprising of Managing Directors, Joint Managing Director, and Nominee Director, if applicable, in the above example.

If presuming, nominee is from IFCI instead of UTI and is not against non-retiring portion, the total strength for the purpose of section 255 will be 11 and the directors subject to retirement will be 8 directors instead of 7 as illustrated above.

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