16 December 2010
In case of a Private Company which is a subsidiary of a Public Company, a person was appointed in the General Meeting of the Company as a Director of the Company libale to retire by rotation. Now, the Company has ceased to be a subisidiary of a Public Company and has regained the status of an Independent Private Company. So, whether the Director appointed to retire by rotation is liable to retire by rotation at the AGM of the Company?
In case of an appointment of a Director at the GM of the Company, is it neccesary to mention in the resolution that he is appointed as Director of the Company liable to reire by rotation???? If this is not mentioned, is there any violation of any section of the Companies Act, 1956?????
16 December 2010
Answer to your first question is - the director is not liable to retire by rotation in the next AGM after the conversion, even though in the previous resolution his appointment would have been subject to retirement by rotation. However since his appointment would continue with the words "subject to retire by rotation" you may pass a resolution in the ensuing GM reappointing him as a director without the above provision once for all.
Answer to second query is - it's not necessary to mention in the resolution, so far as the provisions of Section 255 and 256 are complied with.
Agreed that it is not mandatory to mention in the resolution that the Director appointed is liable to retire by rotation.
But the general practice followed is to mention that the Director appointed is liable to retire by rotation. According to me the reason being section 255 of the Companies Act, 1956 clearly stipulates that unless the Articles provide for the retirement of all the Directors, 2/3rd of the total number of Directors shall be the one who shall be liable to retire by rotation at every AGM of the Company.
Hence,every time a resolution is passed for appointment of a Director, it is better to mention the fact that the Director shall be liable to retire by rotation in the reolution itself.
After ceased the status from a private company which is a subsidiary of public company, it will be treated as private company with in the meaning of 3(1)(iii) of the Companies Act, 1956.
Sub section (2) of section 255 contains no provisions for retirement of directors of private limited company; retirement depends entirely on the provisions in the articles and in the absence of any such provisions, the directors are entitled to continue, until removed. {S. Labh Singh v. Panesar Mech. Works (P) Ltd. [1987] Comp Cas 618}. The provisions of section 255(1) do not apply for retirement of directors of private limited company.
From the above it may be concluded that appointment and retirement of director of private company are totally governed by the articles.
16 December 2010
Yes, in case of private companies it's purely governed by Articles.
In the absence of any provisions in the articles, the directors in private companies are not liable to retire by rotation as Section 255 applies only to public company or to a private which is a subisdiary of a public company.
In case of public companies we have the option of having 1/3 directors without rotation and 2/3 subject to rotation. That's why to differentiate between the directors who are appointed subject to rotation and who are appointed without rotation, it is customary to mentioned the fact in the resolution.
12 August 2013
Is it necessary for Pvt Ltd company to have provisions in the AOA regarding appointment of Director in EGM u/s 255(2)??
If it does not have any provisions in AOA for appointment of Director in EGM, Can it appoint a Director in EGM by passing Ordinary Resolution under section 255(2)??
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