AoA - retirement clause - implication

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 16 September 2010

3 Directors who are also Shareholders..

1 Director died.. Now 2 directors but still 3 shreholders ( 3rd shareholder will be his legal heir)..

Board Meeting for AGM >> Quorum of 2directors >> valid

AGM >> Check AOA >> 2shareholders >>> valid

Provision in AOA in respect of Retirement of Directors by rotation>> valid in law becoz Private company can make any provision in its AOA..

Practical Solution for above case :-

1. File Form32 for cessasion of deseased director.

2. Transfer the shares of deceased person to his legal heir.

3. Hold an EGM to amend the provision of Retirement Directors by Rotation.. Pass SR.. File Form 23.

4. Now follow the normal procedure to hold AGM..

1 Like

vivek (CS) (751 Points)
Replied 18 September 2010

Upto my understanding:- 1. Being two directors number neares to one third become 1 Director to retire by rotation who is holding office from longest period. 2. Being Pvt. company two shareholders will form the valid quorum. 3. Unless otherwise mentioned, i don't think the provision retire by rotation can be done in any General Meeting other than AGM. 4. No you can not ignore the provisions of AOA but definetely the other way out is available, you can hold a Board Meeting then EoGM and pass SR for altering the provision of AOA and file F23 for this purpose. Upto my understanding if a director is reappointed in the meeting in which he retiers by rotation this is treated as vacancy or gap in office of directorship. For this purpose- (You may note) Department's View that a Public Company's article may provide that all directors would annually retire (Company News & Notes, Dated July 1, 1963), mean to say this will not attract the violation in minimum number of Directors provision of the ACt. Others Views Solicited: Regards,

1 Like

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 19 September 2010

Agree with Vivek,

Solution can be - reappoint retiring director in forthcoming AGM (ya AGM because though Sec. 255 / 256 is NA to Pvt. Co. but Sec. 258 is applicable to Pvt. Co. also)

Then after AGM, alter the aforesaid clause of AoA.

Kindly rectify if I am wrong.

1 Like

Ajay Mishra (Company Secretary) (74332 Points)
Replied 20 September 2010

Dear Friend

As per my understanding, the provisions of rotational/retiring provisions will not apply to private company.

If the article contains there provision, your company is complying these provision, because in case of private company, quorum should not be less than one third or two whichever is higher.

The provision of Regulation 75 will not apply because the company have more than one director.

Regards

CS Ajay Mishra

1 Like

DIVYA JAIN (PCS) (24 Points)
Replied 05 October 2010

Can anyone guide me as to the validity of an article in AOA of a Public Ltd. Co. stating that the directors are not liable to retire by rotation????????

Ajay Mishra (Company Secretary) (74332 Points)
Replied 05 October 2010

Dear Friend

Sub section(2) of section 255 contains no provision for retirement of directors of private limited company; retirement depends entirely on the provisions in the articles and in the absence of any such provision, the directors are entitled to continue, until removed-S. Labh Singh v. Panesar Mech. Works (P.) Ltd. [1987]

From the above it may be concluded that appointment and retirement of directors of private company are totally govern by the articles. If the articles are silent as to the appointment and retirement of directors, then appointment of directors shall be made by the company in general meeting and they can be removed under section 284 only.

Regards

DIVYA JAIN (PCS) (24 Points)
Replied 05 October 2010

respected sir,

thanx for replying but i wanted to know that is it possible for a public ltd. co. to have no provisions as to retirement by rotation for its directors in its AOA

guidance in this respect is urely awaited...

Ajay Mishra (Company Secretary) (74332 Points)
Replied 05 October 2010

Hi

You can not accept any article which overider the provisions of Companies Act, 1956.

In case of public company it is mandatory to comply the provisions of section 255 and 256, means one third directors should be liable to retire by rotation.

Regards