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Corporate Law - Section 258 and 259

praveen (Chartered Accountant) (6971 Points)

04 February 2011

In the following example should the company take approval of the Central Government

There are 12 existing directors and as the AOA the maximum number of directors are say 15 now the company wants to increase the board strength from 12 to 15 is CG approval needed.

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12 Replies

pravin (student) (38 Points)
Replied 04 February 2011

Hi Praveen

1. The AOA says that the max no is 15. in that case the AOA should be the first registered one.

2. If it is so no need to get the central govt. approval if it is within the limits of AOA.

3. If that is not the case CG approval is required.

Krushna (ACS) (119 Points)
Replied 04 February 2011

If the company is private company no CG approval is required however if its public company then as per sec 259 of companies act CG approval is compulsory .

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 05 February 2011

Originally posted by : Krushna
	If the company is private company no CG approval is required however if its public company then as per sec 259 of companies act CG approval is compulsory .

Agreed with Krushna

Pvt Co no limit for max directors.

Public co, ,max 12, above that CG Approval required.

regards

Santosh Shah

Sudhir Garg (Service) (236 Points)
Replied 05 February 2011

I partly agree with Krushna and partly with Pravin

For Pvt companies, section 259 not applicable. (Krushna is right)

Increase of number of directors upto registered AOA, no CG approval is required otherwise required except where increase upto Tweleve is OK without CG approval.

If we look at the wording, there is mention of regsitered AOA which actually OKAys Krushna statement. Means, every change in AOA needs to be filed with ROC but fixing of limits of number of directors beyond Twelve requires CG approval. AND such registration, you are free to increase number of directors without CG approval.

Other member views are welcomed.

Regards- Sudhir

Mayank Ahuja ("Learner") (586 Points)
Replied 06 February 2011

I assuming its a Case f Public Ltd Co.

No need To Take Permission of CG again.......

Just Pass Resolution 4 Increase in Members...

As When they Registered AOA Earlier there they Mention No. Of Directors =15, It means registrar already approved it prior approval f CG, So No Need to Take Permission Again.

Correct Me, If i m Wrong anywhre.

Regards

Pooja Verma (Chartered Accountant) (38 Points)
Replied 06 February 2011

As per Sec.259, Approval of CG is required only when No. of directors as increased exceeds the Max. no. of directors specified in the articles as FIRST REGISTERED.

As per the case specified by you, if the Max. specified directors in AOA(as first registered) is 15 and the co. wants to increase the no. to 15 only, then no approval is required.

If any further clarifications required then you are most welcome.

Regards

Pooja

pravin (student) (38 Points)
Replied 06 February 2011

Agreed with pooja

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 07 February 2011

Originally posted by : Pooja Verma

Agree with Pooja. My observations are marked green.

As per Sec.259, Approval of CG is required only when No. of directors as increased exceeds the Max. no. of directors specified in the articles as FIRST REGISTERED.

Agreed. But when the increase is beyond the maximum specified in AOA as first registered but within 12, no CG approval is required.

As per the case specified by you, if the Max. specified directors in AOA(as first registered) is 15 and the co. wants to increase the no. to 15 only, then no approval is required.

Agreed. But if the maximum specified in AOA is 10 and the company wants to increase it to 12, no CG approval is required.

If any further clarifications required then you are most welcome.

Regards

Pooja

Venugopal Saboo (Article) (222 Points)
Replied 14 July 2011

Hi,

If As on 31/3/2009 AoA max specified directors as 12. And only 10 were holding the Office.

On 31/3/2010 AoA were amended and max specified directors were increased to 18. (Holding office still 10)

On 1/7/2010 2 directors were appointed in GM ( Directors Holding Office now 12 (10+2)

On 1/8/2011 2 directors were appointed in GM ( Directors Holding Office now 14 (12+2)...

During which period or date the Central Govt appointment was require?

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 14 July 2011

The appointment made on 1/7/2010 is within the limits specified in AOA as well as Section 259 of the Companies Act. Hence no CG approval is required.

However appointments to be made on 1/8/2011 will take the number of directors beyond the limits fixed in AOA as FIRST REGISTERED (Refer to Section 259 of the Companies Act, 1956). Hence for this appointment CG approval would be required.

Aparupa (none) (21 Points)
Replied 20 August 2013

259. Increase in number of directors to require Government sanction. In the case of a public company or a private company which is a subsidiary of a public company, any increase in the number of its directors, except-

(a) in the case of a company which was in existence on the 21st day of July, 1951 , an increase which was within the permissible maximum under its articles as in force on that date, and

(b) in the case of a company which came or may come into existence after that date, an increase which is within the permissible maximum under its articles as first registered, shall not have any effect unless approved by the Central Government; and shall become void if, and in so far as, it is disapproved by that Government: 1[ Provided that where such. permissible maximum is twelve or less than twelve, no approval of the Central Government shall be required if the increase in the number of its directors does not make the total number of its directors more than twelve.].

In my opinion CG approval is required cause it is clearly mentioned in the bare act that any increase in the number of directors within articles as originally registered provided such increase is 12 or less than 12, no CG approval is required. in the given case, the suggested increase may be within the articles as originally registered but is more 12, hence the exception rule will not apply and CG approval will be required.

My answer is with reference to the original question asked.

Thank You.