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Director retire by rotation as per section 152 of ca 2013

jaydip patel (company secretary) (30 Points)

05 June 2014

In our company there are five directors (Two Managing Directors and Three Indpendent Directors). as per MD agreement and AOA, managing directors are non rotational. As per new Companies Act, 2013 independent directors are also non rotational then in our case who is going to retire in next AGM.

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23 Replies

RoHaN k (CA & CS) (308 Points)
Replied 05 June 2014

I think its not necessary to be retired by rotation ,

Though MD is not allowed , but If necessary , if required, MD can retire and reappoint in single resolution.

Dipendra Prasad Poudel (Article Assistant ( Internal Audit) ) (578 Points)
Replied 05 June 2014

Please refer to section 152 of Companies Act 2013. I hope sub section (d) will help you to know the retirement of director. I am also supposing that your company is public limited company. In case it is private then compulsory retirement is not applicable (own understanding, please refer to expert before using it)

(6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company
shall—
(i) be persons whose period of office is liable to determination by retirement of directors by rotation; and
(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

personal views : it means that unless the article provide retirement of all the directors atleast 2/3 number of directors of a public company shall be persons whose period of office is liable to determination by retirement of directors by rotation.

(b) The remaining directors in the case of any such company shall, in default of, and
subject to any regulations in the articles of the company, also be appointed by the company
in general meeting.

(c) At the first annual general meeting of a public company held next after the date of
the general meeting at which the first directors are appointed in accordance with clauses (a)
and (b) and at every subsequent annual general meeting, one-third of such of the directors
for the time being as are liable to retire by rotation, or if their number is neither three nor a
multiple of three, then, the number nearest to one-third, shall retire from office.

(d) The directors to retire by rotation at every annual general meeting shall be those
who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

Explanation.—For the purposes of this sub-section, “total number of directors” shall
not include independent directors, whether appointed under this Act or any other law for the
time being in force, on the Board of a company.

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Regards

Dipendra Prasad Poudel

TULIKA AGARWAL (Self employed) (80 Points)
Replied 05 June 2014

But in many cases specially in a closely held public limited all the family members (say 4) are directors and for want of remuneration they become WTD directors. Now should the retirement by rotation amongst these directors is a proper compliance of law?

Dipendra Prasad Poudel (Article Assistant ( Internal Audit) ) (578 Points)
Replied 05 June 2014

As per my understanding retirement is compulsion but they can be re-appointed but they should be voted individually (section 162). At a general meeting of a company, a motion for the appointment of two or more person as a directors of the company by a single resolution shall not be moved unless a proposal to move such a motion has first been agreed at the meeting without any vote being cast against it.

I hope it will be useful to you Tulika Agarwal.

Please take consent of expert as far as possible.

Regards

Dipendra Prasad Poudel

TULIKA AGARWAL (Self employed) (80 Points)
Replied 05 June 2014

My concern is more for a constitution of this kind of board where all the directors are WTD. Is that okay?

Dipendra Prasad Poudel (Article Assistant ( Internal Audit) ) (578 Points)
Replied 05 June 2014

I think there is no problem. But there are certain limitation regarding payment of managerial remuneration in case of inadequate profit (section 197) and in certain cases CG can also interfeare.

I am not sure about this point but i liked your doubt @ tulkit

regards

Dipendra Prasad Poudel

Dipendra Prasad Poudel (Article Assistant ( Internal Audit) ) (578 Points)
Replied 05 June 2014

sorry for misspelling your name @ Tulika Agarwal

TULIKA AGARWAL (Self employed) (80 Points)
Replied 05 June 2014

Thanks for your input Dipendra!

This indeed is a case of a company with inadequate profits. Since March '14 we were following schedule XIII of CA'56 and ofcourse being a closely held company all the directors wants maximum remuneration and it is really difficult to manage. But last year one of the MCA circular had mentioned to treat 'closely held public limited companies' as good as 'private limited' for the purpose of managerial remuneration. Not sure how much that circular stands today. If u hv any idea please let me know.

Best Regards,

2 Like

Ashish Peety (Bikaner) (88 Points)
Replied 04 November 2014

In this case, no one shall retire by rotation. According to language of provision, "if there is no prov. In article, at least 2/3 of total no. Of directors (exc. ID) shall be....

Rajni (Internal Audit Assistant) (22 Points)
Replied 01 July 2015

Are these provisions applicable on a private company which is subsidiary of a public company?

vibhu gautam (student) (48 Points)
Replied 31 October 2015

Who shall retire by rotation if all the Directors are Additional Directors and are required to be regularized in the coming Annual General Meeting?

bal krishna jha (ca) (21 Points)
Replied 31 December 2015

practically, any company can follow the section 152 of company act 2013 ( because same director is appointed as a director who are retire by rotation ) ?