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Retire by rotation

Khushboo Maheshwari (Company Secretary) (548 Points)

07 June 2012

If a company is having 7 directors n one of them is MD and he is not liable to retire by rotation....how many directors will retire by rotation in one AGM...two or one??

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36 Replies

Raj Kumar (Student) (102 Points)
Replied 07 June 2012

1/3rd of rotational dirctrs shall liable to retire at every AGM , in ur case 1/3rd of 6 is 2 so 2 rotational directrs shall liable to retire[sec.256(1)]

shrinath (CS Final and CA Fina) (65 Points)
Replied 07 June 2012

in this case only two director require to retire by rotation

ashish gupta (Teaching for CA CS Students ) (281 Points)
Replied 07 June 2012

Agree with Sheen..

CA Srujann kumar Reddy (Asst Manager(Internal audit)) (1679 Points)
Replied 08 June 2012

kushboo jii,

YOUR QUERY WAS NOT CLEAR AS BECAUSE YOU HAVE NOT SAID WHETHER IT IS PUBLIC COMPANY OR PRIVATE LIMITED COMPANY

Following are the provisions relating to PUBLIC COMPANY

i agree with raj kumar and i want to include some more points in that which are,

As per section 256(1) classification of rotational or non rotational is give and the appointment of any director who is not a director listed in the MOA or AOA and also a director who is not a director u/s 260 or 313 or 252or 283, for all of them 257 is the common route to get into the company as a director.

as per query given by you among the seven directors one of them is MD who is not retired by rotation( May be after the completing 5 yrs of period) and among the remaining directors you need to check out how many of them are interested as per section 297,299 so then such director s who are so intereseted as per sec300 they cannot be COUNTED FOR THE PURPOSE OF QUORUM even if they are present and Such director are not valid to show their VOTE, Even if they VOTED such vote shall become VOID and shall not be counted"

Then if interested directors are 2/3rds of the total directors then as per the section 287(2), total quorum must be 1/3rd of the total directors who are not interested or minimum 2 can be quorum as per the provisions of the companies act,India, 1956.

FOR Private LIMITED COMPANY

all the provisions of sec 299 and 300 shall not apply with which there will be no concept of interested directors so the quorum shall be only 1/3rds of the total directors, is sufficient to fullfill the purpose of sec 287.

FOR SEC 25 companies

1/4th of quorum or 5 directors which ever is more enough to form the quorum for sec 25 companies

Parashar (Company Secretary 2004) (1013 Points)
Replied 08 June 2012

Before encforcing the provisions of Section 256 the provisions of section 255 must be read carefully. Sec 255 says 2/3 of the total directors shall be subject to retire by rotation, then 1/3 of such directors shall retire at each AGM, UNLESS the Articles of Association requires all the directors to retire at the AGM. In such case only 1 director shall retire. Experts correct me if I am wrong.

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(Guest)

In a public company, at every annual general meeting, one-third of the directors liable to retirement by rotation will retire but eligible for re-election.

Hence in your case 2 directors will retire in AGM (being 1/3 of 6)

Regards

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 08 June 2012

Originally posted by : Khushboo Maheshwari
	If a company is having 7 directors n one of them is MD and he is not liable to retire by rotation....how many directors will retire by rotation in one AGM...two or one??

Hi,

Please find below the reply.

In your case the total strength of the board is 7 which includes 1 non rotational director i.e. your MD.

For the purpose of section-255 total strength of the board would be 7.

Determination of rotational directors u/s 255

Rotational directors in your case would be 2/3 of 7 i.e. 4.67 directors. Here as per section 255 rotational directors would be 5. Remaining 2 will be considered as non- rotational directors and includes your MD.

4.67 will be converted into 5 because of phrase “not less than 2/3” used in section 255.

Determination of Directors liable to retire u/s 256

As per section 256 ---1/3 of rotational directors shall retire at each AGM. Hence 1/3 of 5 would be 1.67.

As per the language of 256 “nearest to 1/3” we can rounded off 1.67 as 2. (As nearest to 1.67 will be 2).

Now in your AGM you have to retire only 2 directors as rotational director.

I hope the calculation method is clear.

Regards

Ankur Garg

5 Like

Akash Jain (CA Final Student) (261 Points)
Replied 08 June 2012

Two Directors liable to retire by rotation in ur case..

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 08 June 2012

Dear Khushboo,

Under Section 255 every company must have atleast 2/3rd rotational directors.

Secondly section 256 says that 1/3rd of rotational director must retire at every AGM.

Therefore, in your case the strength of Board is 7

Rotational Directors = 7*2/3= 5 Directors

At AGM 1/3rd of above rotational director must retire therefore 5*1/3= 2 directors must retire at every AGM.

2 directors must retire at every AGM.

Must say the method of calculation is nicely explained by Ankur ji....

6 Like

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 08 June 2012

Note: The Board may have more than Rotational Director. It means Non Rotational Directors may be less than 1/3rd of the Board.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 08 June 2012

Originally posted by : CS Ankur Srivastava
	Must say the method of calculation is nicely explained by Ankur ji....

Thanks Ankur Ji for the appreciation.

My motive is to ensure the reach of right calculations/Interpretations/Internal corporate working and practice to the maximum number of students and professionals through Caclubindia by selecting the right post/topic.

Thanks once again.

Ankur

1 Like

(Guest)

Hi Ankur Sir/s,

Thanks for nice explanation.

But unfortunately I am not very clear about calculation explained. Pls clear my doubt.

Section 255 says that :

In 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.

So in this case directors subject to retire by rotation shall be 6 since MD is non rotational director.

Section 256 says :

Atleast 1/3rd of directors who are subject to retire by rotation shall retire in every AGM.

Hence 1/3rd will be calculated for 6 since 6 directors are subject to retire by rotation as per section 155.

I trust I am able to portray my query legibly.

Looking forward for your interpretation eagerly.

Sincerely,

Neha

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 08 June 2012

Originally posted by : Neha Jain
	But unfortunately I am not very clear about calculation explained. Pls clear my doubt.

I was expecting some sort of discussion…

Anyways let me give you the one liner which is missing or rather confusing you.

“MD is not a non-rotational director by law and a part of total number of directors, hence considered in calculating the portion of 2/3 i.e. director liable to retire by rotation.”

Explanation: We all know there is a reserve space of 1/3 in section 255 for non-rotational director after determining 2/3. So generally the perception/conviction in our mind is MD is a non-rotational director by law and by the time we appointed him and give him the status of non-rotational director via appointment resolution itself.

But his non-rotational status in not inherent and our perception/urge for using that 1/3 reserved space in section 255 for non-rotational director does not mean that we should not consider him in total number of directors required to calculate 2/3 in section 255.

So as per the best practice follow the steps given in section 255 and 256 and as depicted in my calculation. First calculate 2/3 by considering the entire strength of board and then put the safe directors in 1/3 bracket. This 1/3 bracket may contain MD, WTD, and directors appointed by statutory authorities.

Hope the picture is clear now.

Regards