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Retirement by rotation

CS Pravin (Asst Manager Secretarial) (62 Points)

20 May 2013

Whether additional directors will be counted for considering the 2/3 limit of directors laible to retire by rotation.

e.g

There are 6 directors on the Board, 1 being a MD.

Out of other 5, there are 2 additional directors who will be holding office upto coming AGM.

How many directors ( being 1/3 of such directors liable to retire by rotatoion ) should be retiring in the forthcoming AGM?

Whether Add Director will be considered while considering the retirement by rotation?

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20 Replies

Sneha (Company Secretary) (1594 Points)
Replied 20 May 2013

According to my perception,

As additional director hold office upto the date of AGM, he cant be counted for calculation of retirement by rotation.

Further those 2 additional director can be regularized at the said AGM or resign from the post of directorship.

In this case, out of 3 directors 2/3^rd retire by rotation i.e. 2 directors and 1/3^rd actually retires i.e. 1 director.

1 Like

CS Pravin (Asst Manager Secretarial) (62 Points)
Replied 20 May 2013

Ms Sneha,

Thank you for your reply.

I am of the opinion that both sections i.e. Section 255 & 256 should be seen independently.

Section 255 states that 2/3 of the total directors should be liable to retire by rotation.

so 2/3 of 6 directors (total strength of the Board) 4 directors are liable to retire by rotation.

in this case only 1 director is not subject to retirement by rotation being a MD.

So section 255 is complied with.

Now Section 256 states that 1/3 of these 2/3 should actually retire by rotation in the AGM.

So 1/3 of 5 that is 2 directors will be retiring by rotation in the coming AGM apart from those 2 add directors who will vacate their office as additional directors and will seek reappointment as director.

Pl let me know if you have a different opinion.

Thanks

Pravin Satardekar

Sneha (Company Secretary) (1594 Points)
Replied 20 May 2013

I have already written my opinion. Wait for others to reply.

CA Ashish Pathak (Employed at Cipla Ltd.) (2779 Points)
Replied 20 May 2013

Hi Pravin and Sneha,

Section 260 of the act (which covers provisions regarding Additional Directors) overrides Section 255 (Rotational directors)

So For the purpose of Section 255, Additional Directors shall not be included in 'total number of directors')

Additional Directors will not be considered for section255 and hence also for section256.

In your example, "Total Number of Directors" for the purpose of section 255 is 4 (i.e excluding 2 Additional Directors)

Now atleast 2/3rd of these 4 has to be Rotational Directors (Sec 255). So 2/3rd of 4 i.e 3 directors should be rotational.

Now at AGM 1/3rd of these 3 should retire i.e 1 director should retire at AGM.

Hope this settles your queries. Further queries in this regard are still most welcome.

Best Regards

Ashish Pathak

CS Pravin (Asst Manager Secretarial) (62 Points)
Replied 20 May 2013

Thank you Ashish!

Dipak Soni (Trainee) (111 Points)
Replied 20 May 2013

------> Out of 6 Directors.... Managing Director and Additional directors are not counted for retire by rotation.

------> Both the Additional Directors will vacate the office in the coming AGM.

------> Therefore no. of director retire by rotation is 3*2/3rd i.e 2

-------> Director acctually retires in the coming AGM is 2*1/3rd i.e 1

Director retire in the coming AGM 1 Director

Director who will vacate office = 2 Additional Directors

CS Pravin (Asst Manager Secretarial) (62 Points)
Replied 20 May 2013

Dear Mr Dipak,

Thank you for sharing your views.

Though the final answer is coming to 1 director retiring by roation is same as suggested by Mr Ashish, the principle applied by you is different.

In your case, you have excluded the MD from the total strength of the Board.

How one can arrive at a total strength of the Board if the WTD are also excluded from the calculaion?

As per the Explanations given in Ramaiya, only Govt Directors & Nominee Directors are excluded for the puspose of calulation of total strength of the Board as contmplated in section 255.

Kindly discuss!

Sneha (Company Secretary) (1594 Points)
Replied 20 May 2013

Check the Articles of the Company. MD/WTD is appointed for a fixed term. They are not required to retire by rotation

1 Like

Dipak Soni (Trainee) (111 Points)
Replied 20 May 2013

Pravin Satardekar

I agree with Ms Sneha Bianani

MD/WTD is appointed for a fixed term ( Max of 5 years)

They are not required to retire by rotation

CS Pravin (Asst Manager Secretarial) (62 Points)
Replied 20 May 2013

I do agree.

MD is not laible to retire by rotation.

My doubt is whether he will be considered for counting the total strength od the Board?

In this case whether the total strength will be

3 Directors + 1 MD = 4 directors

2/3 of these 4 that is 3 will be laible to retire by rotation .....section 255

Section 256

1/3 of these 3 i.e. 1 will actually retire by rotation???

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 20 May 2013

Additional director or MD or WTD will be counted for the purpose of section 255 and 256.

Further, you are requested to go through the link given below for the removal of all your doubts:

/forum/retire-by-rotation-205200.asp

Thanks

Ankur

1 Like

Dipak Soni (Trainee) (111 Points)
Replied 20 May 2013

No. MD will not considered for counting the total strength of the Board

Dipak Soni (Trainee) (111 Points)
Replied 20 May 2013

Ankur Sir plz tell

There are 6 directors on the Board, 2 being MD. How many directors ( being 1/3 of such directors liable to retire by rotatoion ) should be retiring in the forthcoming AGM?

From your point of view its 2 ?

Sneha (Company Secretary) (1594 Points)
Replied 20 May 2013

Ankur sir, thank you so much for your clarification on the same. The link has really made the whole provision crystal clear. I always look up to your replies for clearing my doubts.