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Sec 255 & 256

sakshi (CS) (261 Points)

08 April 2011

Kindly throw some light on section 255 & 256. I am confused.

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CA Sandeep Kumar (Audit Assistant) (804 Points)
Replied 08 April 2011

forget about sections, it can be summarised as follows:

A public limited company should have not less then 2/3rd of total number of directors as Directors who shall retire by rotation. (for example, if there are 12 directors, 8 directors shall be directors who shall retire by rotation every year)

how many should retire? Out of the directors who shall retire by rotation (in this case, 8), 1/3rd of them should retire every AGM, 1/3rd of 8 is 2.66, round it to 3, so in a year 3 directors shall retire by rotation. Thay shall be eligible for re appoinment.

ABove provisions not applicable to private companies.

In short a public company can have only 1/3rd of total number of directors who shall not retire by rotation.

Private company can have all its directors as permanent.

Also, in case of public company, AOA can provide that all directors shall retire by rotation.

In short limit is for permanent directors, no limit for directors retiring by rotation, every director can be made to retire at AGM, but provide for the same in AOA.

I hope i have made the provisions short and simple, there are many other points, which are even more simple. ABove points are main provisions.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 09 April 2011

As per section 255, unless Articles provide otherwise, the Board must have atleast 2/3 directors whose period of office is liable to be determination by rotation.

It means the board must have atleast 2/3 Rotational Directors, it may have more than 2/3rd but 2/3rd must be rotational.

Section 256 says that amount above 2/3rd directors, 1/3rd must be retiere at every AGM. The directors retiering must be longest in the office amoung such rotational directors.

Shridhi Jain (Company Secretary) (1678 Points)
Replied 09 April 2011

Suppose if there are 9 directors in a company then 2/3rd i.e 9 x 2/3 = 6 are liable to retire by rotation. It means 6 directors can be retired at the time of AGM.

But its not compulsory to retire all the 6 directors. Only 1/3rd of directors liable to retire by rotation should compulsorily retire i.e. 6 x 1/3 = 2.

It means you have to mandatory retire at least 2 directors by rotation in AGM, who can be re-appointed again in the same AGM.