In a Public Ltd Company there are 3 Whole Time Directors and 2 Directors.
My query is that as per section 255, not less than 2/3rd of the Board of a Public Ltd company shall consist of rotational Directors.
So as the total strength of the board is 5, 2/3 of them i.e 3.33 or 4 should be rotational, whereas WTD is non-rotational Director and only 2 rotational directors are present.
In this case what is the course of action to be taken and is there any penalty devolving on the company ?
Section 255 and 256 of the Companies Act, deal with rotational directors. The provision of rotation will not apply to WTD so the provision of section 255 and 256 will apply only on balance 2 directors.
So, I will suggest you to select on director out of 2 directors, who will retire this year.
01 October 2012
Yes, whole time directors are not taken for the purpose of section 255 and 256, however, In any case of urgency the rotation director falls short WTD shall be counted as rotational director.
As per my understanding, the above section only says that 1/3rd will be retire on AGM but it not says that the company must have minimum rotational director.
I have a company in which only 3 directors is and out of e 1 is MD but as a practice in last three years i am retiring one by one out of 2 director alternatively, because the section 255 and 256 says the director eligible to retire not saying that minimum number so i follow this practice.
04 October 2012
I agree with Mr. Ankur. That is why i want to find out the future course of action to be taken in order to ensure compliance of the Act.
05 October 2012
Thats what I exactly wanted to know Ajay ji. There is no doubt that only 1 among the 2 directors are liable to retire by rotation.
But out of the total strength of the Board (5 members) only 2 are rotational directors, whereas the Board ought to have not less than 2/3rd of its strength as Rotational Directors.
Hence 2/3*5=3.33 or 4, but in our case only 2. So what would be the suggested future course of action to ensure compliance?
05 October 2012
Dear Friends, the provisions of section 255 and 256 applies to only public companies wherein it is required to have atleast 3 directors and as per section 255 atleast 2 directors must be ROTATIONAL and between those 2 directors 1 will retire at every AGM.
05 October 2012
It is suggested to keep the constitution of the Board as per section 255, either pass Board Resolution and include directors withing the purview of section 255 or appoint new director to be retire by rotation.
CAclubindia
