Directors retire by rotation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 if a public ltd company has three directors then whether it is required to appoint directors retire by rotation in the first annual general meeting, or we can appoint the directors retire by rotation in the annual general meeting after the first annual general meeting, kindly clarify ( Section 255 and Section 256) of the companies act, 1956

CS Ankur Srivastava

CS Ankur Srivastava (Expert)
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24 September 2012 Under section 255 the board must contain atleast 2/3 rotational director i.e. the directors whose tenure shall be determined on the basis of rotation.

Unders section 256 1/3 of above directors shall retire at every AGM.

In case of 3 director at least 2 directors must be rotational director and 1 director will retire at every AGM.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 thanks ankur, plz clarify that it is mandatory to retire by rotation in the first AGM or can be started retire by rotation in the next AGM after first AGM.

as mentioned in section 256 at the first AGM held after the date of general meeting at which first directors are appointed in accordance with section 255 and at every subsequent AGM.

Kindly clarify

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Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

In the absence of any provision regarding appointment of first directors then the subscribers to the Memorandum, who are individuals, shall be the first directors of the company.

The DCA in its Letter No. 8/25(254)/64-PR, dated 19-5-1964 has confirmed that the words "until the directors are duly appointed in accordance with section 255 occurring in section 254" refer to the point of time prior to the appointment of individuals either by the company in general meeting or by person or persons having right to appoint directors by virtue of powers conferred on them by the Articles of Association or the company.

Thus the subscribers to the Memorandum shall cease to be directors of the company when individuals are appointed as directors either by the company in general meeting or by persons in exercise of the powers in that behalf conferred on them by the Articles.

The words "in default of and subject to any regulations in the Articles" occurring in section 254 show that, the subscribers of the Memorandum who are individuals are deemed to be the directors of the company when the Articles do not make any provision for some individuals acting as directors of the company until the appointment of individuals as directors in general meeting or by other persons in accordance with section 255. In other words, if the Articles of Association of the company make provisions for some individuals acting as directors of the company after its incorporation and prior to the appointment of individuals as directors in accordance with section 255, then section 254 is never attracted."

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Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

First directors shall act till the directors are appointed at a general meeting of the company:

When the said directors are named in the Articles or where the subscribers become directors, the said persons will act as directors till the directors are appointed at the first general meeting after incorporation of the company.
After the incorporation of a company, the first directors, who are subject to retirement as above, shall be appointed at the general meeting to be called and held after incorporation irrespective of the manner of their appointment. [Section 255]

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 thanks sir, it means it is required to appoint director retires by rotation in the first AGM if the subscribers of the MOA are directors of the co.

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

No need to regularise the first directors at AGM. Firstly check what your company article says.

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 sir wat about directors retire by rotation

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Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 if the articles says for retire all the directors, then all the dirctors will be reties by rotation otherwise as per section 255 and 256.... am i right sir.

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

Check what your company article says, if it is silent then no need to regularise such directors.

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

Section 255(1) of the Companies Act, 1956 will not apply to private company unless it is subsidiary of public company.

So , the provision that all director liable to retire by rotation will not apply to private company.