Additional Director

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PSETHI (Querist)
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20 November 2008 when a director is called additional director?
How he/she is appointed & terminated in a private company.

Ravikumar.G

Ravikumar.G (Expert)
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20 November 2008 Appointment of additional directors
Where the Articles so authorise, the Board can appoint additional directors, if by such appointment, the total strength of the Board is within the limit fixed by the Articles. The appointment may be made at a Board meeting or by a circular resolution. (Specimen of Board resolution has been given in Appendix 2)

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Ravikumar.G

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20 November 2008 Tenure of additional director
The person so appointed can act as an additional director up to the date of next annual general meeting. This provision is not meant to enable the company to keep on its Board a person as additional director for an indefinite period of time by not holding the annual general meeting. Section 260, therefore, must necessarily be read with section 166 which stipulates that the annual general meeting be held every year and not more than 15 months shall elapse between the date of one AGM and the next. [P. Natarajan v Central Government (2004) 60 CLA 274 (Mad)].
It is open to the Board of directors to appoint additional director if power has been conferred on the Board by the Articles of Association, irrespective of the provisions of section 255, 258, & 259 of the Companies Act. The additional director so co-opted shall hold office only upto the date of the next AGM. The co-option of an additional director in terms of the first proviso to section 260 ceases unless re-appointed on the last day of the next AGM that should have been held. The word 'shall hold office only upto the date of next AGM' mean that such director shall hold office upto the last date on which the next AGM should have been held and not the actual holding of that meeting if it is beyond the statutory period for holding of such meeting.

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Ravikumar.G

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20 November 2008 Position in a private company
If the Articles of a private company so authorise, additional directors can be appointed in a private company. But since the Articles of a private company can regulate the appointment of directors, as stated in section 255, a private company may not have any provision in its Articles.
If a private company adopts Table A, clause 72 thereof regarding appointment of additional director automatically applies to such a company.

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Ravikumar.G

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20 November 2008 Appointment of additional director needs to be appointed as ordinary director at the next annual general meeting:
Since the Board may appoint an additional director to hold office till the date of the next annual general meeting, his appointment needs to be appointed as a normal director by way of an ordinary resolution as a special business at the annual general meeting. (Specimen of resolution at the annual general meeting has been given in Appendix 3)
The provision for an additional director is one which is meant to enable the companies to have the benefit of the services of a person, who otherwise is suitable for serving on the Board, and whose presence in the Board is desirable in the interests of the company till upto the time the next AGM is held. That provision is not meant to enable the company to keep on its Board a person as additional director for an indefinite period of time by not holding the annual general meeting. Section 260, therefore, must necessarily be read with section 166 which stipulates that the AGM be held every year and not more than fifteenth months shall elapse between the date of one AGM and the next. [P. Natranjan v Central Government (2004) 60 CLA 274 (Mad)]. e-Form 32 for change in the designation of director should be filed by the Company electronically to the Registrar within 30 days from the date of general meeting.