26 May 2012
In a Pvt. Ltd. Company , out of three part-time directors, two directors resigned on 30th Sept,2011.If the said Company holds a board meeting on 31st Dec.2011 and appoints two more directors,will it be valid? If yes, can the two additional directors names be shown in the Attendance Record of the meeting held on 31.12.2012 as directors or as special invitees.
26 May 2012
Hi, In your case the company can not run officially after 30th September as your company do not fulfill the basic conditions of two directors at any given point of time. So the question of holding additional meeting on 31st December,2011 and appointing another Two director do not arise and it will not be held valid because one director can not appoint any other directors and if any so appointed it will not be held valid. The only remedy available to your company is appointment of the another two directors on or before 30th September,2011 before resignation of other two directors.
Thanks for your kind advice.I had some doubt about the exact legal provision in such a situation.So I raised the qury.After going through your comments, I went through some reference books and got the correct answer which is given below:
Sub: Power to appoint when single director left in office: It has been held in a good number of cases that where the number of directors is reduced to one,the single director can appoint additional directors even though the Companies Act requires that there shall be atleast two/three directors on the company's board.Zimmers Ltd. v. Zimmer(1951)WN 600;Collieries Trust Ltd. v Dover,St. Margret,s & Martin Mill Light Rly Co.,(1914)2 Ch506(CA).
26 May 2012
Dear Vishrut, Further to my clarification on the above matter , given below provisions of regulation 75 of Table A: As per Reg. 75 of Table A, “The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number if reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose.”
Thus, the continuing director has no option but to act for the limited purpose of appointing an individual as director. However, at the same time holding a board meeting to appoint such individual by the continuing director is also not possible. As for a meeting there must be atleast two individuals present in person. So, how this continuing director is supposed to act for the limited purpose as stated in Reg. 75.
26 May 2012
Dear Vishrut, Further to my clarification on the above matter , given below provisions of regulation 75 of Table A: As per Reg. 75 of Table A, “The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number if reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose.”
Thus, the continuing director has no option but to act for the limited purpose of appointing an individual as director. However, at the same time holding a board meeting to appoint such individual by the continuing director is also not possible. As for a meeting there must be atleast two individuals present in person. So, how this continuing director is supposed to act for the limited purpose as stated in Reg. 75.
I completely appreciate your efforts on the subject but the thing is once you cross the minimum no. of directors than the only remedy available is appointment of additional director is through General meeting with special resolution only
I am discussing a situation where the strength of the Board has fallen below the statutory minimum and there are only one Director.Whether in such a situation, the sole Director can appoint Additional Directors.The reply is yes he can do it.For the said purpose pl. go through Regulation 75 of Table A as well as the case laws cited by me above and taken from Ramaiya's Guide to the Companies Act. However, whatever, you have suggested is also one of the remedies,though the resolution should be ordinary and not special.Directors are appointed through ordinary resolution.
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