Directors liable to retire by rotation
This query is : Resolved
01 October 2012
Dear Experts,
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 ?
Thank you,
With regards,
Sathyan Avinash
e-mail id: sathyanavinash@gmail.com
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 ?
Thank you,
With regards,
Sathyan Avinash
e-mail id: sathyanavinash@gmail.com
01 October 2012
Hi
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.
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.
01 October 2012
Dear Experts,
Thank you for the early reply.
But from my query it is clear that the Board consists of only 2 rotational directors, which is below the required 2/3rd as envisaged in section 255.
Hence what is the course of action to be taken to ensure compliance of the act.
One more information, for the past 2 years only the Directors (not the WTD) have retired by rotation and being eligible got re-appointed as Directors.
Kindly enlighten me in such a situation.
Thank you,
With regards,
Sathyan Avinash
e-mail id: sathyanavinash@gmail.com
Thank you for the early reply.
But from my query it is clear that the Board consists of only 2 rotational directors, which is below the required 2/3rd as envisaged in section 255.
Hence what is the course of action to be taken to ensure compliance of the act.
One more information, for the past 2 years only the Directors (not the WTD) have retired by rotation and being eligible got re-appointed as Directors.
Kindly enlighten me in such a situation.
Thank you,
With regards,
Sathyan Avinash
e-mail id: sathyanavinash@gmail.com
02 October 2012
Hi
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.
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
Ajay ji,
But we have also to comply section 255 as well and keep the board according to it.
But we have also to comply section 255 as well and keep the board according to it.
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.
Kindly advice the suitable course of action.
Kindly advice the suitable course of action.
05 October 2012
Hi
If the Board have only 2 rotational director then if you apply section 255 then how many director will be liable to retire by rotation ?
If the Board have only 2 rotational director then if you apply section 255 then how many director will be liable to retire by rotation ?
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?
Should we advice to appoint 2 more Directors ?
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?
Should we advice to appoint 2 more Directors ?
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.
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