Section 255/256

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Querist : Anonymous

Querist : Anonymous (Querist)

08 October 2013 how to comply with Section 255/256 in case of Private Company which is a subsidiary of public Company having 2 directors.

Ajay Mishra

Ajay Mishra (Expert)
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08 October 2013 Hi

No need to comply the provision of section 256 and 255 if your article is silent.

Such provision is applicable only to public company.

So check your company's articles thereon.

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 But said sections are applicable to Private Company which is a subsidiary of a public company.

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Ajay Mishra

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09 October 2013 No it will not applicable.

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Sir i am sure section is applicable to private company which is subsidiary of public company.

my only question is how do i comply in case there are only 2 directors.

Ajay Mishra

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09 October 2013 Yes, sorry for above suggestion.

You will appoint an other director to comply the provision of such sections. to comply the provision of section 255 and 256.

Ajay Mishra

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09 October 2013
Provisions relating to the retirement of directors by rotation:

A company may include suitable provision in the Articles of Association in this regard as follows:—
1. Not less than two-thirds of the total number of directors shall (a) be persons whose period of office is liable to retirement by rotation and (b) save as otherwise expressly provided in the Act, be appointed by the company in general meeting.
2. At every annual general meeting, one-third of the directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then the number nearest to one-third shall retire from office.
3. The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to the agreement among themselves, be determined by lot.

Ajay Mishra

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09 October 2013
Not less then two-third of the total directors shall be liable to retire by rotation:

In a public or a private company, which is a subsidiary of a public company, not less than two-thirds of the total number of directors shall be such whose period of office shall be subject to retirement by rotation.

The duration of office of remaining one-third of the total strength shall be as per the provisions in the Articles. In the absence of any such provision, the said remaining directors shall also be subject to retirement by rotation.
The directors in a private company, in case of default of any provision in the Articles, will also be appointed by the company in its general meeting.

One-third of rotational directors shall retire annually:

In a public company or a private company which is a subsidiary of a public company, at every annual general meeting, one-third of the directors liable to retirement by rotation (namely one-third or two-thirds of the total directors and where there is no provision in the Articles, one-third of the remaining directors who are also subject to retirement) will retire but eligible for re-election.

Fraction if any, may be corrected to the nearest whole number for working out one-third. It is advisable to round off any fraction as one, irrespective of whether the fraction is half or less than half.

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Ajay Mishra

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09 October 2013
Articles may provide for retirement of all the directors every year
The opening part of sub-section (1) of this section, is, "unless the Articles provide for the retirement of all directors at every annual general meeting", therefore, a company is free to incorporate in its Articles, that all the directors of the company would retire at every annual general meeting. The following clarifications given by the Department of Company Affairs are relevant in this behalf:—
"(1) At the first annual general meeting of a public company or a private company which is a subsidiary of a public company held after the first general meeting not less than two-thirds of the total number of directors who have been appointed under the Articles are required to vacate their office. It is, however, open to such a company to provide in its Articles the manner of appointment in and the vacation of office of not more than one-third of its total number of directors.
Not less than two-thirds of the total number of directors of a public company or a private company which is a subsidiary of a public company are liable to retirement by rotation and one-third of the directors who are liable to retirement by rotation are required to retire at every annual general meeting including the first annual general meeting. It is open to such a company to provide in its Articles that all the directors are liable to retirement by rotation or even that all the directors shall retire at every annual general meeting.
(2) It will be in order for all the directors of a company to retire at every annual general meeting if the Articles of the said company provide to that effect and, in such case, each of such director can be regarded as a director retiring by rotation". [Letter No. 8/16/(1)/PR, dated 9th May, 1961]
If it is not incorporated in the Articles, then the rule enacted in the following part of the sub-section, viz., not less than two-thirds of the total number of directors, shall come into operation. The two-thirds of the total number of directors shall be the persons whose period of office is liable to determination by retirement by rotation. [Section 255(1)(a)]

These directors shall, save as otherwise expressly provided in the Act, be appointed by the company in general meeting. [Section 255(1)]

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Thank you for your reply.

but i am still not clear why do i have to appoint additional (extra) director when section 252(2) allows Private Company to have minimum 2 directors.

Ajay Mishra

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09 October 2013 As per section requirement, you will comply the same otherwise you will change the AOA accordingly.

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Sir Changing AOA is out of the question because section any ways will override it.

just i want to know "how private company which is a subsidiary of public company having 2 directors comply with section 255/256."

does retiring 1 director is sufficient.

or it becomes mandatory to appoint 3 directors in such cases?

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