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Appointment of director

sakshi (CS) (261 Points)

11 July 2013

Can a person be appointed as director at the general meeting instead of being appopinted as additional director at the Board Meeting and under which section?

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2 Replies

Rajat Poddar (Qualified CS and CA Finalist) (3355 Points)
Replied 11 July 2013

Section 257 provides for the right of persons other than the retiring directors to stand for directorship, and provides for the machinery for the election of such persons. It enables a person to stand for directorship at any general meeting and not necessarily only at an annual general meeting.

Any director retiring by rotation at an annual general meeting may be re-appointed at that meeting. This simply requires a recommendation by the Board of directors to the members of the company, which can be given by including in the notice of the annual general meeting under 'Ordinary Business' an item proposing the re-appointment of such director. However, the company at the annual general meeting can appoint some other person instead of the retiring director [section 256(3)]. In this case, the provisions of section 257 must be complied with.

Likewise, if a person, who is not a retiring director or who holds the office of director but was not appointed at an annual general meeting, is to be appointed as a director at an annual general meeting, the provisions of section 257 must be complied with.

Thus, the provisions of section 257 must be complied with when a person who is not a retiring director, is to be appointed as a director at any general meeting. The expression "retiring director" means a director retiring by rotation at an annual general meeting pursuant to the provisions of section 256.

Section 257 is not applicable to a private company which is not a subsidiary of a public company.

An essential pre-requisite for a retiring director to be re-appointed as director (whether to fill up the place of the retiring director or otherwise) as laid down in section 257(1), is that the company should have received a notice proposing a person as a candidate for directorship, to be appointed at the annual general meeting. This notice should be given to the company either by the person desiring to get appointed as a director or by any member of the company intending to propose some other person as director. In the former case, the person giving the notice need not be a shareholder of the company. In either case, the notice must reach the company not less than fourteen days before the date of the concerned annual general meeting. The nomination need not be seconded.

The following requisites of section 257 must be complied with:

(1)	The company must receive a notice proposing a person as a candidate for directorship, to be appointed as a director at a general meeting [section 257(1)].
(2)	The notice of candidature can be given either by the candidate himself even if he is not a member of the company or by any member of the company.
(3)	The notice must be in writing and signed by the candidate or the member giving it. If the notice is given by a member, it is advisable to mention the number of shares held and the folio.
(4)	The notice must be given not less than 14 days before the meeting, i.e. 14 days or more. The notice must reach the company at least on the 14th day before the date of the meeting.
(5)	The notice must be left at the office of the company. The notice must be given in the manner stipulated in section 51 of the Companies Act.
(6)	The notice must accompany an amount of Rs. 500, which may be paid in cash or by cheque or demand draft.