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Appointment of director

Kevin Makwana (Manager - Accounts&Finance) (130 Points)

30 January 2014

Dearest CAclub colleagues,

Suppose one Private Limited Company receives consent from one person to act as the Director on 20.06.2013 and Company passes the Board Resolution on 22.06.2013.

Now my question is what is the effective date for appointment of that Director?

Can company appoint Directors from the date of consent even if the Board resolution was passed later on, as per above example?

Please write section reference if available with you.

Looking forward to hearing from you very soon.

Thanks CAclubindia for such wonderful knowledge plateform.

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4 Replies

CA Srujann kumar Reddy (Asst Manager(Internal audit)) (1679 Points)
Replied 30 January 2014

Kevin sir,

Appointment of a person as a director other than the retiring director section 257 of the companies act 1956, deals with this

But however this method which has been specified in this particular section will not apply to a private company

Why not applicable?

Because the Kerala High court in the case of Meenakshi Amma Vs sree Rama Vilas Press and Publications Limiteed (1992) case it has been clarified that
" A private company is not bound to ainform its members of the names of the persons who propose to stand for election to the board of directors, As such the entrire section 257 is not applicable for private companies. They will be governed by the provisons in their articles, In the absence of any provisions in the articles, the appointments of new directors shall be made at genereal meetings, but even in such cases, the provisons of section 257 shall not apply"

So he can be appointed if stated in articles

As per the section 264 it says about the appointment validity that means the director has to file his consent to act as director with in 23 days of his appoitnment signed and field with register his consent in writing

But however this section shall not apply to Private company(not being a subsidary)

What is written inarticles shall be considered as valid for the appointment.
So as section 264 is not applicable, refer to articles or go with General meeting to appoint

The effective date of appointment could be the date of date of resolution passed in the General meeting.

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CS Arjun Rajagopal (B.com, ACS) (1056 Points)
Replied 31 January 2014

Dear Kevin,

As per Sec.255 of the Companies Act, 1956 appointment of directors in the case of a Pvt Comp should be made as per the AOA of the Company. If the Articles are silent on this, appointment should me made by passing an ordinary resolution in an EGM.

Appointment is effectieve from the date of passing ordinary resolution .

Regards,

ARJUN RAJAGOPAL

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P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 31 January 2014

Board cannot appoint a person as director with retrospective effect. It is only shareholders who can given their consent, if required, subsequent to appointment of a person as a director by the Board.

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