A public co. has its fixed number of directors in its Article of association as 12. Now the company wants to appoint Mr. Z as an additional director as per section 260. Whether the approval of central govt. would be required in this case or not?If no then what would be procedure to appointMr. Z?
21 Replies
Mitali Agarwal
(Company Secretary)
(638 Points)
Replied 04 June 2010
I think approval of Central Government is required as the increase is beyond AOA & 12.
Please refer Section 259.
Deepak Maharishi
(CS)
(514 Points)
Replied 04 June 2010
Dear Vicky,
Yes. The Approval of Central Government will be required to appoint an additional director when the current strength is already 12.
Please read section 260 "Additional Directors" wherein it is specifically written that "the number of the directors and additional directors together shall not exceed the maximum strength fixed by the Board by the articles."
So approval in your particular case is required.
Regards
Deepak Maharishi
C.A Saurabh Jain
(CA )
(164 Points)
Replied 04 June 2010
Yes...... but in section 260 it is specifically mentioned that ...nothing in section 255,258 or section 259 shall effect any powers conferred on the board of directors to appoint additional directors and since it overrides section 259 there is no provision for which application to central govt. can be made..then how would Mr. Z shall be appointed in such case??
Akhil Gupta
(Manager F&A)
(856 Points)
Replied 04 June 2010
Dear Vicky
May be you are mis-interpretating the concept of Additional Director. Yes, Section 262 overrides the provision of Section 255, 258 and 259 but with exception to the effect that the number of the directors and additional directors together shall not exceef the maximum strenght fixed by the board and also that such additional directors shall hold office only upto the next annual general meeting only.
The main effect of over-riding Ss 255, 258 & 259, is that the Board itself can increase the number of Directors upt the limit fixed by the article however in any other case it requires the passing of resolution at AGM/EGM only. Also such directors are not to be counted for calculating the number of directors retire by rotation.
Here while inter pretating Section 260 harmonious law of interpretation applies.
C.A Saurabh Jain
(CA )
(164 Points)
Replied 04 June 2010
Thanx Mr. Akhil.
so that means by just passing a resolution at the board meeting/EGM, MrZ can be appointed?
Mitali Agarwal
(Company Secretary)
(638 Points)
Replied 04 June 2010
Dear Vicky,
Section 260 says that nothing in section 255,258 or section 259 shall effect any powers conferred on the board of directors to appoint additional directors.
But i think you have not read its provision which is as under:
PROVIDED THAT the total no. of directors including additional director shall not exceed the max. limit fixed by Articles.
Thus, you can not exceed the no. of directors to limit fixed i.e. 12 without the approval of Central Government.
Akhil Gupta
(Manager F&A)
(856 Points)
Replied 04 June 2010
Dear Vicky
In the case given by you, if there is already 12 numbers of directors in the Comapny and if the company needs to appoint Mr. Z as additional Director than the company certainly require the Central Government Approval before doing this.
Otherwise Mr Z can be appoint as an Additional Director just by passing a Board Resolution. No need for Resolution at General Meeting.
The concept of additional director:
In the normal case every company is intended to appoint director by the procedure laid down in the Companies Act so as utilise the full three years of services of such person as Director.
If there is any urgency to appoint Director the Act gives relaxation from the normal procedure by inserting Section 260.
Regards/ Akhil Gupta
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 04 June 2010
| Originally posted by : Mitali Agarwal | ||
 |
Dear Vicky, Section 260 says that nothing in section 255,258 or section 259 shall effect any powers conferred on the board of directors to appoint additional directors. But i think you have not read its provision which is as under: PROVIDED THAT the total no. of directors including additional director shall not exceed the max. limit fixed by Articles. Thus, you can not exceed the no. of directors to limit fixed i.e. 12 without the approval of Central Government. |
 |
For your kind information a proviso can not overrule the provision expressed by the main body of the section.
It is a well settled principle of construction that unless clearly indicated, a proviso would not take away any substantive rights given by the section or sub-section.
Thanks
Prasanth Nair V
(ACA,ACS,CWA Final,Mcom)
(557 Points)
Replied 04 June 2010
If it is already above 12 Director, then appointment of an Additional Director will require Approval of the Central Govt.
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 05 June 2010
Hello,
Kindly appreciate for the appointment of Mr. Z as an Additional Director and as 13th director approval of Central Government is not required for sure. Additional Director is not counted for the purpose of counting total strength of board and section 260 fully overrules section 259.
You are requested to read and interpret first line of section 260 which reads as follows:
Nothing in section 255, 258 or 259 shall affect any power conferred on the Board of directors…..So as per the correct interpretation of this line section 260 is an exception to section 258 and 259.
However before regularizing this additional director in the AGM you have to obtain Central Government approval u/s 259.
As far as proviso to section 260 is concerned I’d humbly like to submit that a proviso cannot overrule the provision expressed by the main body of the section.
Akhil Gupta
(Manager F&A)
(856 Points)
Replied 05 June 2010
Dear Ankur Garg Sir,
I agree to your point with a doubt that, till date (may be I am wrong) I assumes the purpose of inserting a proviso to a Section is to restrict the applicability of the provisions of the effect of that Section.
It is highly appreciated if you please clear my misunderstaing of interpretating the proviso.
Thanx in advance
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 05 June 2010
No dear Akhil you are not wrong in anyway but this is simply a contradiction created by law and as per my discussion with Mr. Deepak Gajrani, (eminent law expert and faculty in Delhi) 6 years back.
But i will refer Rammiya and figure out something and let you know.
Best Regards
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