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Public Limited Co. - Resignation of Directors

SAMRAT GHOSH (Chartered Accountant) (64 Points)

24 April 2011

Can a director resign from a public limited company where there is 3 directors?

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11 Replies

CS Shivi Reddy (COMPANY SECRETARY) (175 Points)
Replied 24 April 2011

dear friend,

As per Sec 252 of the Companies Act, 1956, every pulic company shall have a minimum of 3 Directers. if its directorship is reduced below three then it shall be deemed to be a pvt. ltd. co.

However, the vacancy created by the resignation of the Director can be filled in by appointing some other person as director so that the minimum no. of directorship does not go below 3.

if i am wrong kindly correct.

regards

Shivi

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CA Sandeep Kumar (Audit Assistant) (804 Points)
Replied 24 April 2011

The director will be well aware of the statutory minimum of 3 directors, so before handing over the resignation letter to board, they should appoint an additional director and later on he can resign. This is not the position in law, but only a suggestion.

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Krishna Chandra Mohanta (Company Secretary) (54 Points)
Replied 21 November 2011

As it is a public company it requires minbimum 3nos. of Directors in its Board. So one director can resign from the Board but in the same meeti ng another will appoint as Additional Director to comply the law.

vivekmishra (Service) (233 Points)
Replied 22 November 2011

Dear Friend

The resignation of directors does not tantamounts the Public limited Company to private limited Company since the Company in the meeting where two Directors are present can appoint an additional Director to immune the Company from facing the Company from legal action.

Regards

CS Vivek Mishra

ARUN KUMAR MAITRA (Practicing Company Secretary) (1016 Points)
Replied 01 June 2012

As per decisions of leading cases given in Ramaiya's Guide to Companies Act, even a sole director can appoint additional directors.Thefore ,if out of existing 3 directors in a public ltd. company, 2 of them resignes, the remaing single director can appoint additional directors in such a situation. Regulation 75 of TableA of Schedule I also permits it.Further, the company can fill the vacancy by holding EGM.

C.A. A.K.Maitra

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RAMESH KUMAR SONTHALIA (PROPRIETOR) (24 Points)
Replied 18 December 2012

what are the consequences of reducing the directorship to 2 from 3 in case of limited company.

ARUN KUMAR MAITRA (Practicing Company Secretary) (1016 Points)
Replied 18 December 2012

If the number of directors of a Limited Company falls below the statutory minimum, it must arrange to immediately fill up the vacancy either by holding a Board Meeting or an EGM.Otherwise, it will be a contravention of the provisions of the Companies act,1956.

RAMESH KUMAR SONTHALIA (PROPRIETOR) (24 Points)
Replied 18 December 2012

suppose my client donot fill the vacancy and neither they are interested to do. Is there any penalty if yes then how much. What would be status of that company. kindly elaborate in detail.

CS Amit Kumar (CS) (463 Points)
Replied 19 December 2012

Dear friends,

Note that it is mandatory requirement of the Act hence breach of mandatory requirement is obvious with officer in default.

Further it is Mandatory and consequently any business transacted after the number fell below the minimum directors was held to be invalid , in Re. Alma Shining Co. Source : Ramaiya.

hence i request you to please appoint an addtional director in same meeting and even while fiiling form 32 fill the details of appointee first and below resignee for remove any ambiguity or software problem.

ARUN KUMAR MAITRA (Practicing Company Secretary) (1016 Points)
Replied 19 December 2012

As per Reg. 75 of Table A, “The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number if reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose.” It has been held in a good number of cases that where the number of directors is reduced to one, the single director can appoint additional directors even though the Companies Act requires that there shall be atleast two/three directors on the company's board.Zimmers Ltd. v. Zimmer(1951)WN 600;Collieries Trust Ltd. v Dover,St. Margret,s & Martin Mill Light Rly Co.,(1914)2 Ch506(CA).