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 appoint Mr. Z?
6 Replies
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 04 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.
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.
Best Regards
C.A Saurabh Jain
(CA )
(164 Points)
Replied 04 June 2010
Thank you Sir for your repply..
But section 260 also provides that the number of directors and additional directors togather shall not exceed the maximum strengh fixed by its articles,now since the maximum strength is 12 as per the articles whatwould be the procedure to appoint Mr Z?
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?
Akhil Gupta
(Manager F&A)
(856 Points)
Replied 04 June 2010
Dear Vicky
In the case give 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
Akhil Gupta
(Manager F&A)
(856 Points)
Replied 04 June 2010
Dear Vicky
In the case give 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
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