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Simple query on Qualification shares

Mukesh Mittal (CA Final) (87 Points)

23 February 2011

As per sec.270

1: "Any provision in the articles of the company shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such. "

My query is simple: If Articles states shorter duration e.g. 30 days the articles becomes Void.

So whether the director needs to obtain the qualification shares or not.

Since the articles becomes void so directors are not required to get any Q.S??

Or he should get Q.S within two months. Please clarify??

thanks.

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1 Replies

abhishek (CA FINAL) (274 Points)
Replied 23 February 2011

Hi Manish!

A very good doubt indeed !the solution is as below :-)

Sec 270(1) reads as follows:

Without prejudice to the restrictions imposed by section 266, it shall be the duty of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director.

It can be noted that the provision says that qualification shares are to be held by directors only if the Articles of the company requires a directors to do so.

Now coming to your doubt,

If the articles provides for a period shorter than 2 months then ,then such time limit for obtaining the qualification shares is void i.e the director is still required by the articles to obtain qualification shares and therefore he has to obtain them,but since the time limit as per articles voilates the Provison of Companies Act,it will be void and the director will be allowed to obtain the same in time limit of 2 months as allowed by Sec 270.

Hope this helps,

God Bless!