Page 171 - DCOM106_COMPANY_LAW

Company Law

Notes A Director of a private company is appointed as its managing director on a monthly salary of
10,000. There is an objection to this on the ground that a director cannot be appointed to an
office of profit. Advise.

10.11 Retirement of Director

The directors due to retire by rotation vacate office at the latest on the last day on which an
annual general meeting could have been held under s. 166, and therefore, if this meeting is not
held, the directors cannot claim to continue after the date on which the meeting should have
been held. The reasons for not allowing directors to continue after the date on which the AGM
should have been held is that as it is the duty of the directors to call the AGM within the
prescribed time, they cannot be allowed to take advantage of their own default and by that
means to continue in office for the extended period [B.R. Kundra v. Motion Pictures Assn. (1976)
46 Comp Cas. 339 Del].
10.12 Appointment of a Director other than a Retiring Director

Section 257 provides for the procedure of appointment of a person other than the retiring
director. If any person, (whether a member of the company or not) other than the retiring
director wishes to stand for directorship, he must signify his intention to do so by giving
14 days’ notice to the company before the meeting and the company must inform the members
not later than seven days before the meeting either by individual notices or by advertisement of
this fact in at least two newspapers circulating in the place where its registered office is situated,
of which one must be in English and the other in the regional language of the place. Also, the
candidate or the member who intends to propose him as director has to deposit a sum or 500
which shall be refunded to such person or as the case may be, to such other member, if the
candidate succeeds in being elected. In case such person is not elected as director, he or the
member, as the case may be, will not be entitled to the refund of 500 and the amount deposited
shall stand forfeited to the company. Also s.264 requires every person proposed as a candidate
for the office of a director to sign and file first with the company his consent to act as a director,
if appointed and then with registrar within 30 days of his appointment.

Example: The BOD of XYZ Ltd. appoints Mr. A as a director in the vacancy caused by
resignation of Mr. B. Now at the ensuing AGM, Mr. A is to vacate his office. The company is
contemplating to reappoint him as a director, treating him as a retiring director.
The company cannot treat A as a retiring director under s. 257. Therefore, he cannot be deemed
to have been reappointed. The procedure given in s. 257 will have to be followed for his
appointment.

10.13 Power and Fiduciary Duties

10.13.1 Powers of the Board of Directors

Section 291 provides for general powers of the Board of directors.
“Subject to the provisions of the Act, the Board of directors of a company shall be entitled to
exercise all such powers and to do all such acts and things, as the company is authorised to
exercise and do”

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