Page 290 - DMGT407Corporate and Business Laws

Unit 12: Management of Companies

remaining directors in (ii) and (iii) and the directors generally of a pure private company, Notes
unless otherwise provided in the Articles, must also be appointed by the company in
general meeting.
Thus, every company should have a duly constituted Board appointed in accordance with
the provisions of s.255. A general meeting is called by the ‘first’ directors after the allotment
of shares in the case of a company limited by shares and in the case of any other company,
after its incorporation, for the specific purpose of appointment of directors.

Appointment in General Meeting. Section 256 provides that at the first AGM after the general
meeting at which the first directors are appointed in accordance with s.255, the number
nearest to one-third of the directors liable to retire by rotation must retire from office. The
rotation for retirement shall be determined by the length of office of directors, or in case
all were appointed on the same day, by lot. At every subsequent AGM, one-third of the
directors must retire. This is known as retirement by rotation. The retiring directors are,
however, eligible for re-election.
Deemed Reappointment of a Retiring Director. Section 256 also provides for automatic
reappointment of directors in certain cases. The company may fill the vacancy caused by
the retirement of a director at the AGM by appointment of the same person or someone
else, or decide not to fill the vacancy. If the vacancy is not filled up and the company has
not expressly decided not to fill it up, the meeting shall stand adjourned till the same day
in the next week, at the same time and place and if at that meeting also the vacancy is not
filled up and that meeting also does not decide not to fill it up, the retiring director shall
be deemed to have been elected at the adjourned meeting except where: (i) at that meeting
or at the previous meeting a resolution for the reappointment of such director had been
put to vote but was lost; or (ii) the retiring director has, in writing, expressed his
unwillingness to continue; or (iii) he has been rendered disqualified; or (iv) a special or
ordinary resolution is necessary for his appointment by virtue of any provisions of this
Act; or (v) it is resolved not to fill the vacancy.
In respect of an independent private company s.256 does not provide for retirement of any
director periodically. Therefore, in the absence of any provisions in the Articles, directors
are entitled to continue until removed under s.284 [S. Labh Singh v. Panaser Mech. Works
(P) Ltd. (1987)].
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, 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 by 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.
Section 263 prescribes the mode of voting on appointment of directors. No motion can be
made at a general meeting of a public company or a private company which is a subsidiary
of a public company for the appointment of two or more persons as directors by a single

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