Page 291 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes resolution, unless a resolution is first unanimously passed that it shall be so made. Any
resolution moved in contravention of this provision shall be void.
Appointment by Board of Directors. The Board of Directors can exercise the power to appoint
directors in the following three cases: (i) Additional directors (s.260). (ii) Filling up the
casual vacancies (s.262). (iii) Alternate directors (s.313).

If the Articles authorise, the Board may appoint additional directors. Such additional
directors together with the directors constituting the Board should not exceed the maximum
number fixed by the Articles. Also, the additional directors are entitled to hold office only
up to the date of the next AGM of the company (s.260).
Section 262 empowers the Board to fill casual vacancies in the case of a public company or
a private company which is subsidiary of a public company. Thus, if the office of any
directors appointed by the company in general meeting is vacated before his term of
office expires in the normal course, the resulting casual vacancy, may, subject to any
regulations in the Articles of the company, be filled by the Board of Directors at a meeting
of the board. Any person so appointed shall hold office only up to the date to which the
original director would have continued if it had not been vacated.

By virtue of s.313, alternate director, in place of a director who is absent from the State in
which Board meetings are held for not less than three months, may be appointed by the
Board, if so authorised by the Articles or by a resolution passed by the company in general
meeting. The alternate director shall not hold office for a period longer than that permissible
to original director and shall vacate office when the original director returns to such State.
Also, if the term of office of the original director is determined before he so returns, any
provision for the automatic reappointment (under s.256) of retiring directors in default of
another appointment shall apply to the original director and not to the alternate director.
The Articles of a company may authorise a director to appoint by will or otherwise his
successor in office. This appointment is not hit by s.312 which prohibits assignment of
office by director.

Appointment by Central Government. Section 408 empowers the Central Government to appoint
directors on the Board of a company on the recommendation of Tribunal that it is necessary
to appoint government directors to effectively safeguard the interests of the company or its
shareholders or the public interest. On the application of not less than 100 members of the
company or of members holding not less than one-tenth of the total voting power therein,
the Company Law Board may, if satisfied after making any inquiry it deems fit that it is
necessary to prevent oppression and mismanagement and that the affairs of the company
are being carried on in a manner which is prejudicial to the interest of the members or the
company or the public, direct the appointment of as many persons (whether members of the
company or not) as directors as it thinks fit to hold office for such period not exceeding three
years on any one occasion. The Company Law Board, however, instead of passing the above
order direct the company to alter its Articles so as to arrange for the election of its directors
on the principle of a proportional representation under S.265.
A person appointed by the Central Government in pursuance of the above provisions
shall not be: (a) considered for the purpose of reckoning 2/3rds or any other proportion of
the total number of directors of the company [s.408(3)]; (b) required to hold qualification
shares [s.408(4)]; (c) required to retire by rotation [s.408(4)]; and (d) required to file written
consent with the company under s.264(1).
The Central Government may remove any such director from his office at any time and
appoint another person to hold office in his place the provisions of this section are applicable
to both public and private companies.

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