Appointment of Directors by the Central Government

The Central Government has been empowered to appoint directors on, an order passed by the Company Law Board. The Company Law Board may so

order either on a reference by the Central Government or on the application of not less than 100 members of the company or of members holding not less

than l/lOth of the total voting power. Such appointments shall be so ordered by the Company Law Board where it finds that the affairs

of the company have been conducted in a manner oppressive to any member of the’ company or in a manner prejudicial to the interests of the company

or to public interest. Such a director may be appointed for any term but not exceeding three years.

The Central Government may remove any such director from his office at any time and appoint another person to hold office in his place ISec. 408(4)].

In lieu of passing an order as aforesaid, the Company Law Board may direct the company to amend its Articles so as to provide for election of directors by

the system of proportional representation. It may also direct that until new directors are appointed in pursuance of order aforesaid, such number of

persons, as it may specify as being necessary to effectively safeguard the interest of the company / shareholders or public interest, shall hold office as

additional directors of the company [Sec. 408 (2)].

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 [Sec. 408(3)],

(b) required to hold qualification shares [Sec. 408(4)], and

(c) required to retire by rotation [Sec. 408(4)].

The provisions of this Section are applicable to both public and private companies.

4. State the circumstances under which a director retiring at an AGM shall be deemed to have been reappointed even though no such appointment was

made.

fC.A. (Final) November, 1986J