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Thursday, January 3, 2008

Appointment of Directors to be Voted on Individually (Sec. 263). Section 263 prescribes the mode of voting on appointment of directors

According to

Section 263, two or more directors cannot be appointed by a single resolution unless a resolution is first unanimously passed that it shall be so made.

However, the following companies are exempted:

(a) a private company which is not a subsidiary of a public company; (b) government company; and

(c) associations not for profit, i.e., Section 25 companies.

3. Appointment of Directors by the Board The rd of Directors may appoint a director:

Ja).-crs an additional director; or

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l (b) to fill a casual vacancy; or

(d as an aitemate director.

(a) Additional Director (See. 260). The Board of Directors are empowered, if so permitted by ArtiCles, to appoint additional directors. As to the number

that may be appointed as additional directors, Section 260 states that in no case the total number of the directors and additional directors together shall

exceed the maxhnum strength fixed for the Board by the Articles.

It may be noted that without-a power given in the Articles, the Board of Directors cannot appoint additional directors. The Section applies o all companies-

public as well as private [Needle Industries (lndill) Ltd. vs. Needle Industries Neway (lndill) Holdings Ltd. AIR 1981 SC 1298]

Is a resolution passed at Board meeting necessary for appointment of additional.

directors?: Unlike in case of filling a casual vacancy which can be done only in a regular meeting of the Board (Section 262), tf}e appointment of additional

directors may be made either at a meeting of the Board or by passing a resolution by circulation as provided in Section 289.

Tenure of Additional Director: As noted above, an additional director is entitled to hold office only up to the date of the next annual general meeting of the

company. But, in case annual general meeting is not held on time, can the stay of the additional director be extended thereby? In Krishna Prasad Pilani v.

Colaba Land and Mills Company [1959] 29 Compo Cas. 273, it was held that a director appointed as an additional director vacates his office, at the latest,

on the last date on which the annual meeting could have been called as required by Section 166, and cannot continue in office thereafter on the ground

that the meeting was not or could not be called within the time prescribed by that Section. The expression “up to the date of the annual general meeting”

means “up to the date when the next Annual General Meeting ought to be held at the latest.”

In Ador-Samill Ud. v.Indocan Engg. Systems Ltd. [1999] 35 CLA 224 (CLB-N. Delhi), it was held that for application of Section 260, time limit fixed under

Section 166 alone is relevant and not that under Section 210.

Powers of Additional Directors. Additional directors will enjoy the same powers and rights as other directors. Through this route, the Board of Directors

can, therefore, appoint competent persons on the Board who may find it difficult to come through election.

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