Section 2(34) provides, director means a director appointed to the board of the company.
The said definition seems as a reference only so let’s understand the meaning of board.
The Companies Act define the board in Section 2(10) which provides that “Board of Directors or Board”, in relation to a company means the collective body of the directors of the company.
In a layman language,
A board of directors is a group of individuals who are elected by the shareholders to represent them and they jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency.
Taking an example of a Company, since company being an artificial person ca n’t manage the business and other, day to day operation by its own. Thus Board comes into the picture.
Legal Background of Rotational Director-
NOTE - BEFORE WE PROCEED, IT IS IMPORTANT TO KNOW THAT THERE IS NO CONCEPT OF ROTATIONAL DIRECTOR IN PRIVATE COMPANY EXCEPT IF ARTICLE (AOA) PROVIDES.
Section 152(6)(a) of the Companies Act 2013 states that unless the article provides for the retirement of ALL directors at every annual general meeting, not less than 2/3rd of the total number of director of a public company shall -
(i) be persons whose period of office is liable to determination by retirement of directors by rotation; and
(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.Analysis
This sub-clause is refering to the provision of section 2(87), i.e, Holding company controls the composition of Board of directors of its subsidiary company. Thus in a simple language, this sub-clause provides an exception that such 2/3rd can be appointed to board other than the way of General Meeting
Analysis
This clause provides that such 1/3 directors are appointed by articles of the company and if Article of the company is silent about appointment then such 1/3rd directors shall also be appointed in general meeting.
(c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) of section 152(6) and at every subsequent annual general meeting,
one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
(d) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing( by ordinary resolution) the retiring director or some other person thereto.NOTE- Independent Directors shall not be counted in the total number of directors.
Analysis
Important Point
* The rotational directors are liable to retire even if the AGM is not held, on the last day on which AGM was required to be held. ( BM KUNDRA V. MOTION PICTURES LTD )
The answer is NO because the article can provide retirement of ALL the director, hence in our case article may provide that all the 7 directors shall be required to retire at AGM.
[one can refer the first para of section 152(6)]
NOTE- WHEN ARTICLE PROVIDE FOR RETIREMENT OF ALL THE DIRECTORS AND THE AGM WAS NOT HELD, NONE OF THE DIRECTOR WILL RETIRE. ( In Re: Incab Industries Ltd.)
ABOUT THE AUTHOR
Aakarshit Jai: Commerce Graduate and Company Secretary .
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.
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