Requirement of Special Resolution for reappointment of Director

[CS VIJAY L VYAS]

Is it necessary to pass a Special Resolution at every reappointment of a person above the age of 75 years as a Non Executive Director or it is required only once when he completes 75 years? 

[Ashutosh Shukla]

Hello Vijay Sir, 

You have not specified if the non-executive director you are talking about is an independent director or someone else. Nevertheless, while no specific provisions appear to be given either in the Companies Act 2013 or the SEBI (LODR) 2015 in relation to your issue, I can still hold that a special resolution shall be required in your case based on the doctrine of harmonious construction of the provisions of a) Regulation 17(1a) and 17(1c) of the SEBI (LODR) Regulations 2015 and b) Section 149(10) of the Companies Act 2013. Starting with Regulation 17(1a) which expressly states that an SR shall be required where the maximum age limit is being breached at the time of appointment, it would be absurd to hold that an SR would not be required in the case of reappointment, which is nothing but an appointment of the NED for a fresh term. Moreover, since it is expressly required by Regulation 17(1A) to pass an SR; unless an express provision to the contrary exists, it appears contrary to the law to say that an SR would not be required in the case of reappointment. Further, based on Regulation 17(1C) of the SEBI (LODR) 2015, the appointment or reappointment of a “person” on the “board of directors” (among others) shall be approved in the next general meeting or within a time period of three months from the date of appointment, whichever is earlier. 

Please note that the term "appointment" under Regulation 17(1C) of the SEBI (LODR) 2015 has been used to indicate both appointment and reappointment. Regulation 17(1c) cannot be interpreted radically differently from Regulation 17(1A) in relation to the appointment, reappointment, or seeking approval thereof given both these provisions are part of the same regulation dealing with the same set of corporate activities. Now, coming to Section 149(10) of the Companies Act 2013, the reappointment of an independent director post the completion of his first term of five consecutive years is already subject to an SR. Since an independent director is also regarded as a NED, I stretch its applicability to your case as well because SEBI regulations do not override the Companies Act 2013 unless provided otherwise in the act itself. Although Section 149(10) specifically deals with reappointment for a second term, please note that it is also going to be a reappointment perhaps for the second term in your case. Thus, if you are already required to pass an SR for the second term, I do not see any reason why a second resolution cannot be moved for the age constraint. 

Hope it helps! 

Other learned members are welcome to share their views as well.

Thanks and Regards,

CS Ashutosh Shukla

[CS VIJAY L VYAS]

Dear Shukla ji, 

Thanks for your response. I may clarify as follows. 

The Director is a NED/ Non Independent Director for more than 15 years and a Special Resolution was passed when he was to complete 75 years of age to continue him as a NED/NID. Now his reappointment on retirement by rotation is to be done. Whether a Special Resolution is again required this time? Please give your views.

--
--
************************************************
Mail your comments, feedback and suggestions on CSMysore to Moderator: datta...@gmail.com and Manager: vivekhe...@gmail.com
---
You received this message because you are subscribed to a topic in the Google Groups "CSMysore" group.
To unsubscribe from this topic, visit https://groups.google.com/d/topic/csmysore/uvIJhi7h95o/unsubscribe.
To unsubscribe from this group and all its topics, send an email to csmysore+u...@googlegroups.com.
To view this discussion on the web visit https://groups.google.com/d/msgid/csmysore/4d86f3a2-c539-486b-bc1e-7ed91ca14e5fn%40googlegroups.com.

[Ashutosh Shukla]

Sir,

Please refer to the attached judgement. Although it relates to the non-compliance of Regulation 17(1A) of the SEBI (LODR) Regulations 2015 in the case of a casual vacancy relating to an independent director, the interpretation approach adopted by the Hon'ble SAT appears to be relevant. Basically, SAT ordered against SEBI on the ground that  SEBI (LODR) Regulations 2015 do not say anything about the applicability of Regulation 17(1A) to a casual vacancy, which is dealt with by Section 161 of the Companies Act 2013, and accordingly, a special resolution shall not be needed. 

I see this judgement as something that says that if the provisions dealing with the appointment or reappointment of a NED are given under SEBI (LODR) Regulations 2015 and are not specifically dealt with by the Companies Act 2013, then a special resolution shall be required to be passed. But, are the provisions related to the reappointment of a non-independent NED given in the SEBI (LODR) Regulations 2015? Yes, based on the attached judgement, which shows that a harmonious reading of 17(1A) and 17(1C) can be done. I had already explained how the term "appointment" indicates both "appointment and reappointment." So, I think that it would be required in your case considering the new details you have shared. Nonetheless, other members may also share their opinion.

Thanks and Regards,

CS Ashutosh Shukla