Time limit for appointment of director

[Ratnamala Hegde]

Dear Members

In a public company, if number of directors falls below 3 due to death of a director, then what is the time limit for appointment of another director to increase the number of directors to minimum limit of 3. 

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Regards,
Ratnamala Hegde

[Sachidananda Bhat]

I think 6 months

 

Regards.

 

Sachidananda

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[tripti jain]

Refer Section 45 of Companies Act, 1956 relating to reduction in mambership.............

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Thanks & Regards,
Tripti Jain
CS, LL.B, CA(Inter)
Mob: 9999712603
email: tripti...@gmail.com

[Rudra Alok]

Madam,

Sorry to point out S 45 talks about members and not directors .... refer S 252 and you need to find out the consequences. Question sounds easy but good one for analysis. 

Regards,

-----------------

Alok

[vikram jhawar]

Hello Sir,

I think it will fall under SECTION 262, because the matter is about death of director

[Rudra Alok]

Dear Vikarm,

There is no denial regarding applicability of Section 262. 

Question raised is........ within what time limit vacancy shall be filled up and not how the vacancy should be filled up.

Regards,

------------------

Alok

[sudhir kumar]

I dont think there is any specific section for the concerned matter.

 

My interpretation is depending upon the due date of Board Meeting i.e., for the purpose of complying the section 285 read with 287 the board has to fill the vacancy within a max of six months.

 

Any other different views..............

 

Regards

CS Sudhir kumar

[vikram jhawar]

Dear Alok,

There is no time limit prescribed U/S 262. Subject to any regulations in Article of Association, it should be filled by the BOD at the Board Meeting. (No time limit prescribed for Board Mee

[Rudra Alok]

Dear All,

Thanks a lot for such a wonderful info sharing. 

However, I am not agreed with any of the reasonings, would like to study further on the issue ... and then reply ... Due to work load pressure I can come forward with my opinion on Monday. 

Regards,

-------------------

Alok

[Vivek Aggarwal]

Dear Alok

Section 262 does not provide any time limit. Appoint director in the very next Board Meeting.

 

Regards
CS Vivek Aggarwal

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From: Rudra Alok <rudr...@gmail.com>
To: csmy...@googlegroups.com
Sent: Thursday, 10 March 2011 12:34 PM

Subject: Re: [CSMysore] Time limit for appointment of director

[Bharat Hegde]

Dear All,

 

The requirement of maintaining minimum number of directors are mandatory and any business transacted after the number fell below the minimum would be invalid.  When number of directors falls below the minimum number, the remaining directors cannot act. This is so even if  the number of remaining directors are sufficient to constitute the quorum required for board meeting. Therefore  the appointment of the directors shall be made immediately, i.e. in the first meeting held after the number fell below the minimum.

 

Other views are solicited.

 

Thanks and Regards,

Bharat Hegde

[sudhir kumar]

i  think my analysis is also on similar lines. isnt it????

[Rudra Alok]

Willl reply on or after Monday plzzz

Till then keep me enlighten.

Regards,

-----------------

Alok

[Ratnamala Hegde]

Dear Bharat

Can you tell me is there any time limit for convening the Board Meeting for appointment of a director after the number of directors falls below the minimum prescribed limit.

Regards,
Ratnamala Hegde

[Bharat Hegde]

Hi Ratnamala,

 

There is no time limit prescribed under the Act. But as i wrote in my earlier mail, when number falls below the minimum limit the Board becomes incompetent to act. In that case the remaining directors are left with no option but to meet and appoint the new director/s to bring the number to at least minimum required.

 

There are English case laws supporting  the above argument. In a leading case, the allotment of shares was held to be invalid when the strength of the Board was below the minimum required, even though there was required quorum at the meeting while allotting the shares.

[Parameshwar bhat]

Dear Ratnamala

In case of death of the Director of a Company, after receipt of the intimation regarding the death of the Director, the Company needs to record the same and have to intimate the ROC regarding the cessesion of the said Director within 30 days. But in your case due to death of the Director, the number of Directors has come down to less than minimum number required by a public company. 

If you file Form 32, the system will not accept the Form 32 without the minimum number of Directors in the Board. Therefore practically it is not possible to file the Form without appointing the another Director in the casual vacancy created by the death of the earlier Director.

Therefore even though the Act is silent on the time limit. In your case you have to appoint a Director in the casual vacancy created due to death of the Director, within 30 days to strictly complying with the law.

Contrary views solicited.....

CS Parameshwar Bhat
B.Com,LLB,ML,ACS,(MBA)
Company Secretary
Bangalore

[Ratnamala Hegde]

Thank you everyone for your valuable inputs..........

[Vivek Aggarwal]

Dear Ratanmala

There is no time limit prescribed but as per Section 45 of the Act, if no. of  Directors falls below minimum limit & it remains so for 6 months, all the actions of the Directors will be invalid.
 

Regards
CS Vivek Aggarwal

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From: Ratnamala Hegde <ratnam...@gmail.com>
To: csmy...@googlegroups.com
Sent: Thursday, 10 March 2011 5:03 PM

[dipak singh]

Dear friends

I am agree with Mr.Parmeshwar Bhat , that is no time limit is
prescribed in the Companies Act and you can not file form 32 for the
Sudden death of Director because MCA portal will not Accept. So it is
in Company Record we have 2 directors so it is better to appoint a
Director U/S 262 and file form 32 for both the Directors i.e
appointment and Cessation due to Death.

Correct me if I am Wrong..

Regards

Dipak Kumar Singh
ACS,LLB,M.com,B.com(Hons)

[shilpa jain]

I am agree with Mr.Parmeshwar Bhat Ji

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CS SHILPA SOGANI
B.COM(HONS.), M.COM, ACS, LLB(P)
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[Bharat Hegde]

Dear All,

 

Difficulty in filing the form 32 for the cessation of the director is well noted.

 

But kindly note that as per Section 252, the minimum number of directors for a public company is 3. But the articles can stipulate higher minimum number to be the strength of the Board, for ex - 5 directors. In such case we will not have any difficulty in filing form 32 for the cessation of directors as long as minimum number of directors under section 252 is maintained, i.e.3.

 

Here the question is, Is the Board competent to act and discharge its functions when its strength is below the minimum? The minimum number required may be as per Section 252 or as per AOA, if AOA stipulates higher minimum number.

 

 If the answer to the above question is no, then the remaining directors have to appoint the new directors immediately as the company cannot be run by an incompetent Board.

 

Other views are solicited.

 

Thanks,

Bharat Hegde

[Vivek Hegde]

Dear Bharat

Thanks for your elaborate reply.

You have made some references to English case laws. Except that I could not find any provision or case laws (in the Indian context) which mandates compulsory appointment within specified period. Kindly explore the same for me pls. ASAP.

Because, as professionals, sometime we need to find (and advice) the loops in the legislations (any law for that matter) to get out of some critical issues in corporate life. 

Hope you understand.

Vivek Hegde 

Warm Regards

CS Vivek Hegde,B.com, ACS, CWA
Company Secretary in Practice
No. 405, 4th Block, 7th Cross
Koramangala, Bangalore-560034
Mob: 09019756940/09900898223

[Bharat Hegde]

Dear Vivek,

 

Thanks. I do fully agree with your views.

 

Regarding the issue under consideration, I could not trace any Indian case laws supporting my views. But if we analyse the Section 252, it seems, companies are supposed maintain the minimum number stipulated in the Section always. I don't think we will have any time period to raise the number to the minimum when it falls below the minimum.

 

The basic purpose of Section 252 is to avoid the one man management or to avoid one or few directors from dominating over decision making process. The Section is mandatory and the Board should first comply with this before transacting any business.

 

The E-forms are also designed in such a way that the system does not allow us to file any forms (including form 20B) which would result in falling the number of directors below the 3 or 2, as the case may be.

 

Other views are always welcome.

[Rudra Alok]

Dear All,

Thanks a lot for such an elaborate discussion. Special Thanks to Mr. Bharat.

As per my understanding and readings on the subject ...

As per the wordings of Section 252 and subject to minimum number of directors as per AOA of the company, the company must have the minimum number of directors at all times. In other words – right from incorporation to the point of time the company is in existence.

Practically there can be three situations, i.e. irrespective of the fact whether the said reduction is due to resignation or death –

1.       Number goes below the limit fixed by the Act / AOA – but quorum is present; or

 

2.       Number goes below the limit fixed by the Act / AOA – quorum is not present; or

 

3.       No director at all – complete deadlock.

 

Again Regulation 75 of Table A addresses this issue as –

“  The continuing directors may act notwithstanding any vacancy in the Board; but if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose.”

 

[1] Kindly notice the underlined words –as per first part of this regulation at least two directors are required. Since the word used is “Directors” and not “Director”. Hence continuing directors may continue to act notwithstanding to any vacancy.

 

[2] Now the second part address where the number of directors falls below say one / below quorum - -the continuing director or directors may act for limited purpose only i.e. – for increasing the number of directors and calling a general meeting of the company.

 

[4] where the company is under complete deadlock (no directors at all) – proper course is an application to be made by the members of the company to CLB for the appointment of directors. [Ref. Section 186].

 

Again, where no specific penalty is provided elsewhere in the Act , I suppose Section 629A is applicable and the same is true in the present case also; it seems.

 

On the basis of above the requirement........ to fill the vacancy......... should be immediate or else maximum 3 months reasonable period, as being a public company, there should be one meeting in every quarter.

Plus in spite of this reasonable period argument and not appointing immediately ... Can the company avoid penalty u/s 629A is the moot point for the discussion and analysis   

 

Contrary view solicited.  

Regards,

-------------------

Alok

[CS A Rengarajan]

The applicability of section 629A will come into force when no penal provisions are not provided in some sections.

In section 252  no penal provision was not provided and hence Section 629A will come into force

Contrary view solicited

Best Regards

csarengarajan
Company Secretary, Chennai
email csaren...@gmail.com
mobile 093810 11200
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