Appointment of Director directly under Companies Act, 1956_IN PVT CO

[Simranjeet Singh]

 Dear All

Pls tell whether a Pvt Ltd Co can directly appoint a person as an Director of the Company by a Board resolution without first appointing him as an Additional Director as per Section 260 of Companies Act, 1956

Provisions as given in AOA of the Company are:-

"The Directors shall have power, at any time and from time to time,to appoint person as an additional director in addition to the existing directors to be Directors, but so that the total number of Directors shall not at any time exceed the no. fixed for directors in these articles.any directors so appointed shall hold office only untill the next following AGM but shall be eligible thereof for election as director."

So, Is it right for  the company board to appoint a director in Board Meeting without convening AGM for Regularisation u/s 257  ?  but section 257 is not applicable to Pvt companies.. so how it should be done???

whether co can directly appoint any person as Director keeping in view the above situation and sec 257 not applcble to pvt co's ?? pls guide 

 Thanks & Regards

 ACS Simranjeet Singh

 

[Vinod Sunder R]

Dear Sinmranjeet,

Specific to your situation, here are the answers.

1. Correct, Sec 257 is not applicable to a pvt company

2. Correct, in case of a pvt co you can appoint a director without going through the Sec 260 route (additional director), provided your articles permit.

In this regard, Sec 255(2) is relevant.. to quote, 

The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company, also be appointed by the company in general meeting  [emphasis supplied]

The import of this provision, as related to private companies is that every director must be appointed by shareholders, in default of and subject to provisions in the AOA. Therefore, if the AOA provides for direct appointment, then you can do so.

3. In your case, there is no benefit of this provision, because the AoA says such director will hold office till following AGM. And the reference in the AoA is clearly to 'Additional Director' . 

4. Suppose your AoA had mentioned that 'The Board, from time to time, shall have power to appoint one or more persons as Directors of the Company to hold office for life and the provisions of Sec 255(2) shall accordingly, not apply' or something on similar lines, then, yes, you can appoint a person directly as a Director without going through the additional director route. Needless to mention, as you have rightly pointed out, Sec 257 is inapplicable to a private company, and hence, there is no further need of shareholders approval.

Please also note that Sec 161(1) of the Companies Act 2013 relating to additional directors has already been notified. Sec 257 of the 1956 Act still continues as clause 160 is yet to be notified.

Hope this clears your doubt

Vinod

[Simranjeet Singh]

thanks very much Sir for detailed reply to query.. so can we do like this calling BM to consider app of director in EGm of the meeting by voluntary complying sec 257 of the CA, 1956 or simply a board resolution to appoint director can do..

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[Vinod Sunder R]

Dear Simranjeet,

1. Easiest option is to follow Sec 260 and appoint as Additional Director and then, at a forthcoming AGM appoint him as a Director. [I gather from your email that you do not want to do this, but I am not sure why]

2. At a Board Meeting, you can decide to convene an EGM and in the BM you can recommend the name of director for approval by members. in the EGM notice, item relating to appointment of Director will appear.  No need to comply with requirements of Sec 257 such as receiving proposal, deposit etc etc. 

Vinod

[Simranjeet Singh]

Thank u Mr. Vinod Sunder R for ur reply.. i don't want to go through 260 route as director had been already appointed 2 years

back and in form 32 filed his designation shown is shown as director

so as per your reply it is possible to hold BM and recommend the name of director for approval by members. in the EGM notice on the same date on shorter notice ??