Nominee Director and retirement by rotation

[Astarag]

Dear members

 

please give your views on the following

Total strengh of board is 6

1 MD

2 WTD

1 Nominee Director

2 Directors

 

2/3 of total strenght should retire by rotation

means 4 should be liable to retire by rotation

 

in the above case how to comply with the provision of sec 255

 

as MD/WTD and nominee director by Financial institution are not liable to retire by rotation   

--
with regards,

Cs. P.A. Patnaik
Mob 99480 57660

[Vivek Aggarwal]

Dear Astarag

 

I dont think WTD are not liable to retire by rotation. They are not appointed for any fixed period like MD. They can retire by rotation. In the present case, 2 WTD's and 2 Directors should retire.

Regards

Vivek Aggarwal

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From: Astarag <papa...@gmail.com>
To: utkal-cs-a...@googlegroups.com; csmy...@googlegroups.com
Sent: Fri, 30 July, 2010 3:28:04 PM
Subject: [CSMysore] Nominee Director and retirement by rotation

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[Mridula .P.Thomas]

Dear Mr.Astarag,

255(1)Unless the articles provide for the retirement of all directors at every annual general meeting,not less than two-thirds of the total number of directors of a public company, be persons whose period of office is liable to determination by retirement of directors by
rotation.

This provision you have to comply when you are appointing a Director, not at the time of retirement. When you appoint a Director you have to ensure that atleast two thirds of total strength of the Board are the Directors, who are liable to retire by rotation.

There is no need of worrying about Sec. 255 now. Otherwise also you are complying  the section.

Now, in your case, 4 directors are liable to retire by rotation (excluding MD and Nominee Director). 1/3rd of the 4 will be 1.33. One director has to retire by rotation (number nearest to one-third, shall retire from office). To be on safer side, you can take it as two Directors.

Members views are solicited.

Best Regards,
Mridula

[Alok Rudra]

Dear All,

Allow me to put forward my opinion on this issue -- First of all this issue is not at all so complicated, all you need careful study of AOA and the Act.

First you check your AOA then the relevant provisions of the Act --

When you read provisions kindly go through combined reading of Section 255 and 256 for clear vision. In brief --

1. Non-rotational / Life time directors for a public company - maximum permitted is 1/3rd of the total strength of the BOD.

2. 2/3 of the total strength of BOD shall be liable to retire by rotation. Out of 2/3rd -- 1/3rd shall retire at every AGM.

3. Articles may provide that all the Directors will retire at every AGM.

4. A Director appointed by Small shareholders in terms of Companies (Appointment of Small Shareholder's Director) Rules, 2001 --need not retire by rotation. 

5. AOA of most companies contain an express provision regarding retirement on rotation excluding MD and WTD. Whereas, if it is specifically provided that "a person shall not be liable to retirement by rotation so long as he continues to hold the office of the MD/WTD.", then MD/WTD is not liable to retire by rotation but practical problem one may face. (Kindly go through the last para of this message)

In the given situation --(Normal assuming article is silent on MD/WTD issue)

MD - retire by rotation

WTD- retire by rotation

Nominee - not liable to retire by rotation

Directors - retire by rotation.

In your case, total strength is 6 (as disclosed by you), problem is not there .. coz 1/3 compliance you can easily do. But always remember, your MD/WTD is subject to retirement by rotation or not depends on AOA, otherwise they are subjected to retirement by rotation. 

There may be a situation when your AOA may contain provision that MD/WTD is/are not subject to retirement by rotation but for the compliance sake of Section 255/256 you need to retire your MD/WTD in meeting and re-appoint them at the same AGM. For instance - you have total 4 non-rotational directors and 8 rotationa (total strength- 12) and  while in the mean time one nominee director appointed by FI. If you recalculate total strength - it will be 5 non rotational and 8 rotational. Here it will amount contravention of Section 255 as it will certainly exceed 1/3 (i.e, non-rotational director). To handle this situation, best possible recourse is -- non-retiring director/MD/WTD is subjected to retirement by rotation who will retire at the AGM and re-appointed at the same meeting. 

hope matter is crystal clear now.

With warm regards,

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

Alok

[paritala srinivasarao]

Dear Member   I think Mr. Vivek Agarwal is correct. WTDs need not be non-retiring directors.   You can make WTDs as retiring directors and MD and nominee directors can be non-retiring directors. Alternatively if you want WTDs also non-retiring directors, then you will have to increase the number of directors so that non-retirng directors can be 4. Warm Regards P Srinivasa Rao Company Secretary 9840152398 --- On Mon, 2/8/10, Mridula .P.Thomas <mridu...@gmail.com> wrote:

[Vivek Aggarwal]

Dear Alok

Thanks for the detailed explanation.

 

But in case AOA of the co. provides that MD/WTD will not retire by rotation, you suggest that MD/WTD should retire & be reappointed. I think this will amount to violation of the Articles of the company as you are going against this. What to do in such a situation.

 

Regards

Vivek Aggarwal

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From: Alok Rudra <rudr...@gmail.com>
To: csmy...@googlegroups.com
Sent: Mon, 2 August, 2010 5:19:09 PM
Subject: Re: [CSMysore] Nominee Director and retirement by rotation

[chakri hegde]

Dear sir,

 

As rightly pointed out by Alok ji that, where the AOA of the company contains a provision that, the MD?WTD are not liable to retire by rotation, then for the purpose of complying with the provisions of section 255/256 of the Act, you HAVE to retire the MD/WTD in the Annual General Meeting and re-appoint them in the same meeting.

 

As the Companies Act is the supreme Law, the AOA of the company cannot prevail over this. And in such a case, this will not tantamount to violation of AOA of the Company and you dont need to alter your Articles too.

 

Other members views are solicited...............

---------------------
With Best Wishes
Chakri G Hegde
Nissin Foods India Ltd.
Bangalore

[CS Sunil Kumar B.G.]

Dear All,

I agree with what Mr. Chakri has highlighted.

Section 9 of the Companies Act will override the provisions contained in the AOA & MOA

Warm Regards,

Sunil Kumar B.G.
Practicing Company Secretary
Mysore
http://cssunilbangerabg.blogspot.com/

[Alok Rudra]

Dear Mr. Vivek,

The correct question in this regard should be "Does re-appointment lead to breach of agreement with MD/WTD". In such a case it is advisable to add a suitable Article in AOA that in such a case retirement and reappointment does not lead to breach of agreement with MD/WTD for his/her specified tenure and same should also be incorporated in the Agreement with MD/WTD.

As i explained in earlier email -- reappointment does not lead to breach of  your AOA. AOA may say MD/WTD shall/will not be liable to retire by rotation but contrary is also true ... they are not liable to retire but they may retire and reappointed. 

With best regards,

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

Alok 

[Vivek Aggarwal]

Dear Alok

 

Thanks for the clarification.

Regards

Vivek Aggarwal

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From: Alok Rudra <rudr...@gmail.com>
To: csmy...@googlegroups.com

Sent: Tue, 3 August, 2010 5:23:40 PM