As per the provisions of the Section 252 of the Companies Act, 1956, a Public Limited Company needs to appoint at least 3 Directors in the Company. This minimum limit shall be maintained for ever till the time period the Company is not either wound up or become defunct.
My query is that, if suppose for a period of say 1 year this statutory minimum requirement of 3 Directors goes below 3 & not complied with, which means for a period of 1 year, if Company operates and transact all regular businesses with 2 Director, then what will be the repercussion. What penal provisions will be imposed on the Company as per the provisions of Companies Act, 1956.
20 October 2010
252. Minimum number of directors (1) Every 1[public company (other than a public company which has become such by virtue of section 43A)] 2[***] shall have at least three directors:
3[Provided that a public company having,-
(a) a paid-up capital of five crore rupees or more;
(b) one thousand or more small shareholders,
may have a director elected by such small shareholders in the manner as may be prescribed.
Explanation.-For the purpose of this sub-section "small shareholders" means a shreholder holding shares of nominal value of twenty thousand rupees or less in a public company to which this section applies.]
(2) Every 4[other] company 5[***] shall have at least two directors.
(3) The directors of a company collectively are referred to in this Act as the "Board of directors" or "Board".
1. Subs. by Act 31 of 1965, sec. 29, for "public company" (w.e.f. 15-10-1965).
2. The words "and every private company which is a subsidiary of a public company" omitted by Act 65 of 1960, sec. 81 (w.e.f. 28-12-1960). 3. Ins. by Act 53 of 2000, sec. 128 (w.e.f. 13-12-2000).
4. Subs. by Act 31 of 1965, sec. 29, for "private" (w.e.f. 15-10-1965).
5. The words "which is not a subsidiary of a public company" omitted by Act 65 of 1960, se
I know the provisions of Section 252 of the Companies Act, 1956. But, my query was that if there is a non-compliance of the provisions of Section 252 of the Companies Act, 1956, what penal provisions of the said Act shall be attracted towards the Company concerned.
21 October 2010
There is no penal provision for non compliance of the minimum number of directors. once the Pubic limited company goes below the 3 directors, it will be deemed as a pvt limited company.
21 October 2010
Further one has to understnad how the number of minimum directors numbder came below 3. Is it because of death ? resignation or directors disqualification ?
As per the provisions of Companies Act 1956, directors can appoint a director in board meeting to fill the casual vacancy and if not appointed then Central Govt. has the power to appoint the directors. If reduction of directors is not intimated to the (Govt) thru ROC, then Govt may take action against the company for oppression & mismanagement.
Posted On 21 October 2010 There is no penal provision for non compliance of the minimum number of directors. once the Pubic limited company goes below the 3 directors, it will be deemed as a pvt limited company."
Can you Kindly quote the section under which the public company deems to become a private limited company in case the number of directors fall beyond the prescribed limit.
23 October 2010
Mr.AV.Vishal. Please see S.43A.Sub-section (2A) of the companies Act. I am giving a detailed explanation on that. Private companies deemed to be a public company (by default) Sections 43 and 43 A deal with the private company deemed to be a public company. If a private company makes a default as to complying with the provisions required by law to be fulfilled by it, it is deemed to be a Public company. Some of the omissions of the legal provisions would be: the number of its members may be, or may at any time be reduced, below seven. where, after the commencement of the Companies (Amendment) Act, 1988, a private company accepts, after an invitation is made by an advertisement, or renews, deposits from the public, other than its members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal, as the case may be, is first made after such commencement. A private company, which has become a public company by virtue of this section, shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company. If a company makes default in complying with the provisions under this section, the company and every officer of the company, who is in default, shall be punishable with fine, which may extend to five hundred rupees for every day, during which the default continues.
S 43A is deleted vide the amendment act of 2000. Further the section quoted by you is relating to a private limited company deemed to have become a public limited company, the querist query relates to a pubic limited company in which the number of directors come down the prescribed number.