Muralidharan (Self Employed) 19 December 2008

Appointment of Director at EGM

A Private Limited company had appointed Mr.X as Additional Director of the Company in the month of 20th January 2008. Pursuant to the provisions of Section 260 and also in accordance the Articles of Association of the company the said additional director holds office until the date of the next Annual General Meeting of the Company (In this case AGM was held on 30.09.2008). At the said AGM approval of the Members should be obtained for his appointment as Director of theCompany. Form 32 has to be filed within 30 days with ROC / MCA.

A peculiar event has happened in this case. The Company had convened an EGM in the month of May 2008 for increasing its authorised share capital. At the said EGM the company had also passed a resolution appointing the Additional Director as Director of the Company. Form 32 was also filed with ROC.

Is the procedure followed by the company is correct.

can anybody show some light on the above subject.

my advance thanks

Muralidharan

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5 Replies

Prakash Yedhula (Lawyer) 29 December 2008

The procedure is correct. The addtional director appointed shall hold office upto the date of the next annual general meeting of the company. Section 260 is clear on this.

260. ADDITIONAL DIRECTORS.

Nothing in section 255, 258 or 259 shall affect any power conferred on the Board of directors by the articles to appoint additional directors:

Provided that such additional directors shall hold office only up to the date of the next annual general meeting of the company :

Provided further that the number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the articles.

JAGMOHAN (COMPANY SECRETARY) 12 January 2009

I have a differet opinion on this

the procedure adopted is wrong

the director if appointed as additional director as per 260 will be regularised in the annual general meeting only.

so if a director is regulatised in any other meeting other than Annual General meeting it will not suffice the purpose

A V Vishal (Advocate) 26 January 2009

i DIFFER jAGMOHAN, SINCE THE APPOINTMENT HAS TO BE APPROVED BY THE SHAREHOLDERS, THERE IS NO HARM IF THE SAME IS DONE AT THE EGM. THE SECTION 260 CLEARLY STATES THAT THE VALIDITY TO THE OFFICE OF THE ADDL DIRECTOR IS ONLY UPTO THE AGM SO THAT APPROVAL IS TAKEN BY MEMBERS AT AGM, HOWEVER IF MEMBERS CONFIRM IN THE EGM BEFORE THE AGM IT IS VALID.

SATISH KUMAR (COMPANY SECRETARY) 26 January 2009

Mr.JAG MOHAN is correct.

The procedure adopted by the company is wrong. The company law has prescribed certain matters which are to be adopted at the annual general meeting of the company. Regularisation of office of directors, appointed u/s. 260, is one among them. Which has to be passed in the annual general meeting ony.

Directors appointed as additional directors u/s.260 will hold up to the next agm. Even though the agm is not held, they are deemed to be vacated on the last date of agm.

What is the position of director, if at the egm the resolution was rejected by the sharehoders. They may lose their right to continue up to the date of AGM

In view of this, i opinion that the procedure adopted by the company is wrong.

A V Vishal (Advocate) 26 January 2009

Please refer S 258, Further in my opinion and in the Form 32 to be filed the options given are promoter, independent or technical under type of director. Companies Act did not prescribe Independent or technical directors.

In case even the egm rejects the resolution by the members the addl director ceases as such.

But the company can still opt appointment u/s.258, the matter is debateable since the query relates to a private limited company.