Amended and updated notes on section 152 of Companies Act 2013. Detail discussion on provisions and rules related to appointment of directors.
Chapter XI (Sections 149–172) of the Companies Act, 2013 (CA 2013) deals with the provisions related to appointment and qualifications of directors. Section 152 of CA 2013 provides for appointment of directors.
Recently, we have discussed in detail section 151 (Appointment of director elected by small shareholders) of CA 2013. Today, we learn the provisions of section 152 of Companies Act 2013.
The provisions of section 152 are effective from 1-April-2014. You may refer Notification No. S.O. 902(E) issued dated 27-03-2014. In this article, you will learn detail of the provisions of section 152 of the Companies Act 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014.
The appointment of directors shall be made as per the provisions of section 152 of the Companies Act, 2013. Section 152 of CA 2013 has come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
This new section provides for the appointment first directors and filling up the vacancy of retiring directors by rotation and re-appointment of directors of public as well as private companies. Section 152 corresponds to the following sections of the Companies Act, 1956:
- i) Section 254 of the Companies Act, 1956 i.e. subscribers of memorandum deemed to be directors;
- ii) Section 255 of the Companies Act, 1956, i.e. appointment of directors and proportion of those who are to retire by rotation;
- iii) Section 256 of the Companies Act, 1956 i.e. ascertainment of directors retiring by rotation and filling of vacancies;
- iii) Section 259 of the companies Act, 1956 i.e. increase in number of directors to require Government sanction; and
- iv) Section 264 of the Companies Act, 1956 i.e. consent of candidate for directorship to be filed with the company and consent to act as director to be filed with the Registrar.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XI |
| Chapter Name | Appointment and Qualifications of Directors |
| Section No. | 152 |
| Section Name | Appointment of Directors |
| Monthly Updated Edition | Company Law PDF |
Appointment of Directors in Private and Public Company
Appointment of First Director of a Company [Section 152(1)]:
The provisions regarding appointment of first director of a company are generally mentioned in the Articles of that company. You may refer section 5 of CA 2013 for more details about the articles of a company.
However, if there is no provision made in the articles of a company for the appointment of the first director, the following individuals shall be deemed to be the first directors of the company:
- i) In case of One Person Company: An individual being member;
- ii) In other case: the subscribers to the memorandum who are individuals.
Such deemed first director or directors hold office until the director or directors are duly appointed by the member in accordance with the provisions of section 152 of the CA 2013.
Appointment of Directors of a company [Section 152(2)]:
In accordance with the provisions of section 152(2) of the CA 2013, every director shall be appointed by the company in general meeting. Note that other provisions may expressly provide for the appointment of directors in company.
Compulsory requirement of DIN [Section 152(3) & 152(4)]:
If any person wants to be appointed as a director in any company, then he/she must have Director Identification Number (DIN). DIN shall be allotted under section 154 by the Central Government (CG) within one month from the receipt of the application under section 153.
You may refer Rule 9-12 of the Companies (Appointment and Qualification of Directors) Rules, 2014 for more details like Application for allotment of Director Identification Number, Allotment of DIN, Cancellation or surrender or Deactivation of DIN, and Intimation of changes in particulars specified in DIN application.
Before appointment as a director of a company the proposed person shall furnish DIN along with a declaration that he/she is not disqualified to become as a director. Note that DIN also includes the Designated Partnership Identification Number (DPIN) issued under section 7 of the Limited Liability Partnership Act, 2008.
Filing Consent with ROC [Section 152(5)]:
A consent in writing to hold office as a director shall be given in Form DIR-2 by the appointed director before acting as a director in the company. Such consent shall be filed with the registrar in Form DIR-12 within 30 days from the date of appointment of director. You may refer Rule 8 of the Companies (Appointment and Qualification of Directors) Rules, 2014.
However, in the case of appointment of an independent director in the general meeting, a statement shall be included in the explanatory statement annexed to the notice of the GM that in the opinion of the Board, he fulfils the conditions specified in the CA 2013 for such an appointment.
Did you know? In the Old CA 1956, such consent was not required for a director of a private company unless it is a subsidiary of a public company. But, now the same has also been made compulsory for every Director in a private Company to give his consent for appointment as such and the consent shall be filed with the Registrar of Companies.
Retirement of Directors by Rotation of a Company [Section 152(6)]
The article of a public company shall provide for the retirement of all directors at every Annual General Meeting (AGM) of the company. Otherwise, not less than 2/3 of the total number of directors of a Public Company shall be persons whose period of office is liable to determination by retirement of directors by rotation and be appointed by the company in general meeting.
The remaining directors of such public companies shall also be appointed by the company in GM subject to any regulations in the articles of that company.
Note that as per the explanation of section 152(6) of the CA 2013, total number of directors shall not include independent directors. Further, as per sub-section (13) of section 149, the requirement of retirement by rotation pursuant to sub-section (6) and (7) of Section 152 shall not be applicable to appointment of independent directors.
At the first AGM of a public company held next after the date of the GM at which the first directors are appointed and at every subsequent AGM, 1/3 of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
For Example: If a Company have 6 directors then a) the directors liable to retire by rotation shall be equal to 6*2/3 i.e. 4; and b) No. of directors to retire shall be 4*1/3 i.e. 1.33 or nearest to one third is 1.
The directors who have been longest in office shall retire by rotation at AGM. However, those persons who became directors on the same day shall retire as per the agreement among themselves otherwise the same shall be determined by lot. However, the company may fill up such vacancy at the AGM at which the director retires by appointing the retiring director or some other person thereto.
Re-appointment of Director of Company [Section 152(7)]
In accordance with the provisions of sub-section (7) of section 152 of the CA 2013, if the vacancy of the retiring director is not so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at the same time and place.
If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting.
However, the retiring director shall not be deemed to have been appointed at the adjourned meeting in the following five cases:
- Resolution Put and Lost: If a resolution for the re-appointment of retiring director has been put to that meeting or at the previous meeting and lost;
- Unwillingness for re-appointment: If the retiring director by a notice in writing has expressed his unwillingness to be so re-appointed;
- Disqualified: If the retiring director is not qualified or is disqualified for appointment as a director of company;
- Requirement of Resolution: If a Special Resolution (SR) or an Ordinary Resolution (OR) is required for his appointment or re-appointment by virtue of any provisions of CA 2013; or
- Applicability of Section 162: If the provisions of section 162 (Appointment of directors to be voted individually) is applicable to the case.
As per the explanation given under section 152(7) of the CA 2013 the expression “retiring director” means a director retiring by rotation.
Section 152 of Companies Act 2013: Appointment of directors
Section 152 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
(1) Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed and in case of a One Person Company an individual being member shall be deemed to be its first director until the director or directors are duly appointed by the member in accordance with the provisions of this section.
(2) Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting.
(3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154 or any other number as may be prescribed under section 153.
(4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number or such other number as may be prescribed under section 153 and a declaration that he is not disqualified to become a director under this Act.
(5) A person appointed as a director shall not act as a director unless he gives his consent to hold the office as director and such consent has been filed with the Registrar within thirty days of his appointment in such manner as may be prescribed:
Provided that in the case of appointment of an independent director in the general meeting, an explanatory statement for such appointment, annexed to the notice for the general meeting, shall include a statement that in the opinion of the Board, he fulfils the conditions specified in this Act for such an appointment.
(6) (a) 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 shall—
- (i) be persons whose period of office is liable to determination by retirement of directors by rotation; and
- (ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.
(b) The remaining directors in the case of any such 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.
(c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
(d) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.
Explanation: For the purposes of this sub-section, “total number of directors” shall not include independent directors, whether appointed under this Act or any other law for the time being in force, on the Board of a company.
(7) (a) If the vacancy of the retiring director is not so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at the same time and place.
- (b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless—
- (i) at that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost;
- (ii) the retiring director has, by a notice in writing addressed to the company or its Board of directors, expressed his unwillingness to be so re-appointed;
- (iii) he is not qualified or is disqualified for appointment;
- (iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by virtue of any provisions of this Act; or
- (v) section 162 is applicable to the case.
Explanation: For the purposes of this section and section 160, the expression “retiring director” means a director retiring by rotation.
Exception/ Modification/ Adaptation:
1) In case of Government company, sub-section (5) of section 152 shall not apply where appointment of such director is done by the Central Government or State Government, as the case may be. – Notification No. G.S.R. 463(E) dated 5th June, 2015.
2) Sub-sections (6) and (7) of section 152 shall not apply to —
- (a) a Government company, which is not a listed company, in which not less than fifty-one per cent. of paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments;
- (b) a subsidiary of a Government company, referred to in (a) above. –Notification No. G.S.R. 582(E) dated 13th June, 2017.
3) In case of Section 8 (Non-profit) Companies, proviso to sub-section (5) of section 152 shall not apply. –Notification No. G.S.R. 466(E) dated 5th June, 2015.
4) In case of a Specified IFSC public company, in sub-section (5) of section 152, for the words “thirty days” read as “sixty days”. –Notification No. G.S.R. 08(E) dated 4th January, 2017.
5) In case of a Specified IFSC public company, sub-sections (6) and (7) of section 152 shall not apply. –Notification No. G.S.R. 08(E) dated 4th January, 2017.