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Monday, January 7, 2008

Aditional director appointed

Aditional director appointed in February, 1995.
Advise the Board on the directors who are to vacate their office in the general
meeting to be held in June, 1995.
Section 255 of Companies Act. 1956, provides that unless the Articles provide for retirement of all the directors at every general meeting, not less than two-thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall retire by rotation. In terms of Section 256 of the Act, one-third of the directors liable to retire by rotation, shall retire at the Annual General Meeting of the Company. If the number of directors liable to retire by rotation is not three or a multiple of three, then the number nearest to one-third shall retire from the office of director.
In order to detennine the directors who shall retire by rotation at every general meeting, it is provided that the persons who have been longest in office since their last appointment shall be liable to retire. As between the persons who became directors on the same day, the directors who shall retire may be determined by agreement among themselves. In the a1;>ence of any such agreement the persons liable to retire shall be chosen by lot.
I Of the 11 directors mentioned in the question, A and B, who are nominees of IFCI anCrfCICI, respectively, are non-rotational directors-a!ld are -nOt lIable -to retire..;,. K’, being the Managing Director, is also n.9t liable to retire. \The position in regard to the remaining 8 directors is as under:
(i)T and ‘L’ who were appointed as Additional Directors in January 1995 and February 1995, respectively, shall vacate office on the date of Annual General
Meeting to be held in June 1995. c1’
(ii)‘J’ was appointed in place of ‘F’ who died and will, therefore, hold office till
the date ‘F’ would have held office.
(iii) Of the 6 rotational directors [11 - 5 (2 Additional directors + 2 Nominee directors + 1 Managing Director) = 6], 2 directors constitute one-third, and those who have been longest in office are liable to vacate office. Accordingly, out of ‘e’, ‘D’ and ‘E’ who were apppointed in June 1993 AGM and have been longest in office, two of them shall vacate office as per the law stated above
(i.e., by mutual consent or by draw of lots).
To sum up, besides I and L, two out of C, D and E will vacate the office of director
. in the Annual General tfeefug to be held in June 1995.
A company passed a special resolution authorising payment of commission
of 1 per cent of the net profits to part-time directors for a period of 5 years. Registrar of Companies filed a complaint that the company has contravened the provisions of Section 310 of the Companies Act, 1956 as they have not obtained Central Government’s approval. This failure was sought to be punished under Section 629A
of the Act. Discuss J2l.ns. Under Section 310 of the Act, any provision for increasing the remuneration of a director and others contained in, inter alia, a resolution passed by the members shall not have any effect unless approved by the Central Government. It is given in the question that the Company has not complied with the provisions by not obtaining the said approval.
It has been held by the Court in Raghunath Swarup Mathur vs. Har Swamp Mathur (1967) 2 Comp LJ 195 (All) that the phrase “shall not have effect unless
approved by the Central Government” used in Section 269’before the amend
ment in 1988 did not contain a direction or prohibition and that before an act can be regarded as an offence there must be spcified statutory prohibition. In that case the Court, therefore, held that no action can be taken under Section 629A.

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