Companies Act Section 152 — Appointment of directors
CHAPTER XI APPOINTMENT AND QUALIFICATIONS OF DIRECTORS
Commercial / Corporate
Summary
Sub-section (1) covers what happens when a company's articles do not say how the first director is to be appointed. In that case, the individuals who signed the memorandum are treated as the first directors until directors are properly appointed. For a One Person Company, the individual who is the member is treated as the first director until the member appoints a director or directors as per this section.
Sub-section (2) states that, unless the Act says otherwise, every director must be appointed by the company at a general meeting.
Sub-section (3) says that a person cannot be appointed as a director unless they have been given a Director Identification Number under section 154, or any other number prescribed under section 153.
Sub-section (4) requires every person proposed to be appointed as a director, whether at a general meeting or otherwise, to provide their Director Identification Number (or such other number prescribed under section 153) and a declaration that they are not disqualified from becoming a director under the Act.
Sub-section (5) says that a person appointed as a director cannot act in that role unless they give their consent to hold the office, and that consent is filed with the Registrar within thirty days of appointment in the prescribed manner. The proviso adds that when an independent director is appointed at a general meeting, the explanatory statement attached to the meeting notice must include a statement that, in the Board's opinion, the person meets the conditions for such appointment under the Act.
Under clause (a) of sub-section (6), unless the articles say that all directors retire at every annual general meeting, at least two-thirds of the total number of directors of a public company must be persons whose term can end by retirement by rotation, and, unless the Act says otherwise, they must be appointed by the company at a general meeting.
Under clause (b) of sub-section (6), the remaining directors of such a company must also be appointed by the company at a general meeting, unless the articles provide otherwise.
Under clause (c) of sub-section (6), at the first annual general meeting held after the meeting where the first directors are appointed, and at every later annual general meeting, one-third of the directors who are liable to retire by rotation must retire. If that number is not three or a multiple of three, then the number nearest to one-third retires.
Under clause (d) of sub-section (6), the directors who retire by rotation at each annual general meeting are those who have been in office the longest since their last appointment. If directors became directors on the same day, then, unless they agree otherwise, the ones to retire are chosen by lot.
Under clause (e) of sub-section (6), at the annual general meeting where a director retires, the company may fill the vacancy by appointing the retiring director or someone else. The explanation clarifies that for this sub-section, the total number of directors does not include independent directors, whether appointed under this Act or any other law.
Under clause (a) of sub-section (7), if the vacancy of the retiring director is not filled and the meeting has not expressly decided not to fill it, the meeting is adjourned to the same day the next week at the same time and place, or if that day is a national holiday, to the next day that is not a holiday.
Under clause (b) of sub-section (7), if the vacancy is still not filled at the adjourned meeting and that meeting also has not expressly decided not to fill it, the retiring director is treated as re-appointed at the adjourned meeting. This does not apply if a resolution for re-appointment was put to a vote and lost at either meeting, if the retiring director has written to the company or its Board saying they do not want to be re-appointed, if the director is not qualified or is disqualified, if a special or ordinary resolution is required for their appointment or re-appointment under the Act, or if section 162 applies. The explanation states that for this section and section 160, retiring director means a director retiring by rotation.
Official Text
(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 1[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 1[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.