Appointment Of Directors Under Companies Act 2013 (Section 152)
Updated: Sep 30, 2022
Provisions of Appointment of Director
1. Appointment of First Director:
The regulations for the appointment of the first director of a corporation are usually presented in their Article of Association. However, if such provision is absent, the following people would be considered the first directors of the corporation:
i) The individual in the case of One Person Company;
ii) In the remaining cases: the individuals who are subscribers to the memorandum.
Such presumed initial director/s can hold the position until the director/s are duly assigned by the members. Every director should be appointed by the company in a general meeting by its members.
2. Requirement of DIN:
Individuals who want to be appointed as a director in any company should have a Director Identification Number (DIN). DIN is allotted by the Central Government within one month after applying for the post. Before the actual appointment as a director of a company the selected individual should provide a declaration that s/he isn’t disqualified for the post of director along with DIN
3. Consent and ROC:
The appointed individual should give consent in writing in Form DIR-2 to hold office as a director before starting as a director in the company. The consent should be filed with the registrar in Form DIR-12 by the company within 30 days from the date of appointment of the director. However, if the individual is appointed as an independent director in the general meeting, an explanatory statement should be annexed to the notice of the GM that according to the Board, he is capable of becoming an independent director.
4. Retirement by Rotation
The article of association(AoA) of a public company should provide rules for the retirement of all directors at every Annual General Meeting (AGM) of the company. At least, not less than 2/3rd of the total number of directors of a Public Company should be the individuals whose tenure is to be determined by the retirement of directors by rotation and be appointed in general meetings by the company.
The ‘retiring director’ means a director retiring by rotation.
The remaining directors should also be appointed by such public companies in GM subject to any regulations in the articles of AoA of that company. Here, the total number of directors doesn’t include independent directors. Moreover, this section does not apply to the appointment of independent directors.
In the first AGM of a public company held after the GM in which the first directors are appointed and at every subsequent AGM, 1/3 of such directors should retire by rotation for the time being, or if their number isn’t three or it's multiple, then, the nearest number to one-third will retire from office.
For Example: If a company has 12 directors then a) the directors who should retire by rotation would be 12*2/3 i.e. 8, and b) No. of directors who will retire are 8*1/3 i.e. 2.33 or nearest to one third is 2.
The directors with the longest tenure should retire by rotation at AGM. However, individuals who became directors on the same day should retire as per the agreement among themselves, or else it will be decided by a lot. However, the company should fill up such vacancies at the AGM where the director retires by appointing a retiring director or some other individual thereto.
5. Re-appointment of Director
If the position of the retiring director is vacant and the meeting wasn’t expressly able to fill the vacancy, the meeting will stand adjourned till the same day, at the same time and place in the next week, or if that day is a national holiday, till the next working day, at the same place and time.
If at the next adjourned meeting also, the position remains vacant and that meeting also wasn’t expressly able to fill the vacancy, the retiring director will be re-appointed at the vacant post in the adjourned meeting.
However, the retiring director wouldn’t be re-appointed in the adjourned meeting in the following five situations:
In case a resolution for the re-appointment of a retiring director has been put to the current or previous meeting and lost;
In case the retiring director expresses his unwillingness to be re-appointed by written notice;
In case the retiring director disqualifies or is not qualified for appointment as a director of the company;
In case a Special Resolution (SR) or an Ordinary Resolution (OR) is necessary for his appointment or reappointment; or
In case the individual was appointed with all individual votes in a general body meeting.
Section 152 of the Companies Act 2013
[Appointment of Directors in Private and Public Company]
152. (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 by 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 fulfills 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 by 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 this sub-section, “a 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 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 any provisions of this Act; or
(v) section 162 applies to the case.
Explanation. For this section and section 160, the expression “retiring director” means a director retiring by rotation.