Appointment of Directors (Section 152 of the Companies Act, 2013) :

According to section 152 of the Companies Act, 2013:

(i) Appointment of directors:

(a) 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. [Section 152(1)]

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.[Section 152(1)]

(b) Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting. [Section 152(2)]

(c) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number (DIN) under section 154. [Section 152(3)]

(d) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number (DIN) and a declaration that he is not disqualified to become a director under this Act. [Section 152(4)]

(e) 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 fi led with the Registrar within 30 days of his appointment in Form DIR-12 along with the fee as prescribed [Section 152 (5)].

Rule 8 of the Companies (Appointment and Qualification of Directors) Rules, 2014 provides that every person who has been appointed to hold the office of a director shall on or before the appointment furnish to the company consent in writing to act as director in Form DIR-2.

The proviso to Section 152 (5) states that in 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.

The Ministry of Corporate Affairs has clarified via Notification No. 463(E) and 466(E)dated 5th June, 2015, that section 152(5) shall not apply:

(i) where appointment of such director is done by the Central Government or State Government, as the case may be.

(ii) to a section 8 company.

(vi) Retirement by rotation [Section 152(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—

(A) be persons whose period of office is liable to determination by retirement of directors by rotation; and

(B) 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 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.

For e.g.:

(i) Company is having six directors.

Directors liable to retire by rotation: 6 * 2/3 i.e. 4

No. of directors to retire at AGM: 4* 1/3 i.e. 1.33 or nearest to 1/3rd is 1.

(ii) Company is having 7 directors.

Directors liable to retire by rotation 7*2/3 i.e. 4.7

No. of directors to retire at AGM: 4.7* 1/3 i.e. 1.56 or nearest to 1/3rd is 2.

(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.

For the purposes of the above provisions “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.

(vi) Vacancy in case of retiring director [Section 152(7)]

(a) If the vacancy of the retiring director is not so fil led-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 ret iring 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—

(A) 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;

(B) 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;

(C) he is not qualified or is disqualified for appointment;

(D) a resolution, whether special or ordinary, is required for his appointment or re appointment by virtue of any provisions of this Act; or

(E) section 162 is applicable to the case.

For the purposes of section 152, the “retiring director” means a director retiring by rotation.

Non applicability of section 152(6) and 152(7): The Ministry of Corporate Affairs has clarified via Notification No. 463(E) dated 5th June, 2015, that section 152(6) and (7) of the Companies Act, 2013, shall not apply to:

(i) A Government company in which the entire 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:

(ii) A subsidiary of a Government company, referred to in (a) above, in which the entire paid up share capital is held by the Government company.