Corporate Governance: Directors Appointment

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Questions and Answers

What happens if a vacancy of a retiring director is not filled at a general meeting and no resolution has been made to not fill the vacancy?

A special resolution is required for re-appointment.

The director is immediately deemed re-appointed.

The general meeting is adjourned to the following week. (correct)

The board will fill the vacancy without adjournment.

Under what circumstance will a retiring director not be deemed re-appointed?

If there are no candidates for re-appointment.

If the retiring director submitted a written notice of unwillingness. (correct)

If the director had been on the board for less than a year.

If the meeting had a low attendance.

What must occur at the adjourned meeting for a retiring director to be deemed re-appointed?

The meeting must resolve not to fill the vacancy.

The vacancy must still remain unfilled. (correct)

A vote must be cast with all directors present.

A special resolution must be passed.

If a resolution for the re-appointment of a director has been put to the meeting and lost, what is the result?

The director cannot be deemed re-appointed. Signup and view all the answers

In which scenario would a single resolution for the appointment of multiple directors be considered void?

No prior proposal was moved for each appointment. Signup and view all the answers

What is one requirement for a retiring director to be considered eligible for re-appointment?

The director must not be disqualified under the Act. Signup and view all the answers

What occurs if the adjourned meeting falls on a national holiday?

The meeting will occur the next day. Signup and view all the answers

Why might a retiring director's re-appointment be invalid under Section 162?

A resolution was used to appoint multiple directors simultaneously. Signup and view all the answers

What is the meaning of 'retiring director' as per Section 152?

A director who has completed their term and rotates off Signup and view all the answers

Which types of companies do Sections 152(6) and 152(7) not apply to?

Government companies not listed with majority government ownership Signup and view all the answers

What is required for a subsidiary of a government company to be exempt from Sections 152(6) and 152(7)?

It should not have defaulted on filing financial statements Signup and view all the answers

What does Director Identification Number (DIN) signify?

A unique identification for any individual intending to become a director Signup and view all the answers

Can Mr. Rajesh use his existing DIN when appointing himself in a LLP?

Yes, he does not require to apply for DPIN Signup and view all the answers

When was the notification for the Non-applicability of Sections made?

5th June, 2015 Signup and view all the answers

What does the abbreviation 'DPIN' stand for?

Designated Partnership Identification Number Signup and view all the answers

What is the minimum percentage of paid-up share capital that qualifies a government company for exemptions under Sections 152(6) and 152(7)?

51% Signup and view all the answers

What is the maximum number of public companies in which a person can serve as a director?

10 Signup and view all the answers

Which type of company directorship is excluded from the maximum limit of 20 companies?

Dormant companies Signup and view all the answers

What is the requirement for Section 8 companies to be exempt from the maximum directorship limit?

They must not have committed any defaults in filing financial statements. Signup and view all the answers

What actions must a director take if they were serving in more companies than allowed before the 2013 Companies Act?

Select the allowed number of companies within one year. Signup and view all the answers

How can the members of a company specify a lesser number of directorships?

By special resolution. Signup and view all the answers

Which of the following directorships counts toward the limit of 10 public companies?

Private companies that are holding or subsidiary to public companies. Signup and view all the answers

If a person is a director in 25 companies at the time of the Companies Act commencement, what must they do?

Select a maximum of 20 companies within a year. Signup and view all the answers

What is the main purpose of Section 165 of the Companies Act, 2013?

To limit the number of directorships a person can hold. Signup and view all the answers

What is the minimum proportion of directors in a public company who must be liable to retire by rotation if the articles do not specify otherwise?

Two-thirds Signup and view all the answers

What must happen at the first annual general meeting of a public company regarding directors?

One-third of the rotational directors must retire. Signup and view all the answers

Which type of company is exempt from the retirement by rotation requirement?

Private companies that are not subsidiaries of public companies Signup and view all the answers

How are non-rotational directors appointed in a public company?

They are appointed by shareholders in a general meeting. Signup and view all the answers

What is the calculation rule for determining the number of directors retiring by rotation?

The nearest integer to one-third of the rotational directors must retire. Signup and view all the answers

What is required for articles of a public company regarding the retirement of directors?

They can allow non-rotational appointments. Signup and view all the answers

What happens at every subsequent annual general meeting following the first meeting regarding retiring directors?

One-third of the directors must retire if applicable. Signup and view all the answers

Which of the following statements is true about the retirement of directors?

Permanent directors are exempt from the retirement rule. Signup and view all the answers

What is the time frame for an individual to inform the company of changes in their particulars?

15 days Signup and view all the answers

Under what circumstance can a director's DIN be cancelled or deactivated?

Circumstances mentioned in rule 11 of Companies (Appointment of Directors) Rules, 2014 Signup and view all the answers

What is required for a person who is not a retiring director to stand for directorship?

A written notice signifying candidature Signup and view all the answers

What provision does section 160 of the Act relate to?

Eligibility to stand for directorship Signup and view all the answers

What action did the RoC take in the case of Imraj Ali Molla v. Union of India regarding DIN deactivation?

They deactivated the DIN based on disqualification. Signup and view all the answers

What must a candidate do at least 14 days before the general meeting to be eligible for directorship?

Submit a notice of candidature Signup and view all the answers

Which section discusses the right of persons other than retiring directors to stand for directorship?

Section 160 Signup and view all the answers

What was the outcome of the ruling in Gaurang Balvantlal Shah v. Union of India regarding DIN?

DIN cannot be canceled except under specific circumstances. Signup and view all the answers

Study Notes

Appointment and Retirement of Directors

Retirement by Rotation: Unless a public company's articles of association dictate otherwise, a minimum of two-thirds of the total directors must be appointed with a term subject to retirement by rotation. These directors are appointed by a general meeting.
Non-Rotational Directors: The remaining directors are appointed by the company in a general meeting, subject to the company's articles.
Retirement Schedule: At the first annual general meeting following the appointment of the initial directors, and at every subsequent annual meeting, one-third of the directors subject to retirement by rotation retire from office.
Exemption for Private Companies: Private limited companies that are not subsidiaries of public companies are exempt from the rotation requirements and can appoint all directors with permanent positions.

Deemed Reappointment of Directors

Adjourned Meetings: If a retiring director's position remains unfilled after a general meeting, and the meeting does not explicitly decide not to fill the vacancy, the meeting is adjourned to the same time and place the following week. If this date is a national holiday
Deemed Reappointment: If the vacancy remains unfilled at the adjourned meeting as well, and the meeting does not explicitly decide not to fill the vacancy, the retiring director is deemed to have been reappointed with immediate effect.
Exceptions to Deemed Reappointment: A retiring director is not deemed to be reappointed if:
- A resolution for reappointment was put to the meeting but failed.
- The retiring director has expressed their unwillingness to be reappointed in writing.
- They're disqualified from holding the position based on provisions within the Act.
- A special or ordinary resolution is required for their appointment or reappointment.
- The appointment of two or more directors using a single resolution resulted in a violation of Section 162.

Exemptions from Rotation

Government Companies: The requirements of Sections 152(6) and 152(7) do not apply to government companies that are not listed on a stock exchange, provided at least 51% of their paid-up share capital is held by the Central Government, a State Government, or a combination of both.
Subsidiaries of Government Companies: This exemption also applies to subsidiaries of government companies mentioned above.

Director Identification Number (DIN)

Purpose: The Central Government assigns a unique Director Identification Number (DIN) to individuals who wish to be appointed as directors.
Previous DINs: DINs obtained prior to the notification of the 'Specification of Definitions Details Rules' remain valid under the Companies Act, 2013.
Designated Partnership Identification Number (DPIN): The term "DIN" encompasses DPINs issued under the Limited Liability Partnership Act, 2008.
DIN Changes: The DIN Cell of the Ministry informs the Registrar of changes submitted in Form DIR-6, and individuals are required to inform companies they're directors of within 15 days of any changes to their own information.

Right to Stand for Directorship

Eligibility: Individuals who are not retiring directors can also stand for election to the board.
Written Notice: Individuals seeking to stand for directorship must provide a written notice at least 14 days prior to the general meeting where the election will take place.

Limitations on Directorships

Maximum Directorships: An individual cannot hold office as a director, including alternate directorships, in more than 20 companies at a time.
Public Company Limit: The maximum number of public companies an individual can be director in is 10. This includes directorship in private companies that are either holding or subsidiary companies of a public company.
Exemption for Dormant and Section 8 (Non-Profit) Companies: Directorships in dormant companies and Section 8 companies do not count towards the limit of 20.
Exemption for Section 8 Companies: The limit of 20 directorships does not apply to Section 8 companies, provided they've not defaulted on filing their financial statements or annual returns.
Lesser Number of Directorships: Companies can, through a special resolution, reduce the maximum number of directorships a director of their company can hold.

Transition Period

One-Year Deadline (Prior to 2014): Individuals holding more directorships than permitted under the Companies Act, 2013, had one year (until March 31, 2015) to choose the companies they wanted to continue serving as directors of.

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Description

This quiz focuses on the appointment and retirement of directors in public companies, highlighting the rules governing rotational and non-rotational directors. It also addresses exemptions for private companies and the implications of adjourned meetings for retiring directors. Test your understanding of these vital corporate governance concepts!