WHETHER FIRST DIRECTOR – REGULARIZATION MANDATORY
WHETHER FIRST DIRECTOR –
REGULARIZATION MANDATORY
BACKGROUND:
Many professionals have been raising question on
interpretation/ provisions relating to Regularization of First Director:-
Situation:
As per Act, Company can appoint first director
by mention the name of directors in the Article of Association or in case of
article don’t give any name in that case subscriber of the MOA who are
individual shall be deemed to be first Director.
v
Whether
first director appointed as per section 152(1) (by name in AOA or as subscriber
of MOA) mandatory to regularize or not?
Let’s first discuss the questions:
Various professional have the view that in position
of appointment of First Director either through AOA or through subscriber sheet
their term will be upto the date, they resign from the post or retirement by
rotation. Other professional have the observation that tenure of first
directors will be upto the First AGM of the Company, in first AGM Company have
to regularize them with the consent of the shareholders. If they don’t get
regularized in the AGM then their tenure will be considered as finish at the
end of the AGM.
Statutory Provisions Contained Under the Act:
Provisions of the Companies Act, 2013 to the
extent relevant for our discussion, are stated as under (with necessary
comments and modifications, wherever felt necessary).
As stated in
Section 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.
As stated in
Section 152(2) Save as otherwise expressly provided in this Act, every director
shall be appointed by the company in general meeting.
Interpretation Note:
Therefore, as per the language
of section 152 First Director can be appoint by AOA or by subscriber sheet. But
as per Section 152(2) every director shall be appointed by the Company in
General Meeting. First director are not appointed in General Meeting.
If we look at the
language of Section 152(1) there are one sentence “deemed to be first
directors of the company until the directors are duly appointed” and 152(2)
apparent that director can be appoint barely by shareholders in general
meeting. As a result, first director may hold office till directors are
elected, in accordance with the provisions of section 152(2) at the first
general meeting held after the incorporation but prior to the holding of the
first annual general meeting
CONCLUSION:
Hence, taking into consideration the provisions of Section
152(1) & (2) one can opine that First director of the Company contain their
tenure upto the date of first general meeting held by the Company subsequent to
incorporation.
Thus, here one can opine that First Directors of
the company are required to regularized in the first General meeting of the
Company.
Any other opinion is also welcome for further
clarity of the provision of the Companies Act.
In my opinion Section 152 (6) (c) only talks about those directors who actually assumed the charge by virtue of holding the position being the subscribers to the memorandum.
ReplyDeleteThus, First Directors of the company are required to regularized in the first General meeting of the Company only in case subscribers to the memorandum are assumed as First Directors of the Company.
Sec 152(1) clearly states that subscribers who are deemed to be the first directors and shall be regularized in first GM. However, it is only for such cases where no provision is made in the articles of a company for the appointment of the first director, thereby meaning that if first directors are duly mentioned in AOA, then the same may fall outside the purview of regularization. The said stance is further confirmed by the Non-obstante clause provided in Sec 152(2) which starts with "Save as otherwise expressly provided in this Act", meaning that if a director is duly appointed under some other provisions of this act, then their regularization is not required. Ofcourse it does point out to nominee directors but wont it be covering such first directors' appointment whose name is specifically mentioned to be the First directors under AOA?
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