Appointment and Reappointment of Directors

Note the two limits. It operates only where the articles are silent, and only the subscribers who are individuals are deemed directors, because a body corporate cannot be a director.

The general rule: section 152(2)

Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting.

The exceptions are the express ones: the first directors under section 152(1); the additional, alternate, nominee and casual vacancy directors the Board appoints under section 161; and a small shareholders' director elected under section 151. Everything else comes from the members.

What must accompany an appointment is in [Who is a Director, and the Director Identification Number]: a Director Identification Number, a declaration of non-disqualification, and a consent filed with the Registrar within thirty days before the appointee may act.

Retirement by rotation: section 152(6)

Unless the articles provide for the retirement of all directors at every annual general meeting:

(a) 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 shall, in default of and subject to any regulations in the articles, also be appointed by the company in general meeting.

(c) At the first annual general meeting held next after 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.

(d) The directors to retire at every annual general meeting shall be those who have been longest in office since their last appointment; and as between persons who became directors on the same day, those to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

(e) At the meeting at which a director so retires, the company may fill up the vacancy by appointing the retiring director or some other person.

The 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.

The arithmetic, done carefully

Step one: how many are rotational? Not less than two-thirds of the total number of directors, excluding independent directors. The remaining third or fewer are non-rotational.

Step two: how many retire this year? One-third of the rotational directors, and if that number is neither three nor a multiple of three, the number nearest to one-third.

Read step two again, because the wording is easy to misread. The "neither three nor a multiple of three" test applies to the number liable to retire by rotation, and where it is not divisible neatly the answer is the number nearest to one-third, not the next whole number up.

Step three: which ones? Those longest in office since their last appointment. Note "since their last appointment": a director who retired and was reappointed starts again from that reappointment.

Step four: ties. Those who became directors on the same day decide among themselves by agreement, and failing agreement, by lot.

The five points to say in an answer

1. It binds a public company, and does not apply if the articles require all directors to retire every year.
2. Not less than two-thirds must be rotational, and they are appointed in general meeting.
3. One-third of those rotational directors retire at each annual general meeting, or the number nearest to one-third.
4. Longest in office goes first; same-day directors by agreement or lot.
5. Independent directors are not counted in the total number.

If the vacancy is not filled: section 152(7)

(a) If the vacancy of the retiring director is not filled up and the meeting has not expressly resolved not to fill it, 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 the vacancy is still not filled and that meeting has also not expressly resolved not to fill it, the retiring director shall be deemed to have been re-appointed, unless:

• (i) at that meeting or the previous one, a resolution for his re-appointment has been put and lost;
• (ii) the retiring director has, by notice in writing to the company or its Board, expressed his unwillingness to be 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 provision of this Act; or
• (v) section 162 is applicable to the case, that is, the appointment is caught by the rule against a single resolution appointing two or more directors.

The Explanation provides that for this section and section 160, "retiring director" means a director retiring by rotation.

The deemed re-appointment is the rule students most often miss. Silence twice over re-appoints the retiring director. Nothing happens by default except his continuation, and there are five ways out of it.

A worked example

Kolhapur Engineering Limited, a public company, has twelve directors, of whom three are independent.

The count. By the Explanation to section 152(6), independent directors are excluded from the total number, so the relevant total is nine.

Rotational directors. Not less than two-thirds of nine is six. So at least six directors must be liable to retire by rotation and be appointed in general meeting. The other three may be non-rotational, and are also appointed in general meeting in default of any regulation in the articles.

How many retire this year. One-third of six is two. Two directors retire at each annual general meeting. Had the rotational number been seven, one-third is 2.33, which is neither three nor a multiple of three, so the number nearest to one-third is two.

Which two. Those longest in office since their last appointment. Mr Pawar and Ms Joshi were both appointed on 12 August 2024 and are the longest serving. They are tied, so they may agree between themselves who goes; failing agreement, it is decided by lot.

At the meeting. The company may fill the vacancy by re-appointing the retiring director or by appointing somebody else: section 152(6)(e).

Nobody is appointed. The members neither appoint anybody nor expressly resolve not to fill the vacancy. The meeting stands adjourned to the same day in the next week, at the same time and place. That day turns out to be a national holiday, so it goes to the next succeeding day which is not a holiday.

At the adjourned meeting, again nothing happens. By section 152(7)(b) Mr Pawar is deemed to have been re-appointed.

Five ways that would not have happened. If a resolution for his re-appointment had been put and lost at either meeting; if he had written to the company expressing unwillingness; if he were disqualified; if the Act required a special or ordinary resolution for his appointment; or if section 162 applied.

An outsider. Mr Salunkhe, not a retiring director, wants the seat. He must leave a notice in writing at the registered office not less than fourteen days before the meeting, with a deposit of one lakh rupees, refunded if he is elected or polls more than twenty-five per cent of the total valid votes: section 160, treated in [Types of Directors].

A change to the articles. Suppose the articles were altered to require all directors to retire at every annual general meeting. Section 152(6) then does not apply at all: its opening words are "unless the articles provide for the retirement of all directors at every annual general meeting".

A private company. Had Kolhapur Engineering been a private company, section 152(6) would not have applied, because it speaks only of a public company. Its articles would decide.

Distinctions that carry marks

What this does NOT mean

It does not mean two-thirds of the Board retires each year. Two-thirds are liable to rotate; one-third of those retire annually.

It does not mean independent directors rotate. They are excluded from the total number by the Explanation to section 152(6).

It does not mean an unfilled vacancy stays empty. Unless the meeting expressly resolves not to fill it, the retiring director is deemed re-appointed after the adjourned meeting.

It does not mean rotation binds every company. Section 152(6) applies to a public company, and not even to that where the articles require all directors to retire at every annual general meeting.

Quick revision

• 152(1): where the articles are silent, the subscribers who are individuals are the first directors; in an OPC, the individual member.
• 152(2): save as otherwise expressly provided, every director is appointed in general meeting. The exceptions are sections 152(1), 161 and 151.
• 152(6)(a): not less than two-thirds of a public company's directors are liable to retire by rotation and appointed in general meeting; (b) the rest are also appointed in general meeting in default of the articles.
• 152(6)(c): at the first AGM after the first directors are appointed and at every subsequent AGM, one-third of those liable to retire, or, if their number is neither three nor a multiple of three, the number nearest to one-third, shall retire.
• 152(6)(d): those longest in office since their last appointment retire first; same-day directors decide by agreement, failing which by lot.
• 152(6)(e): the company may fill the vacancy with the retiring director or somebody else.
• Explanation: independent directors are excluded from "total number of directors".
• 152(7)(a): if not filled and not expressly resolved against, the meeting is adjourned to the same day next week, or the next non-holiday.
• 152(7)(b): at the adjourned meeting the retiring director is deemed re-appointed, unless a resolution for his re-appointment was put and lost, he has given written notice of unwillingness, he is disqualified, a resolution is required by the Act, or section 162 applies.

Test yourself

1. Who appoints directors? Save as otherwise expressly provided in the Act, the company in general meeting: section 152(2). The express exceptions are the first directors under section 152(1), the additional, alternate, nominee and casual vacancy directors under section 161, and the small shareholders' director under section 151.

2. How many directors of a public company must be liable to retire by rotation, and how many retire each year? Not less than two-thirds of the total number of directors, excluding independent directors, must be liable to retire by rotation; and at each annual general meeting one-third of those liable to retire, or, if their number is neither three nor a multiple of three, the number nearest to one-third, retires: section 152(6)(a) and (c).

3. Which directors go first, and how are ties resolved? Those who have been longest in office since their last appointment; and as between persons who became directors on the same day, by agreement among themselves, failing which by lot: section 152(6)(d).

4. Are independent directors counted? No. By the Explanation to section 152(6), "total number of directors" shall not include independent directors, whether appointed under this Act or any other law.

5. What happens if the vacancy of a retiring director is not filled at the meeting? Unless the meeting has expressly resolved not to fill it, the meeting stands adjourned to the same day in the next week at the same time and place, or, if that is a national holiday, to the next succeeding non-holiday: section 152(7)(a).

6. And if it is still not filled at the adjourned meeting? The retiring director is deemed to have been re-appointed, unless a resolution for his re-appointment was put and lost, he has given written notice of unwillingness, he is not qualified or is disqualified, a special or ordinary resolution is required by the Act for his appointment, or section 162 applies: section 152(7)(b).