Board Resolution for Non Regularisation of Additional Director

Reference: Section 161(1) of the Companies Act 2013 of India

Sub-section (1) of section 161 reads as follows: "The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier."

Non-regularisation - Not Required

As you will notice from the above mentioned provision under section 161(1) - which clearly states that the appointment of the additional director is valid till the next AGM or in case the AGM is not held the last due date for the next AGM.

So, on that day - the term of the additional director will expire or his office will get vacated automatically, hence there would not be any requirement to non-regularise his appointment.

Company opposing proposal for Additional Director appointment as Director

There comes another situation where the company has received a notice from a member under section 160(1) proposing the directorship of the same Additional Director whose term is expiring in the ensuing AGM - but the company is not in favour of such appointment.

Then in that case if you are thinking - can the company pass a resolution for non-regularisation or non-appointment of that additional director? The answer is 'no'.

Reasons:

(1) As per section 160(1), a person is eligible to be appointed as a Director if he is not retiring as per section 152 and if a notice is received proposing his candidature - as per rule 13 of the Companies (Appointment and Qualification of Directors) Rules, 2014, the company has to inform its members about such notice of candidature. Hence, as the Director is eligible for appointment, the company has to take up this business at the AGM for voting. The company cannot pass a resolution proposing his non-appointment.

(2) However, the company may include its remarks in the 'Explanatory Statement' by way of adverse recommendation, if any, of the Board of Directors and/or Nomination and Remuneration Committee regarding the appointment/ qualification/ expertise of the said person and the reasons, if any, as to how the company may be adversely affected by the appointment of the said person as a Director. So that the shareholder may be indirectly advised not to vote in favour of the resolution.


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Disclaimer: The above views and opinions are the personal interpretation of the author and may not necessarily represent the true view of the law. Do consult the experts before going ahead.

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Relevant Resolution: Board Resolution for Regularisation of Appointment of Additional Director as a Director