Director absents himself
The period of three months
should be calculated from the date of the first meeting from which the director
absents himself. The period of absence does not run until he has failed to
attend three consecutive meetings as regards all of which he has received
notice and which he should have attended; or has refrained from attending all
the meetings where they are more than three, held during a continuous period of
three months.
Leave of absence of Directors (S.
283(l)(g))
The words 'absent himself'
imply voluntary or deliberate absence and do not cover cases of involuntary
absence such as that caused by illness etc. due to causes beyond his control.
Re, London & Northern Bank Macks Claim, 1900 WN 114. Where a question
arises whether a Director's office has become vacant by reason of his absenting
himself, it is only just that the Director should be given an opportunity to
explain his absence. Richardson v. Methely School Board, (1893) 3 Ch 510.
However, it has been held that no hearing is required to be given under sub-sectlon
(1)(g) of section 283, and that the vacation of office is automatic . Shekhar
Mehra v. Kilpest (P) Ltd., (1986) 3 Comp LJ 234 (MP) (DS).
A Director can defend
himself by showing that he had no knowledge of the alleged meetings. But where
the company was able to produce postal certificates of the notices sent to him
it was held to be enough to bring the provision into operation. Parmanand
Choudhury v. Shukla Devi Mishra Smt., (1988) 1 Comp LJ 109 (MP).
Absencen of non-resident
director at a Board Meeting not validly convened will not result in the
vacation of his office under clause (g) of section 283(l). Dr. Kamal K. Dutta
and Another v. Ruby General Hospital Ltd. & Others, (2000) 36 CLA 214 (CLB-PB).
Under section 283(l)(g) a
director vacates office if he absents himself from 3 consecutive board meetings
or from all the board meeting for a continuous period of three months whichever
is longer without obtaining leave of absence from the Board and this three month
period would commence only from the date of the first meeting that a director
absents himself from attending. Vinod Kumar Mittal v. Kaveri Lime Industries
Ltd. and others, (2000) 100 Corn Cases 66 (CLB-PB). In a family company
where leave of absence is normally gi-en without any formal request
whether oral or written in such a situation it cannot suddenly put a director
to a surprise by proposing to remove him on account of absence without any
record of leave. Ajit Singh v. DSS Enterprise (P) Ltd., (2001) 45 CLA 102.
The factual validity of an
automatic vacation of office under section 283 is a matter of civil court
Jurisdiction. The director in question was held to be entitled to move the
company court for adjudication. K. Venkat Rao v. Rockwool (India) Ltd., (2002)
108 Com Cases 494 (AP-FB).
RESOLVED that Shri ABC,
Director of the company who has failed to obtain the qualification shares as
per the provisions contained in Article 68 of the Articles of Association of
the Company be and is hereby deemed to have vacated his office as director
pursuant to section 283(l)(a) of the Companies Act, 1956."
1. Shareholding not statutory required. -There is no statutory
requirement that a director must hold any shares at all. If the Articles of
Association provide for qualification shares, then it shall be the duty of
every director to hold a specified share qualification and to obtain his
qualification within two months after his appointment as director.
2. Provisions in the Articles. -Any provisions in the Articles of the company shall
be void in so far as it requires a person to hold the qualification shares
before his appointment as a director or to obtain them within a shorter time
than two months after his appointment as such.
3. Value of share qualification. -The nominal value of qualification shares
shall not exceed Rs. 5,000/- or the nominal value of one share where it
exceeds Rs. 5,0001. Bearer of share warrant shall not be deemed to be the
holder of shares specified in the warrant.
4. Registered Holder. -A person cannot be said to be qualified in respect
of qualification shares until he is registered as holder of the shares
(Arthanari Transport P. Ltd. v. K. P. Swami Goundar, (1965) 35 Comp Cases 930).
5. Holding of share qualification, meaning of. -In sub-section (1)
clause (a) "to hold the share qualification" means to hold in ones
own name or jointly with others. But a mere claim of right to shares is not
enough. (Coal Products (P.) Ltd. v. Ram Avtar Jalan, (1969) 39 Comp Cases 223).
6. Private Companies.-A private company by its articles provide that the
office of director shall be vacated on any other grounds.
7. Penalty.-If after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270, he shall be punishable with fine which may extend to five hundred rupees for every day between such expiry and the last day on which he acted as a director. [Section 272]
8. Procedure -Ensure that necessary changes have been effected in
the Register of Directors (S. 303) and Register of Directors' shareholdings
(Section 307). Also ensure to file Form 32 within thirty days with the
Registrar of Companies concerned in duplicate.
Vacation of office due to unsound mind
"RESOLVED that Shri.
SPM who has been found to be of unsound mind by the High Court of Delhi be and
is hereby deemed to have vacated his office of the Director pursuant to clause
(b) of sub-section (1) of section 283 of the Companies Act, 1956."
PRACTICE NOTES
1. Unsound Mind.-The Director shall be deemed to be of unsound mind only by a court of
competent jurisdiction.
2. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283 he shall be punishable with fine which may extend to Rs. 500/-
for each day on which he so functions as a director.
3. Procedure.-Ensure that necessary changes have been effected in the Register of
Directors (S. 303) and Register of Directors' shareholdings (Section 307). Also
ensure to file Form 32 within thirty days with the Registrar of Companies
concerned in duplicate.
Director adjudicated as insolvent
"RESOLVED that Shri.
SPM, Director who has applied to be adjudicated as an insolvent, be and is
hereby deemed to have vacated his office pursuant to clause (c) of sub-section
(1) of section 283 of the Companies Act, 1956."
1. Vacation of office. -A director shall be deemed to have vacated office of
Director if he has applied to the Court having competent jurisdiction for being
adjudicated as insolvent.
2. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs. 5000/-
for each day on which he so functions as a director.
3. Private Companies.-A private company which is not a subsidiary of a
public company may by its articles provide any other additional grounds for
vacation of office by a director.
4. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (S. 303) and Register of Directors' shareholdings
(Section 307). Also ensure to file Form 32 within thirty days with the
Registrar of Companies concerned, in duplicate.
Vacation of office of Director for insolvency
"RESOLVED that Shri
UKR, Director of the Company who has been adjudged as an insolvent by the High
Court of Delhi, be and is hereby deemed to have vacated his office of Director
pursuant to the provisions contained in clause (d) of sub-section (1) of
section 283 of the Companies Act, 1956."
1. Insolvency as a disqualification.-The director has to be
adjudged as insolvent by a Court of competent Jurisdiction. The
disqualification shall not take effect
(a) for thirty days from the
date of the adjudication;
(b) where any appeal or
petition is preferred within thirty days against the aforesaid adjudication
until the expiry of seven days from the date on which such appeal or petition
is disposed of; or
(c) if any further appeal or
petition is preferred within the aforesaid seven days until such further appeal
or petition is disposed of.
2. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs. 5000/-
for each day on which he so functions as a director.
3. Vacation on additional grounds. -A private company which is not a subsidiary
of a public company may, by its articles provide that the office of director,
shall be vacated on any other additional grounds.
4. Procedure.-Ensure that necessary changes have been effected in the Register of
Directors (Section 303) and Register of Directors' shareholdings (Section 307).
Also ensure to file Form 32 within thirty days with the Registrar of Companies
concerned, in duplicate.
Vacation of Office for being convicted of an offence of
moral turpitude
"RESOLVED that Shri SPM who has been convicted by the High Court of Delhi of an offence of moral turpitude and sentenced to imprisonment in respect thereof for six months be and is hereby deemed to have vacated his office of director pursuant to clause (e) of subsection (1) of section 283 of the Companies Act, 1956."
1. Conviction by court.-If a director is convicted by a court of any offence
involving moral turpitude and sentenced in respect thereof to imprisonment for
not less than six months, he shall be ceased to be a director of the company.
The disqualification shall not take effect
(a) for thirty days from the
date of sentence;
(b) where an appeal or
petition preferred within thirty days against the aforesaid conviction, until
the expiry of seven days from the date on which such appeal or petition is
disposed of; or
(c) if any further appeal or
petition is preferred within the aforesaid seven days until such further appeal
or petition is disposed of.
2. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs. 5000/-
for each day on which he so functions as a director.
3. Vacation on additional grounds. -A private company which is not a subsidiary
of a public company may, by its articles provide any other additional grounds
for vacation of office by a director.
4. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Directors'
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
Vacation of office for failure to pay call money
"RESOLVED that Shri
SPM, Director who has failed to pay call in respect of 200 equity shares of the
Company held by him and six months have elapsed from the last date fixed for
the payment of the call money be and is hereby deemed to have vacated his
office of Director pursuant to clause (f) of sub-section (1) of section
283 of the Companies Act, 1956."
1. Failure to pay calls. -If a director fails to pay any call in respect of
shares of the Company held by him, whether alone or jointly with others, within
six months from the last date fixed for the payment of the call, he shall be
ceased to be a director of the company.
2. Power of Central Government. -The Central Government may by notification in
the Official Gazette remove the disqualification incurred by such failure.
3. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs. 5000/-
for each day on which he so functions as a director.
4. Vacation on additional grounds. - A private company which is not a subsidiary
of a public company may by its articles provide that the office of director
shall be vacated on any other additional grounds.
5. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Directors'
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
S.
283(l)(g)-Grant of leave of absence to Director-Board Resolution
"RESOLVED that Mr. A.B., a Director of the Company be and is hereby granted leave of absence from attending Board Meetings for a period of __________ from this date."
OR
"RESOLVED that Mr. A.B., a Director of the Company be and is hereby granted leave of absence from attending this meeting".
1. Director absenting himself without obtaining leave of absence.-If a Director absents
himself, without obtaining leave of absence, from three consecutive Board
Meetings he is deemed to have vacated office.
2. Additional grounds of vacation.-A private company which is
not a subsidiary of a public company may provide for additional grounds of
vacation of office of a director in its articles of association apart from the
grounds mentioned under section 283(l) of the Act.
Director's vacation of office
"RESOLVED to note that
Mr. NPT, a Director of the Company, ceased to be a Director on __________,
the __________,
2002 __________,
by reason of absenting
himself in three consecutive meetings of the Board of Directors and that the
Secretary of the Company be and is hereby instructed to inform the said
Director about his vacation ot office."
1. Section 283 contains grounds on which Director's office vacated. -Section 283 of the Companies
Act, 1956, provides for several grounds on which the office of a Director stands
vacated.
2. Filing of return. -On vacation of office by a director the company
should file a return in duplicate in Form No. 32 with the Registrar of
Companies within thirty days of such vacation along with requisite filing fee
prescribed under Schedule X of the Act.
Leave of absence of Directors
(Another format)
S.
283(l)(g)-Leave of absence of Directors-Board Resolution
"RESOLVED that leave of absence be and is hereby granted to Shri XYZ and that Shri ABC, be and is hereby allowed to attend the Board Meeting in his place."
OR
"RESOLVED that Shri XYZ
be and is hereby granted leave of absence from attending the meeting of the
Board of Directors for a period of four months from the date of this Board
Meeting, that is 5th July, 2002".
OR
"RESOLVED that pursuant
to the provisions of section 283(l)(g) of the Companies Act, 1956, Shri XYZ
ceases to be a Director of the Company with effect from 29th June, 2002, as he
has absented himself from three consecutive meetings of the Board of Directors
held on 25th September, 2001, 5th December, 2001 and 7th March, 2002 and that
the Secretary of the Company be and is hereby directed to note the cessation of
directorship by Shri XYZ in the register and file the necessary return with the
Registrar of Companies, Delhi and Haryana.
RESOLVED FURTHER that Shri
XYZ be also informed about the cessation of his directorship."
PRACTICE NOTES
1. Leave of absence.-Leave of absence is granted by the Board to a
Director on a request made by the Director. The Board may also grant leave of
absence to a Director even when no request is received.
2. Leave of absence to be for each meeting. -Leave of absence has to be
granted to a Director for each meeting.
3. Director absenting himself vacates office. -The office of a Director
becomes vacant when he absents himself from three consecutive meetings of the
Board of Directors or from all meetings of the Board for a continuous period of
three months, whichever is longer without obtaining leave of absence from the
Board.
4. Words "absent himself” Meaning. -The words 'absent himself'
imply voluntary or deliberate absence and do not cover cases of involuntary
absence such as that caused by illness etc. due to causes beyond his control.
Re, London & Northern Bank Macks Claim, 1900 WN 114.
5. Opportunity be given to director to explain his absence. -Where a question arises
whether a Director's office has become vacant by reason of his absenting
himself, it is only just that the Directors should be given an opportunity to
explain his absence. Richardson v. Methely School Board, (1893) 3 Ch 510.
6. Vacation of office automatic. -It has been held that no hearing is required
to be given under sub-section (1) (g) and that the vacation of office is
automatic. Shekhar Mehra v. Kilpest P, Ltd., (1986) 3 Comp LJ 234 (MP-DB).
7. Director's right to defend himself. -A Director can defend
himself by showing that he had no knowledge of the alleged meetings. But where
the company was able to produce postal certificates of the notices sent to him
it was held to be enough to bring the provision into operation. Parmanand
Choudhury v. Shukla Devi Mishra Smt., (1988) 1 Comp LJ 109 (MP).
8. Filing of Form 32 (in duplicate) with Registrar. -File return in Form No. 32
(in duplicate) with the Registrar of Companies concerned when a Director ceases
to be a Director of the company within thirty days of cessation.
(Another format)
"RESOLVED that Shri SKM
and Ms. SJ be granted leave of absence from attending the Board Meeting."
1. Leave of absence by Board. -The Board can grant leave of absence for any number
of meetings and for any length of time, even if it may extend to the whole term
of a director's office.
2. Vacation of office.-It is to be noted that if a Director absents himself
from three consecutive meetings of the Board of Directors or from all meetings
of the Board for a continuous period of three months, whichever is longer,
without obtaining leave of absence from the Board, he shall be deemed to have
vacated office.
3. Words "absents himself"-meaning thereof. -The words 'absents himself'
imply voluntary or deliberate absence and do not cover cases of involuntary
absence such as that caused by illness etc. due to causes beyond his control.
(Re: London & Northern Bank, Macks Claim, 1900 WN 114: Mc Connell's Claim,
(1901) 1 Ch 728).
Vacation of office due to absence
(Another format)
S. 283(l)(g)- Vacation of office by Directors without
obtaining leave of absence-Board Resolution
"RESOLVED that Shri SPM, Director having absented himself from three consecutive meetings of the Board of Directors held on 5th April, 2002, 4th July, 2002 and 25th October, 2002 without obtaining' leave of absence from the Board be and is hereby deemed to have vacated his office of Director of the Company effective from 25th October, 2002."
1. Absentation from three consecutive meetings.-If a director absents
himself from three consecutive meetings of the Board of Directors or from all
meetings of the Board for a continuous period of three months, whichever is
longer, without obtaining leave of absence from the Board.
2. Calculation of period how made. -The period of three months
should be calculated from the date of the first meeting from which the director
absents himself. The period of absence does not run until he has failed to
attend three consecutive meetings as regards all of which he has received
notice and which he should have attended; or has refrained from attending all
the meetings where they are more than three, held during a continuous period of
three months.
3. Meaning of absents himself.-The words "absents himself' imply
voluntary or deliberate absence and do not cover cases of involuntary absence
such as that caused beyond his control (Re London & Northern Bank, Macks
Claim 1900 WN 114).
4. Opportunity given to Director.-Where a question arises
whether a director's office has become vacant by reason of his absenting
himself it is only just that the director should be given an opportunity to
explain his absence. (Richardson v. Methely School Board, (1893) 3 Ch 510).
5. Automatic vacation.-It has also been held that no such hearing is
required to be given under this sub-section and that the vacation of
office is automatic. (Shekhar Mehra v. Kilpest (P.) Ltd., (1986) 3 Comp LJ
234).
6. Applicability of sub-section (1)(g).-The provisions of sub-section
applies to all kinds of directors including permanent directors.
7. Tenure of granting leave of absence. -Please note that the Board
of Directors may grant leave of absence for any number of meetings and for any
length of time, even if it may extend to the whole term of a director's office.
8. Penalty.-If a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in the several clauses of sub-section (1) of section 283, he shall be punishable with fine which may extend to Rs. 5000/- for each day on which he so functions as a director.
9. Additional grounds of vacation.-A private company which is
not a subsidiary of a public company may, by its articles provide that the
office of director, shall be vacated on any additional grounds.
10. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Director's
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
Vacation of office for accepting loan in contravention
of section 295
S. 283(l)(h)-Vacation of office for contravention of
section 295 by Directors-Board Resolution
"RESOLVED that Shri
UKR, Director who has accepted loan from the Company in contravention of the
provisions contained in section 295 of the Act be and is hereby deemed to have
vacated his office of Director pursuant to clause (h) of sub-section (1)
of section 283 of the Companies Act, 1956."
1. Contravention of section 295.-If a director whether by
himself or by any person for his benefit or on his account or any firm in which
he is a partner or any private company of which he is a director, accepts a
loan, or any guarantee or security for a loan, from the company in
contravention of section 295 of the Act, he shall cease to be a director of the
company.
2. Central Government's approval.-Please note that a previous
approval of the Central Government has to be obtained for making any loan etc.
to the director.
3. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several ' clauses of sub-section (1)
of section 283, he shall be punishable with fine which may extend to Rs. 5000/-l
for each day on which he so functions as a director.
4. Vacation on additional grounds. -A private company which is not a
subsidiary of a public company may, by its articles provide that the offence of
director, shall be vacated on any other additional grounds.
5. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Directors'
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
entered into by company
"RESOLVED that Shri SPM, who has failed to disclose his concern or interest in the contract to be entered into by the Company with ABC Limited in terms of section 299 of the Act, be and is hereby deemed to have vacated his office as director of the company pursuant to clause (i) of Sub-section (1) of Section 283 of the Companies Act, 1956."
1. Disclosure of Directors' interest.-Every director of a company
who is in any way, whether directly or indirectly, concerned or interested in a
contract or arrangement, entered into or to be entered into by or on behalf of
the company shall disclose the nature of his concern or interest at a meeting
of the Board of Directors. In all cases, the disclosure is to be made at a
meeting of the Board and not merely by circulation or otherwise (Section 299).
2. Cessation from office.-If a director acts in contravention of section 299,
he shall be ceased to be a director of the company.
3. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs. 5,000/-
for each day on which he so functions as a director.
4. Vacation on additional grounds. -A private company which is
not a subsidiary of a public company may, by its articles, provide that the
office of director, shall be vacated on any other additional grounds.
5. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Directors'
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
Vacation of office being disqualified under section 283
"RESOLVED that Shri
SPM, Director who has been disqualified by the order of the High Court of Delhi
under section 283 of the Companies Act, 1956 be and is hereby deemed to have
vacated his office of Director of the Company pursuant to clause (j) of sub-section
(1) of section 283 of the Companies Act, 1956."
1. Cessation from office.-If a director becomes disqualified by an order of
Court under section 203, he shall be ceased to be director of the company. The
disqualification shall not take effect-
(a) for thirty days from the
date of the order;
(b) where an appeal or
petition is preferred within thirty days against the order, until the expiry of
seven days from the date on which such appeal or petition is disposed of; or
(c) if any further appeal or
petition is preferred within the seven days until such further appeal or appeal
is disposed of.
2. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs 50001-
for each day on which he so functions as a director.
3. Vacation on additional grounds. -A private company which is
not a subsidiary of a public company may, by its articles provide that the
office of director, shall be vacated on any other additional grounds.
4. Procedure.-En sure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Directors'
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
"RESOLVED that Shri
SPM, Director of the Company who has been removed from Directorship pursuant to
the provisions contained in section 284 be and is hereby deemed to have vacated
his office of Director in terms of clause (k) of sub-section (1) of
section 283 of the Companies Act, 1956."
1. Continuance as Director.-A resignation from the office of Managing
Director of the Company does not ipso facto result in the cessation of the
office of the Director held by him. He will still continue to remain an
ordinary director.
2. Deemed vacation of office. -If a director is removed in pursuance of
section 284 of the Act, he shall be deemed to have vacated office.
3. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in the several clauses of sub-section (1) of
section 283, he shall be punishable with fine which may extend to Rs. 5000/-
for each day on which he so functions as a director.
4. Vacation on additional grounds. -A private company which is
not a subsidiary of a public company may, by its articles provide that the
office of director, shall be vacated on any other additional grounds.
5. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (section 303) and Register of Directors'
shareholdings (section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
Vacation of office for ceasing to be in the employment
"RESOLVED that Shri
SPM, Legal Advisor, who was appointed as a director on the Board be and is
hereby deemed to have vacated his office of director of the Company on ceasing
to be in the employment of the Company pursuant to clause (1) of sub-section
(1) of section 283 of the Companies Act, 1956."
1. Vacation on cessation of employment. -If a director having been
appointed a director by virtue of his holding any office or other employment in
the company, he ceases to hold such office or other employment in the company,
he shall also vacate his office as director of the company. Rights and
liabilities of employee who is also a shareholder will be governed by his
contract of employment and not by Act, insofar as they pertain to or arise out
of his employment. Sunil K. Alagh v. Britannia Industries Ltd., (1993) 11 CLA
68 (Bom).
2. Penalty.-If a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the disqualifications
specified in the several clauses of sub-section (1) of section 283 he
shall be punishable with fine which may extend to Rs. 5,000/- for each
day on which he so functions as a director.
3. Vacation on additional grounds. -A private company which is
not a subsidiary of a public company may, by its articles, provide that the
office of director shall be vacated on any other additional grounds.
4. Procedure.-Ensure that necessary changes have been effected in
the Register of Directors (Section 303) and Register of Directors'
shareholdings (Section 307). Also ensure to file Form 32 within thirty days
with the Registrar of Companies concerned, in duplicate.
Director's vacation of office on any ground
"RESOLVED that the vacation of office by Shri AB, Director of the Company on and from __________ for the following reason viz. (set out one of the conditions mentioned in section 283(l)) be and is hereby noted and the Secretary be directed to file the necessary returns with the Registrar of Companies."
1. Grounds of vacation.-There are twelve grounds of vacation of office of a
director mentioned under section 283(l)-vacation of office on the grounds
of insolvency, convicted by a court or disqualification by an order of Court
will not take effect for thirty days from the date of adjudication of
insolvency, or sentence of the court convicting the director or the order of
the court.
2. Additional Grounds of vacation.-A private company which is
not a subsidiary of a public company may provide for additional grounds of
vacation of office of a director in its articles of association apart from the
grounds mentioned under section 283(l) of the Act.
Proposal to remove Director in the agenda for
the next General Meeting
"RESOLVED that pursuant to the notice under section 284 of Companies Act, 1956 received from Mr. CD, the resolution stated below be and is hereby included as an item of business in the agenda for the Annual General Meeting scheduled to be held on __________
RESOLVED that Mr. AB be and
is hereby removed from his office Director of the Company.
RESOLVED FURTHER that the
Secretary of the Company be directed to take all further steps as required
under section 284 of Companies Act, 1956, in respect of this resolution."
1. Board bound to include proposal to remove director when special
notice served. -Once a notice is received under section 284 of the Act, and is found to
be validly lodged, the Board will have to include the resolution in the agenda
for the next General Meeting.
2. Forwarding of special notice to director concerned. -The company will have send
the notice received to the Director concerned, who may make his representations
thereto. The said notice required to be sent under section 284 does not have to
comply with the requirements of section 190. Karedla Suryanarayan v. Ramadas
Motor Transport Ltd., (1999) 98 Com Cases 518 (CLB-PB)
3. Notice to shareholders of intended resolution. -The Secretary will then have give notice to the members of the intended resolution not less than 7 days before the meeting, either individually or by advertisement stating therein the fact of the representations received from the Director, if any.
4. Circulation of representation along with notice of meeting.-Where individual notices are
sent and the representations of the Directors are received sufficiently early,
the representation is to be circulated to the members along with the notice.
5. Incomplete Notice.-Where the notice proposing the resolution for
removing a rector was not filed in good faith being printed and carried gaps
requiring filling, it was held that such notice was an abuse of the statutory
power and the company was not bound to place the notice before the general
meeting. Dabur India Ltd. v. Anil Kumar Poddar, (2002) 168 Corn Cases 293
(CLB).
6. Compliance Certificate.-Companies having a paid-up share capital of less than Rs. 2 crores but equal to or more than Rs. 10 lakhs are required to obtain a Compliance Certificate from a secretary in whole-time practice to be filed with the Registrar of Companies mentioning therein inter alia that the Board of Directors duly met specified times on certain dates in respect of which meetings proper notices were given and the proceedings were properly recorded and signed including the circular resolutions passed in minutes book maintained for the purpose, as per paragraph 4 of the Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules, 2001.
Fixing a date of the Board Meeting
"RESOLVED that in future the Board Meetings of the company be convened at the Registered Office of the company on the last Monday falling in the months of March, June, September and December."
1. Board Meeting must in every three calendar months. -The Board of Directors must
meet for the despatch of business in every three calendar months.
2. Notice of Board Meeting. -Notice of every meeting of the Board must be
given in writing to all the Directors for the time being in India at their
usual addresses in India.
3. No form of Notice.-Notice need not be in a particular form.
4. Directors to be given sufficient notice of meeting. -Every Director must be given
sufficient notice of each meeting of the Board and he cannot waive the right to
notice. Young v. Ladies Imperial Club, (1920) 2 KB 523.
5. Where articles contain provision with regard to day of meeting it
amounts to sufficient compliance. -Where by the provisions in the articles the
Directors are informed that there would be a meeting on the first Saturday of
each month, it is sufficient compliance with this section. ALAR Arunachalam
Chettiar v. Kaleswarar Mills Ltd., AIR 1956 Mad 309: (1956) 26 Comp Cases 431.
6. Penalty.-Every officer of the company whose duty it is to give notice as a
aforesaid and who fails to do so shall be punishable with fine of up to Rs.
1,000/-.
7. Secretarial Standards.-Secretarial Standard 1, paragraphs, 2.1, 4.1, 4.2,
5.1 and 11 seek to prescribe a set of principles for frequency of meetings of
the Board, attendance at such meetings, leave of absence therefrom, about
Chairman and also about disclosure in annual report. Paragraph 2.1 provides
that the Board of Directors should meet at least once in every 3 months, with a
maximum interval of 120 days between any two meetings such that at least 4
meetings are held in each year. Paragraphs 4.1 and 4.2 provide that an
attendance Register, containing the names and signatures of the Directors
present at the meeting should be maintained and leave of absence should be
granted to a Director only when a request for such leave has been communicated
to the Secretary or to the Board or to the Chairman. Paragraph 5.1 provides
that every company should have a Chairman who would be the Chairman for
meetings of the Board, and paragraph 11 states that the Annual Report of a
company should disclose the number of meetings of the Board and Committees held
during the year indicating the number of meetings attended by each director.
Fixing time of Board Meetings
(Another format)
S.
285-Fixing time for meetings of the Board-Board Resolution
"RESOLVED that the
meetings of the Board be held on the first Friday of each month at 10 A.M. at
the registered office of the Company."
1. To check articles before exercising the power. -The exercise of this power
will depend upon the provisions in the articles of the company.
2. Resolution fixing dates of Board meeting can be passed when Articles
silent. -Where
the articles are silent or leave the option of fixing dates of Board Meetings
to the discretion of the Board, then such a resolution can be passed.
3. Fixing dates of Board Meeting by Board other than fixed by Articles
amount to alteration of articles. -Where, however, the articles themselves fix
dates for Board Meetings, then fixing some other date would amount to an
alteration of articles and the procedure prescribed in section 31 of the Act,
will have to be followed.
Adjourning meeting for want of quorum
"RESOLVED that the
meeting of the Board of Directors convened on __________ be and is hereby adjourned
to __________ for
want of disinterested quorum."
1. Quorum for Board Meeting.-The quorum for Board Meetings is one-third
of the total strength of the Board or 2 Directors whichever is higher. The
total strength is to be computed after deducting the vacancies in the Board.
The number of directors actually appointed should be counted for quorum. Pradip
Kumar Banerjee v. Union of India, (2001) 32 SCL 84 (Cal).
2. Interested directors not to be counted for purposes of quorum. -A Director interested in any
contract or arrangement entered into or proposed to be entered into by the
company cannot vote on the resolution and his presence at the meeting will not
count for the purpose of quorum at the Board Meeting.
3. Business not to be transacted without quorum. -In the absence of a
disinterested quorum, the Board cannot transact any business and consequently
the meeting will have to be adjourned.
4. Appointment of additional director or placing the matter before
general meeting.-Where the number of interested Directors exceed or is equal to two-thirds
of the total strength of the Board, the remedy would be to increase the
strength by appointing disinterested Directors or co-opt or appointing
Additional Directors if authorised by the articles. If this is not practicable,
it would be desirable to place the contract before the General Body.
5. Secretarial Standard.-Paragraphs 3.1 and 3.1.2 of Secretarial Standard 1
provide that quorum should be present throughout the meeting and no business
should be transacted when the quorum is not so present, and that where the
number of directors is reduced below the minimum fixed by the articles of
association, no business should be transacted unless the number is first made
up by the remaining directors or through a general meeting.
“WHEREAS this meeting of the
board was called with due notice and was scheduled to be held on __________
2002 __________;
AND WHEREAS only one
director out of the four directors of the Company was present at the Board
Meeting;
NOW THEREFORE IT IS RESOLVED, subject to confirmation by the directors at the next meeting, that this meeting of the board of directors be adjourned by a fortnight and be held on __________ 2002 __________”
1. Want of quorum. -Any meeting of the board of directors, if not held
for want of quorum, will automatically stand adjourned till the same day in the
next week, at the same time and place. This is subject to any provision which
is made in the articles of association of the company. If the next day of the
adjourned meeting happens to be a public holiday, then the meeting should be
held on the next succeeding day which is not a public holiday, the time and
place remaining the same.
2. Frequency of meetings.-The prescribed frequency of meetings of board of
directors provided under section 285 of the Act, will not be contravened merely
because that the meeting of the board which had been called in compliance with
the provision of section 285 of the Act could not be held due to want of
quorum. Quorum being mandatory, adjourned board meetings with quorum are void
and non est. Maharani Yogeshwari Kumari v. Lake Shore Palace Hotel, (1996) 21
CLA 107 (Raj).
Confirmation of resolution passed by circulation
"RESOLVED that the under noted resolution passed by the Directors by circulation be and is hereby confirmed:
RESOLVED FURTHER that Shri
PSM, Assistant Engineer be and is hereby promoted as Assistant Manager of the
company in the scale of Rs. 55,500-500-65,000 with effect from 10th
July, 2002."
1. Draft of Circular resolution along with all papers to be circulated
to all directors in India. -The draft of the resolution along with all papers
must be circulated to all the Directors in India at their address in India.
2. Businesses to be transacted at Board Meeting only. -Businesses mentioned in
sections 292, 297, 298, 316 and 372 of the Act, can be transacted only at a
Board Meeting and cannot be done by circular resolution.
Confirmation of Directors resolution by circulation
(Another format)
"RESOLVED that the
under noted resolution(s) passed by Directors by circulation on 4th June, 2002,
be and are hereby confirmed.
1. Resolution to be passed at Board Meeting and not by circulation. -The resolutions required to
be passed by the Directors at Board Meeting cannot be passed by circulation.
See S. 292/297(3)(a) of the Act.
2. Passing of resolution by circulation not to dispense with
requirement of holding Board Meetings. -The passing of resolution by
circulation does not, however, dispense with the need for holding a meeting
once at least in three months as required by section 285 of the Act.
3. Secretarial Standard.-Paragraphs 6.1 to 6.4 of Secretarial Standard-
1 provide that a resolution proposed to be passed by circulation should be sent
in draft together with the necessary papers, individually to all the directors
that the draft resolution to be passed by circulation and the necessary papers
should be circulated by hand or by post, or by facsimile, or by e-mail or
by any other electronic mode, that the should be deemed to have been passed on
the date on which it is signed and dated as approved by all the directors then
in India, being not less than the quorum or on the date on which it is approved
by the majority of the directors entitled to vote on the resolution whichever
is earlier and that resolution sent for passing by circulation should be noted
along with the decision thereof at the next meeting of the Board and recorded
in the minutes of such meeting.
Expenditure on publicity and advertisement
"RESOLVED that the
estimated expenditure of Rs. 10 lakhs on advertisement and publicity of
company's products during the year 2001-2002 as submitted before the
Meeting by Director (Commercial) be and is hereby approved."
1. General Power of the Board.-The power to approve expenditure on
advertisement and publicity of a company's products comes within the general
powers of the board under section 291 of the Act.
"RESOLVED that the
minutes of the Board Meeting held on __________ be and are hereby confirmed".
1. Routine Agenda item of the Board. -Confirmation of the minutes
of the previous board meeting is a routine Agenda item of the next board
meeting. Usually in the board minutes of committees meetings are also discussed
and confirmed at intervals.
2. Signing of the Board meeting minutes. -Subsequent to the
confirmation of the board minutes of the earlier board meeting they are signed
either by the Chairman of that meeting or by the Chairman of the meeting in
which they are being confirmed as per section 193(1-A)(a) of the Act.
"RESOLVED that Shri RPS, the Secretary of the company be and is hereby appointed as Arbitrator to act on behalf of the company in term of clause 35 of the agreement dated 15th July, 2002, entered into between the company and Messrs. ABC Limited in respect of the dispute having arisen regarding the interpretation of 'escalation clause' in the said agreement."
1. General Power of the Board.-The Board of Directors of a company is
entitled to exercise all powers and to do all acts on behalf of the company as
the company is authorised to do except those required to be done by the company
in general meeting.
2. Authority given to others.-The Board of Directors of a company can by a
resolution authorise any person to do a particular act and such authority will
be valid till it is taken back again by the Board.
Revaluation of assets
"RESOLVED that the assets of the company mentioned hereunder be and are hereby revalued as per the revised value indicated against each and that the appreciation as a result of the revaluation be credited to the Capital Reserve Account of the company.
Description Book value Revised Appreciation
of Assets value _________.”
_________ _________ _________
1. General Power of the Board.-The Board of Directors of a company is
entitled to exercise all powers and to do all acts on behalf of the company as
the company is authorised to do except those required to be done by the company
in general meeting.
2. Bonus issue prohibited out of revaluation of assets. -In case of listed companies,
bonus issue of shares out of revaluation of assets is prohibited by SEBI
Guidelines.
"RESOLVED that the
amounts noted against each of the items mentioned below appearing in the books
of account of the company for the financial year ended on 31st March, 2000, be
and are hereby written off.
Item No. Amount
Justification for
writing off the amount
_______ _______ ____________________________,”
1. General Power of the Board.-The Board of directors of a company is
entitled to exercise all powers and to do all acts on behalf of the company as
the company is authorised to do except those required to be done by the company
in general meeting.
2. Bad debts, which can be written off.-Sundry debtors which have
become bad and which can be written off as bad must include amounts due in
respect of goods sold or services rendered or is in respect of other
contractual obligations but should not include amounts which are in the nature
of loans or advances.
Sales of Obsolete/Surplus Jigs, Tools and Fixtures
"RESOLVED that jigs,
tools and fixtures which have become obsolete/surplus to the requirement of the
company as per list placed before the meeting, duly initialled by the Chairman
for identification, be disposed of and the Managing Director of the company be
and is hereby authorised to fix the estimated selling prices thereof and
dispose of the same through an advertisement in the local newspapers."
1. General Power of the Board.-The Board of Directors of a company is
entitled to exercise all powers and to do all acts on behalf of the company as
the company is authorised to do except those required to be done by the company
in general meeting.
2. Internal policy decisions. - Internal policy decisions
may also be taken by a Committee of the Board duly constituted.
Deferment of Employees Promotion
"RESOLVED that the promotion and annual increment of Rs. 150/- of Mr. X Y, a class II Employee of the company be and is hereby deferred pending decision in respect of the disciplinary proceedings taken against him."
See under Res. No. 579.
Consent of increase in expenditure
Miscellaneous.-Increase
in capital expenditure-Board Resolution
"RESOLVED that the
consent of the Board of Directors be and is hereby given to the company for the
additional expenditure already incurred/to be incurred by the company against
each of the items mentioned below:
Item of Sanctioned Revised Additional
Capital
Estimates Estimates Expenditure
Expenditure
_________ _________ _______ _________.”
1. Reasons to be given in the notes. -For passing a board
resolution to make an increase in capital expenditure of the company, the
reasons of doing so should be given in the notes to the agenda of that
particular board meeting so that they can be discussed.
2. Nature of Additional Capital Expenditure.-Whether the additional
capital expenditure is made for expansion or for modernization or for
diversification should be mentioned to the Board Members. If expansion or
diversification is to be done for carrying out some new objects by the company,
whether that object is included in the main objects clause of the company. If
the said object is in the other objects clause of the memorandum of association
whether a special resolution is passed to pursue that object.
Disposal of raw materials and inventory items
"RESOLVED that the
surplus raw materials and inventory items which are not required for immediate
production programme of the Company be disposed of through advertisements in
leading newspapers.
RESOLVED FURTHER that on the
basis of the offers received against the aforesaid advertisements the company
do make an offer to XYZ Limited for purchase by them of such items of surplus
raw materials and other inventory items that they may require.
RESOLVED FURTHER that Shri
SKM, a Director of the Company, is hereby authorised to dispose of the
aforesaid surplus raw materials and inventory items to the best advantage of
the Company."
1. General Powers of the Board.-The power to give authority
to dispose of surplus raw materials and inventory items of the company comes
within the general powers of the Board under section 291 of the Act.
2. Applicability of section 297.-While offering any company
to purchase surplus raw materials and inventory items of the company,
provisions of section 297 of the Act should be kept in mind.
Alteration and Amendment to Resolution already passed
"RESOLVED that
Resolution No. 6 passed at the Extraordinary General Meeting of the Company
held on 28th August, 2002 be and is hereby altered in the following manner:
(a) For the figures and
words "10% per month" occurring in third line in the said resolution,
the figures and words "12% per annum" shall be substituted; and
(b) For the words "the
Directors" occurring in last line in the said resolution, the words
"Shri R.S., Whole-time Director" shall be substituted."
1. Amendment through supersession of previous resolution.-Amendment or alteration in a
resolution may be also made by way of supersession of the earlier resolution by
a new resolution. This is specially done when amendments are many and
substantial.
2. Mainly three types of amendments.-Amendments to a resolution
may be either addition or insertion of new words or omission of some words or
omission of some words and addition or insertion of some other words.
Miscellaneous-Rescinding
of Resolution
"RESOLVED that the resolution No. _______ passed by the Board of Directors at its 35th meeting held on 4th July, 2002, be and is hereby rescinded."
1. Formality of passing a resolution. -Rescinding a previously passed board
resolution by way of a resolution is a formality and does not require special
obligation to do so. But the Board should be informed of the reasons of
rescinding a resolution already passed by it as such rescission is rarely done.
2. Presence of specific directors.-For rescission of a board
resolution earlier passed at a meeting, it would amount to good secretarial
practice to obtain no objection letters from the directors who were present at
that previous board meeting but were not present at the later board meeting
where it was rescinded.
"RESOLVED that the
action taken by Mr. ABC the alternate director of the company for signing the
Agreement with the employees as a director be and is hereby be valid even
though he vacated the office of the alternate director by virtue of the
original director coming to the town and thereafter re-appointed at the
earlier Board Meeting held on _______
RESOLVED FURTHER that the
secretary be directed to make the changes in the Register of Directors and also
file Form No. 32 in duplicate with the Registrar of Companies intimating it
about the change.
1. Provisions of the Companies Act, 1956. -Section 290 of the Act
provides that acts done by a person as a director shall be valid,
notwithstanding that it may afterwards be discovered that his appointment was
invalid by reason of any defect or disqualification or had terminated by virtue
of any provisions contained in this Act or in the Articles of Association.
Proviso to section 290 provides that nothing in this section shall be deemed to
give validity to acts done by a director after his appointment has been shown
to the company to be invalid or to have terminated.
2. Supreme Court's order stopping major decisions of the Board. -Supreme court in connection
with a petition for oppression and mismanagement under section 397, 398 and 402
ordered that no major decisions should be taken by a company's Board of
Directors and that status quo in the composition of the Board of Directors
should be maintained. During the pendency of this order of the apex court a
settlement was entered into by the managing director of the company in the
management of affairs and the said settlement was not allowed to be challenged
on the ground that the managing director's term had expired. Spectrum
Technologies U.S.A. Inc. v. Spectrum Power Generation Co. Ltd., (2002) CLC 539
(Del.).
Selling of company's products
"RESOLVED that the offer of M/s. XYZ Ltd. to purchase the products manufactured by the Company at the rate of Rs. 300/- per tonne be and is hereby approved, subject to the said M/s. XYZ Ltd. agreeing for a minimum of take of 500 tonnes per month on one month's credit."
1. General Powers of the Board.-The board of directors of a
company is entitled to exercise all such powers, and do all such acts and
things as the company is authorised to exercise those powers which are required
to be exercised by the company in general meeting.
2. Passing of resolution by circulation. -The board of directors has
power to pass resolutions by circulation under section 289 of the Act of all
matters except those five matters mentioned under section 292(l) of the Act.
The aforesaid resolution can be passed by circulation.
3. Authorisation by wrong resolution.-Where a wrong resolution was
attached by mistake in a complaint filed by a company under authorisation by a
resolution of the Board of Directors, it was held that the company was entitled
to produce the correct document and that it would not be a case of filling up a
lacuna. Recom Agrotech Ltd. v. Vijaya Sales Corporation, (2001) 106 Com Cases
507 (AP).
"RESOLVED that the resolution passed at the Board Meeting on A.B., a Director of the Company, in respect of ……equity shares of the aggregate value of Rs. _______ out of the total issue of _______ equity shares proposed to be issued by the Company, be and is hereby rescinded and the Secretary of the Company is directed to inform Mr. A.B. of the rescission.
Power of Board to rescind its earlier resolution. -It is always open to the Board of Directors to rescind an earlier resolution passed by it, but where third parties have acted to their detriment on the strength of the earlier resolution, the company may be liable to make good the damage sustained by such third parties.
to their detriment on the strength of the earlier
resolution, the company may be liable to make good the damage sustained by such
third parties.