The core provision governing the appointment of a director in an Annual General Meeting (AGM) is Section 152 of the Companies Act, 2013, specifically related to the retirement and appointment of directors.
Here is a breakdown of the key provisions applicable to the appointment of a director at an AGM.
Governing Provisions for Director Appointment in AGM
The formal appointment of a Director during the Annual General Meeting (AGM) is governed by the following provisions of the Companies Act, 2013:
1. Section 152: Appointment of Directors
Sub-section (2): This is the fundamental principle. It states that every director shall be appointed by the company in a general meeting (which includes the AGM).
Sub-section (6): This section dictates the retirement by rotation provisions, which are mandatory for public companies (and certain private companies that are subsidiaries of public companies).
At every subsequent AGM, a specified number of directors must retire from office.
The retiring director is eligible for re-appointment by the members at the same AGM.
Sub-section (7): If the retiring director is not re-appointed, the vacancy may be filled at the same meeting. If the vacancy is not filled, the meeting stands adjourned to the same day, time, and place in the next week.
2. Section 161: Regularization of Directors
While Section 161 deals with appointments made by the Board (like Additional Directors or Alternate Directors), their continuation is governed by the AGM:
Additional Director [Section 161(1)]: A director appointed by the Board as an 'Additional Director' holds office only until the next AGM. To continue in office, their appointment must be approved (regularized) by the shareholders through an ordinary resolution passed at that AGM.
3. Section 102: Explanatory Statement
The appointment or reappointment of any director (other than directors retiring by rotation) is considered Special Business.
Mandatory Disclosure: This requires an Explanatory Statement to be annexed to the notice of the AGM, detailing:
The proposed director's background, qualifications, and experience.
The reason for the appointment.
The nature of their concern or interest in the company (if any).
Exemption from Rotation: Private limited companies are exempt from the requirement of retirement by rotation under Section 152(6) and (7).
The Practical Effect: This means that directors in private limited companies hold office indefinitely unless they resign, are removed by a shareholder resolution (Section 169), or become disqualified. However, their formal appointment must still be approved in a General Meeting.