Companies Act Section 152

Companies Act Section 152: Appointment of Directors

Section 152 of the Companies Act, 2013, outlines the detailed provisions concerning the appointment, retirement, and reappointment of directors of a company. This section establishes the framework for how directors are appointed, their tenure, qualifications, and the procedural requirements that companies must follow when making such appointments. The section is particularly relevant for both public companies and private companies, but it applies differently to each based on the company's type and structure. The rules also set out the retirement policy for directors in the case of a public company and the requirements for the reappointment of retiring directors.

1. First Directors of the Company (Section 152(1))

If a company’s articles of association do not provide a provision for the appointment of the first director(s), then the subscribers to the memorandum of the company (the individuals who have signed the memorandum and are registering the company) shall be deemed to be the first directors of the company. These subscribers will hold the office of director until the directors are duly appointed through the appropriate legal process.
For a One Person Company (OPC), the sole member of the company shall be considered the first director until such time as they appoint a director or directors according to the provisions in this section. This provision ensures continuity in the company's governance from the moment of its incorporation.

2. Appointment of Directors by the Company (Section 152(2))

In general, every director of a company must be appointed by the company in a general meeting, unless otherwise expressly stated in the Act. The decision to appoint or re-appoint directors is subject to the approval of the shareholders at a general meeting. This provision ensures that the shareholders have a say in the appointment of directors, thereby fostering democratic governance within the company.

3. Director Identification Number (DIN) Requirement (Section 152(3))

A person cannot be appointed as a director of a company unless they have been allotted a Director Identification Number (DIN) under Section 154 of the Companies Act. The DIN is a unique identification number issued by the Ministry of Corporate Affairs (MCA) to an individual to act as a director in any company.
Additionally, the Central Government may prescribe other numbers under Section 153, depending on the regulations in place at the time.

4. Declaration and Furnishing of Details (Section 152(4))

Every person proposed to be appointed as a director whether through a general meeting or otherwise must submit the following details:

Their Director Identification Number (DIN), or such other number as prescribed under Section 153.

A declaration stating that the individual is not disqualified from becoming a director under the provisions of the Companies Act, 2013.
This ensures that the company only appoints qualified individuals who meet the criteria set out under the Act.

5. Consent to Act as Director (Section 152(5))

No person shall act as a director until they have given their written consent to hold the office of a director. The company must file this consent with the Registrar within 30 days of the appointment, as per the prescribed manner.
Moreover, when appointing an independent director in a general meeting, the company is required to include an explanatory statement in the notice for the meeting, justifying why the proposed individual fulfills the conditions required for appointment as an independent director. This ensures transparency and that the independent director meets the criteria laid out in the Act.

6. Retirement of Directors in Public Companies (Section 152(6))

In the case of public companies, the Act lays down specific provisions regarding the retirement of directors by rotation:

Two-thirds of the total number of directors in a public company must be directors whose terms are liable to retirement by rotation.

Rotating Retirement: At every annual general meeting (AGM), one-third of the directors (who are liable to retire by rotation) must retire. If the total number of directors does not divide equally by three, the number closest to one-third must retire.

Directors who have served the longest period in office are the ones who will retire first, unless agreed otherwise among the directors themselves. If there are multiple directors who joined on the same date, their retirement order will be decided by lot.

7. Filling the Vacancy (Section 152(6)(e))

When a director retires by rotation during the AGM, the company has the option to fill the vacant position either by re-appointing the retiring director or by appointing a new person to the position.
This mechanism ensures that the company’s Board of Directors remains fully functional and that no board seat is left vacant for too long, which could impact decision-making.

8. Procedure for Filling Vacancy if Not Filled (Section 152(7))

In cases where the vacancy created by the retirement of a director is not filled during the AGM, the meeting is adjourned to the same time and place on the same day of the following week. If the adjourned meeting also fails to fill the vacancy, the retiring director shall be deemed to have been reappointed unless any of the following conditions are met:

A resolution for reappointment was put forth and voted against.

The retiring director has expressed in writing their unwillingness to be reappointed.

The retiring director is disqualified for reappointment, or a special resolution is required for the reappointment.

The provisions of Section 162 apply to the case.

9. Explanation - Definition of Retiring Director (Section 152(8))

The term “retiring director” refers to any director who is retiring by rotation under the provisions of this section and sections 160 and 161. The explanation clarifies that independent directors are not counted as part of the total number of directors when calculating the two-thirds of the directors who must retire by rotation.