INSTITUTE OF MANAGEMENT STUDIES AND TRAINING
All questions are compulsory. The first five questions shall be of 16 marks each. And last questions shall be of 20 marks.
Q1 (A) How are the first directors of the company appointed?
ppointment of First Directors of the Company
“First directors” mean those directors who hold office from the date of incorporation of the company. The first directors are usually named in the articles of association or are appointed by the directors. The above statement can be inferred by reading section 254 of the Companies Act, 1956 which says that in default of and subject to any regulations in the articles of a company, subscribers to the memorandum who are individuals shall be deemed to be the directors of the company, until the directors are duly appointed in accordance with section 255. The articles may adopt the provisions of Table A (Regulations for Management of a Company Limited by Shares) of Schedule I to the Companies Act, 1956 in the articles of association of the company. In that case, regulation 64 provides that the names of the first directors shall be determined in writing by the subscribers of the memorandum or a majority of them. In such a case, the subscribers must determine the names before or at the incorporation of the company and give intimation thereof to the Registrar by Form No. 32 at the time of incorporation or within 30 days thereafter. It is only, if there is no provision in the articles of association of the company regarding the appointment of first directors, the subscribers to the memorandum shall be the first directors of the company. Generally, the first directors are named in the articles. In such a case, there is no appointment. The general practice is that the promoters of the company select the first directors and name them in the articles. The Department of Company Affairs (Now, Ministry of Corporate Affairs) vide DCA’s Circular No. 1/95 14/6/94-CL-V, dated 16 February, 1995 advised that at least one of the promoters of the company, whose names were mentioned in the application for availability of the company’s name, must be the first director of the company. The words “who are individuals” in section 254 of the Companies Act, 1956 is in accordance with the provisions of section 253. Section 253 says that only individuals can be appointed as directors. Thus, a body corporate, an association of persons or a partnership firm cannot be appointed as director of any company. Thus, only those subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company if the articles do not mention the names of first directors. If nothing is mentioned in the articles of association of a company regarding the appointment of first directors of a company, the subscribers to the memorandum of association shall be deemed to be the first directors of the company (including a private company which is a subsidiary of a public company). The first directors shall hold office till directors are appointed in accordance with the provisions of section 255 at the first general meeting held after the date of incorporation. However, the meeting shall be held before the date of holding the first annual general meeting of the company. Procedure for appointment of first directors
Ø Consent of each of the persons proposed to be named as director in the articles of association, seeking his consent to act as director, shall be obtained in the form of a letter. [section 264 (1)]. Ø Consent of the first directors (unless they are named in the articles of association) in Form No.29 prescribed under the Companies (Central Government’s) General Rules &Forms, 1956 shall be filed with the Registrar of Companies [section 264(2)]. Ø Form No.32 prescribed under the Companies (Central Government’s) General Rules & Forms, 1956 in duplicate in respect of the first directors shall be filed with the Registrar, in...
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