The Board of Directors of a Company, may appoint a person as Director, in place of a Director who was appointed in the general meeting of the shareholders and whose office is vacant, due to casual vacancy as per Section 262 of the Companies Act, 1956.
Situations of Casual Vacancy of Directors:-
Generally there are 4 situations, wherein casual vacancy of the Director happens:
(1) Resignation by the Director;
(2) Disqualification of the Director;
(3) Death of the Director;
(4) Insolvency of the Director
The appointment has to be done by passing of a board resolution, in default of and subject to any regulations in the articles of the company.
Convening of Board Meeting mandatory for appointment:-
Section 262 of the Companies Act, 1956 clearly mandates that the appointment of director to fill casual vacancy should be made in the duly convened meeting of the board of directors.
That means if the director, appointed to fill in the casual vacancy, is made through circular resolution, it will not be valid.
Tenure of Directorship:-The Director appointed against the casual vacancy, shall be eligible to hold office upto the date upto which the director in whose place he is appointed would have held office.
Appointment of Director against a casual vacancy is optional:-
It is not mandatory that the Board of Directors must have to appoint a Director in casual vacancy, however it depends on the board whether or not to appoint such director.
The above provisions are applicable to public company or a private company which is a subsidiary of a public company. Not applicable to private company which is not a subsidiary of a public company.