Section 161(4) of the Companies Act, 2013
The Board of Directors of a company may appoint a person as a Director in place of a Director who was appointed in the general meeting of the shareholders and whose office is suddenly vacated before his term of office expires in the normal course, which resulted in a casual vacancy.
Circumstances of Casual Vacancy of Director
Generally, there are four situations wherein casual vacancy in the office of a Director may happen:
(1) Resignation by the Director;
(2) Disqualification of the Director;
(3) Death of the Director;
(4) Insolvency of the Director.
Board Resolution, Circular Resolution Not Allowed
The appointment has to be done by passing of a board resolution in the meeting of the board of directors.
Section 161(4) of the Companies Act, 2013 clearly mandates that the appointment of a director to fill a casual vacancy should be made in the duly convened meeting of the board of directors.
That means if the appointment of a director to fill the casual vacancy is made through circular resolution, it will not be a valid appointment.
Articles of Association
The appointment of a director to fill the casual vacancy is subject to any regulations as may be prescribed in the articles of the company.
Tenure of Directorship
The Director, who is appointed to fill a 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.
After the board resolution is passed for appointment to fill a casual vacancy, the appointment has to be subsequently approved by members in the immediate next general meeting.
Filling the casual vacancy is optional
It is not mandatory that the Board of Directors must appoint a Director to fill the casual vacancy. It depends on the discretion of the board whether or not to appoint such director.
Procedure for Appointment of a Director to fill the Casual Vacancy
• The new director has to submit a consent letter to act as the director of the company;
• Passing of board resolution in a duly convened board meeting approving the appointment of the new director to fill a casual vacancy;
• Filing of Form DIR-12 with the ROC within 30 days to intimate about the appointment;
• Name and other details of the new director has to be entered in the Register of Directors and key Managerial Personnel and their Shareholding as per Section 170;
• Intimate the stock exchange(s) about the appointment as per SEBI Regulations, if any;
• Take approval of the members/shareholders in the immediate next general meeting;
• File necessary form, if any, with ROC for the general meeting resolution.