Amendment of articles so as to provide for appointment of directors by another company to make the company as its subsidiary - Companies Law - No. 14/74,

Circular : No. 14/74, dated 28 ‑ 8 ‑ 1974. Subject:- Amendment of articles so as to provide for appointment of directors by another company to make the company as its subsidiary It has been observed that certain companies have amended their articles of association making provisions for the appointment of directors on the board by another public company with a view to make the company as the subsidiary of the latter company within the meaning of section 4(1)(a). It has been held that the combined effect of sections 255(1), 256(1) and 257 is that a. not less than two‑thirds of the total number of directors of a public company shall be persons whose period of office is liable to determination by retirement of directors by rotation; b. the class of directors referred to above can be appointed only by the members of the public company at the general meeting; and c. one‑third of the said class of directors is required to retire at the annual general meeting. In view of the provisions mentioned above, such purported amendment of the articles of association is hit by the provisions of sections 255, 256 and 257. Section 257 is a mandatory provision and a person s right cannot be taken away by virtue of any contract to the contrary by the members of the company by passing special resolution or under articles. Such an article or special resolution is invalid under section 9.