Election of Company Directors: A company is different from other business and civil proprietorships and partnerships in that it has to fulfill specific legal requirements.
Minimum Directors of a company:
A single member company (SMC) must have at least one director, other private companies must have at least two, whereas a public limited corporation cannot have less than three directors.
First Director of a company:
After incorporation, the all first directors retired on the date of the first Annual General Meeting (AGM), but they continue to discharge their duties until fresh elections are held. If they have completed their term, the fresh elections must be held within ninety (90) days. Delay in elections can attract a fine of up to five hundred thousand rupees.
Example:
For example, if a company is registered in July 2022, then the first elections must be Conducted within sixteen months i,e in December 2023. Therefore, the last date for elections will be 31 December 2023. All officers will be retired on that date. Elections can be taken up to a maximum of ninety days, i.e., March 31, 2024. If the election is Took place before December 31, the next election to be Carried out in 2026.
Election of Company Directors : Casual Vacancy
The directors are elected for 3 years. After the term is expired they are eligible for re-election. During this period. A new election can only be held if a director resigns, dies, or removed or retired. If an officer post becomes vacant, a “by-election” will be held, and the term of the new Board Member will be the same as the remaining term of the previous Member. For example, if a Board Member was elected in December 2023 and his term was until 2026, but he resigns in 2024, the term of the newly elected member will also be until 2026, and not three years from 2024.
Fresh election:
A “fresh election” can be held under section 162, in which all the directors must be re-elected. This happens when, for example, the company has sold some of its shares to other members, and new shareholders want to become board members. If there are more candidates than the existing officers, no additional directors can be taken in a by-election; a fresh election has to be held for this.
Election of Company Directors : Procedures for a fresh elections
The procedure for the election under section 159 is that the company will issue a notice containing the names of all the candidates. This will be followed by an “extraordinary general meeting” in which a resolution will be passed, which will expressly refer to section 162 and will include the names of all existing and new executives.
When appointment of a new director become necessary?
In some cases, the appointment of a shareholder or member as a director is necessary because the director is involved in the day-to-day operations of the company, while the shareholder or member is not involved in the day-to-day affairs. He is called only to the Extraordinary General Meeting or AGM, where he has the right to vote.
On the other hand, the director is directly involved in the day-to-day affairs, especially in the process of opening a bank account. Without his involvement, a bank account cannot be opened. Similarly, in other matters, which require the approval of the board, the directors are involved while the shareholders are not.
Election of Company Directors: Filing Procedure with SECP
In comparison, the manual process also doubles the fees and takes more time. In this method, all the forms are filed manually, signed and sent to the SECP office by post or courier, which obviously takes more time. If you need any further please get in touch with us through our website by filling out the Contact Us form, or reach out via our social media accounts.
