Section 9 of The Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997
- (1)Where any arrangement entered into by the company with an industrial or other concern provides for the appointment by the company of one or more directors of such concern, such provision and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to such concern, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the company in pursuance of the arrangement as aforesaid.
- (2)Any director appointed in pursuance of sub-section (7) shall--
- (a)hold office during the pleasure of the company and may be removed or substituted by any person by order in writing by the company;
- (b)not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto;
- (c)not be liable to retirement by rotation and shall not be taken into account for computing the number of directors liable to such retirement.
Summary
- If the Company has an agreement with another business, like an industrial concern, that lets the Company appoint directors to that business's board, that agreement is fully valid.
- These appointments remain valid even if they conflict with the Companies Act, 1956, other active laws, or the business's own internal rules, such as its memorandum or articles of association.
- Standard restrictions on directors, such as holding minimum shares, age limits, limits on how many boards they can join, or rules for removal, do not apply to these appointed directors.
- Appointed directors serve as long as the Company wants, can be removed or replaced by the Company in writing, do not face rotating retirement, and are not personally liable for actions taken in good faith.
Practical examples
FAQ
1. Who decides how long an appointed director stays in office?
They hold office during the pleasure of the Company, meaning they serve as long as the Company wants and can be removed or replaced by a written order from the Company.
2. Do these appointed directors need to buy shares in the concern to qualify for the board?
No, standard legal rules or bylaws regarding share qualification, which require a director to own a certain number of shares, do not apply to them.
3. Are these directors subject to retirement by rotation?
No, they are not liable to retirement by rotation, and they are not counted when calculating the number of directors who must rotate out.
4. Is an appointed director personally liable for company losses?
An appointed director does not incur personal liability or obligation just for being a director, or for any action taken or omitted in good faith while performing their duties.
Test yourself
Q1.Under Section 9, how can the Company remove or substitute an appointed director?
Q2.Which of the following rules does NOT apply to a director appointed under Section 9?
Q3.What protection is given to a director appointed under Section 9 for actions done in good faith?
Q4.How does retirement by rotation affect directors appointed under Section 9?
Q5.Which of the following laws can Section 9 override regarding director appointments?