Section 256 of the Companies Act, 2013
Here’s a detailed breakdown of Section 256 of the Companies Act, 2013, which deals with the right of persons other than retiring directors to stand for directorship:
📘 Section 256 – Right of Persons Other Than Retiring Directors to Stand for Directorship
When a company is holding an election to fill vacancies by retirement of directors, Section 256 lets members propose “additional” candidates beyond those who retire by rotation.
🔍 Key Provisions
| Provision | Details |
|---|---|
| Who may be proposed | Any person (other than those retiring) who is eligible for appointment as a director under Section 164 (i.e., not disqualified) and who has given written consent to act if appointed. |
| Who can propose | A member (or members) holding at least 1% of total voting power in the company or holding 100 members’ signatures, whichever is lesser, may propose such a person. |
| Notice to the company | The proposing member(s) must send a notice to the company at least 14 days before the meeting at which directors retire by rotation. |
| Company’s duty on receipt | On receiving a valid notice, the company must include the candidate’s name in the notice of the general meeting, and circulate his/her biographical details (as per Schedule II) along with the other directors’ names. |
| Deposit of fee | The candidate must deposit ₹1,000 (or such higher amount prescribed) with the company at least 7 days before the meeting. If he/she withdraws less than 3 days before the meeting, the deposit is forfeited; otherwise, it’s refunded. |
| Form for deposit | No specific ROC form—but the company’s board should record the receipt and refund (or forfeiture) of the deposit in its minutes. |
⚙️ Step‑by‑Step Procedure
Identify Candidate & Obtain Consent
– Ensure candidate is eligible under Section 164.
– Get written consent to act as a director.
Collect Member Support
– Either signatures of ≥100 members or members holding ≥1% voting power.
Serve Notice on Company
– At least 14 days before the AGM/EGM where retirement occurs.
– Include candidate’s name and member(s) details.
Deposit Subscription Fee
– Candidate pays ₹1,000 (or prescribed amount) at least 7 days before the meeting.
Board Prepares Meeting Notice
– Include proposed candidate alongside retiring directors.
– Circulate biographical details (age, qualification, experience, shareholding, directorships).
Meeting & Election
– Candidate stands alongside retiree(s) for election by show of hands or poll.
– If elected, appointment is effective immediately after meeting.
🎯 Purpose of Section 256
Democratizes Board Elections: Allows members to nominate fresh talent beyond the automatic rotation slate.
Ensures Fair Opportunity: Prevents “closed” slates and encourages diverse candidature.
Protects Minority Rights: Even small blocs (≥1% voting power or 100 members) can field their own candidate.
✅ Key Takeaways
Notices and deposits ensure serious nominations only.
Detailed biographical disclosure promotes informed voting.
Forfeiture discourages frivolous nominations.
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