Concept of Retirement by Rotation section 152(6)- Companies Act 2013

Section 152(6) is applicable on public companies which means private companies are out of the ambit of retirement by rotation.

It states that unless it is provided by the articles of the company, 2/3rd directors are liable to retire by rotation and 1/3rd are liable to retire at every general meeting after the meeting at which first directors are appointed.

Any fraction in 2/3rd will be rounded off to the next number as rounding it off to the nearest number will sometime results in contravention of 2/3rd value.

Any fraction in 1/3rd will be rounded off to nearest number(specified in the act itself)

The retiring directors can be re-appointed by shareholders by casting votes in favour in excess of votes casted against the resolution.

Further, Independent directors and Nominee directors are excluded from the calculation of 2/3rd. A small shareholder director will always be a non rotational direction. He will be counted in 2/3rd but cannot be retired by rotation.fi

1/3rd directors which are liable to retire at AGM will be decided by FIFO method. The one who is longest in the office will be reitred first. If 2 or more directors are appointed on same day then it will be decided by draw of lot.

Let us understand it better with a situation:

Suppose there are total 15 directors in a public(unlisted company), 4 of which are independent, 7 of them are executive and 4 are non executive and non independent.

For calculating 2/3rd independent directors are not included in the calculation. So 11*2/3 will be 7.333. It will be rounded off to next number 8. 8 directors are retiring by rotation.

Out of these 8 directors 1/3rd are liable to retire in every AGM. 1/3rd of 8 is 2.666. So 3 directors shall retire at every AGM. Directors can be appointed by shareholders by majority.

Now which 3 directors are liable to retire at the AGM firstly? The directors which are holding office longest will go for retiring firstly. After their re-appointment or retirement, at next AGM, the next 3 directors who are holding office for longest will be liable for retirement.

Assume that these directors are standing in a line in such an order that the person who is holding office for longer when compared to other directors will stand first and the director who is holding office for minimum period of time will be standing at last.

Now the one who is re-appointed will go at last behind the person who has held office for the shortest duration and the one is retired will leave the line. And subsequently this cycle will continue.