Section 152(6) of the Companies Act, 2013—Why Directors Don’t Stay Forever
Boards are meant to guide companies, not dominate them.
That’s the philosophy behind Section 152(6) of the Companies Act, 2013.
Unlike private arrangements where the same people may control decision-making for decades, public companies work differently. They answer to shareholders. And shareholders deserve a periodic say in who continues on the Board.
Section 152(6) ensures exactly that.
It introduces the concept of retirement by rotation, forcing regular change, review, and accountability at the board level.
What Section 152(6) Is Really About
At its core, Section 152(6) exists to prevent stagnation at the top.
It applies in a public company (unless its articles provide otherwise); at least two-thirds of the total directors must be subject to retirement by rotation, ensuring regular changes and shareholder input; at each Annual General Meeting (AGM), one-third of these rotating directors must retire, with the number rounded to the nearest integer, and they can be reappointed or replaced by shareholders, excluding independent directors from these calculations.
That one sentence explains a lot—but it needs unpacking.
Why Retirement by Rotation Exists
Public money brings public responsibility.
In a public company, directors don’t sit on the board purely because they founded the business or invested early. They sit there because shareholders allow them to.
Section 152(6) creates a system where:
- directors are periodically reviewed
- shareholders get a regular vote
- Boards don’t become closed clubs
It’s governance through renewal.
Which Companies Does Section 152(6) Apply To?
This provision mainly applies to public companies.
Private companies are generally exempt unless their Articles of Association specifically adopt rotation rules.
Public companies, however, cannot escape it—unless their articles explicitly provide otherwise.
How Many Directors Must Retire by Rotation?
This is where the maths comes in.
Section 152(6) clearly states that:
- at least two-thirds of the total directors must be rotational directors
This means:
- they are liable to retire
- they are subject to shareholder approval
- they cannot hold permanent seats
Independent directors are excluded from this calculation.
What Happens at Every AGM?
Here’s the practical part.
At each Annual General Meeting (AGM), one-third of these rotating directors must retire, or if the number is not divisible by three, the nearest integer is taken.
For example:
- If there are 6 rotational directors → 2 retire
- If there are 5 → 2 retire
- If there are 4 → 1 retires
The rule is mechanical. There’s no discretion here.
Can Retiring Directors Come Back?
Yes. And this is important.
Retirement by rotation does not mean removal.
Retiring directors:
- can offer themselves for reappointment
- may be reappointed by shareholders
- or may be replaced by someone new
The power rests with shareholders.
That’s the real point of Section 152(6).
Appointment of Directors—The General Rule
Section 152 doesn’t only talk about rotation.
It also lays down a core principle:
Every director shall be appointed by the company in a general meeting.
This reinforces shareholder supremacy.
No matter who proposes a name—promoter, board, or committee—the final authority lies with the members of the company.
Section 152(6) and Director Appointment Framework
Together, the section governs the appointment, tenure, and eligibility of directors.
It ensures:
- no lifetime directorships
- no silent continuations
- no bypassing shareholder approval
Every continuation is, in effect, a fresh vote of confidence.
What About Independent Directors?
Independent directors operate under a different framework.
They:
- are not subject to retirement by rotation
- have fixed terms under Section 149
- are appointed through special resolutions
That’s why Section 152(6) specifically excludes independent directors from its calculation.
Is This an Outdated Mechanism?
Some people argue that this is an outdated mechanism of rotational retirement under Section 152(6) of the Companies Act.
Why?
Because:
- large listed companies already have strong governance
- professional Boards rotate naturally
- independent directors carry oversight
But the law hasn’t removed it.
Why?
Because in many public companies—especially unlisted ones—rotation remains one of the few tools shareholders actually have.
Rotation vs Removal: Not the Same Thing
This is often misunderstood.
Removal of members of the Board of Directors by rotation of the company is not the same as removal under Section 169.
Rotation:
- is automatic
- happens at AGM
- allows reappointment
Removal:
- requires special notice
- involves allegations
- often leads to disputes
Rotation is clean. Removal is confrontational.
Practical Example
Imagine a public company with 9 directors.
- 3 are independent
- 6 are rotational
Out of those 6:
- 2 must retire at every AGM
Shareholders may:
- reappoint both
- reappoint one
- replace both
No drama. No accusations. Just governance.
Common Mistakes Companies Make
From real-world practice, these mistakes are frequent:
- miscalculating the number of rotational directors
- forgetting AGM retirement agenda
- assuming automatic continuation
- including independent directors wrongly
- Articles not aligned with practice
These errors often lead to ROC observations and compliance issues.
Articles of Association Matter a Lot
Section 152(6) begins with an important phrase:
“Unless the Articles provide otherwise…”
This means:
- Articles can modify the rule
- but cannot completely eliminate shareholder control
Companies often forget to review articles after conversion or restructuring.
That’s risky.
Why Section 152(6) Still Matters Today
Even in modern corporate governance, this section plays a role.
It:
- forces Boards to stay accountable
- gives shareholders a regular voice
- prevents entrenchment
Whether outdated or not, it remains the law.
Final Thoughts
Section 152(6) of the Companies Act, 2013, is about balance.
It ensures that every director shall be appointed by the company in a general meeting, that at least two-thirds of directors in a public company are subject to retirement by rotation, and that shareholders regularly decide who continues on the Board.
It may look procedural, but it carries real power.
Because in a public company, no board seat is permanent.
For clear, practical guidance on company law and board-level compliance, you can explore expert support at callmyca.com—because in corporate governance, clarity always comes before control.
