The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 271. Number of directors
(1) Every company, not being a small, company shall have at least two directors.
(2) Subject to subsection (1), any company whose number of directors falls below two shall, within one month of its so falling, appoint new directors and shall not carry on business after the expiration of one month, unless such new directors are appointed.
(3) A director or member of a company, not being a small company, who knows that a company carries on business after the number of directors has fallen below two for more than 60 days is liable for all liabilities and debts incurred by the company during that period when the company so carried on business.
Section 272. Appointment of first directors
Subject to section 271 of this Act, the number of directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum of association or a majority of them or the directors may be named in the articles.
Section 273. Subsequent appointments of directors
(1) The members at the annual general meeting may re-elect or reject directors and appoint new ones.
(2) In the event of all the directors and shareholders dying, any of the personal representatives apply to the Court for an order to convene a meeting of all the personal representatives of the shareholders entitled to attend and vote at a general meeting to appoint new directors to manage the company, and if they fail to convene a meeting, the creditors, if any, may do so.
Section 274. Casual vacancy
(1) The Board of directors may appoint new directors to fill any casual vacancy arising out of death, resignation, retirement or removal.
(2) Where a casual vacancy is filled by the directors, the person may be approved by the general meeting at the next annual general meeting, and if not so approved, he shall immediately cease to be a director.
(3) The directors may increase the number of directors if it does not exceed the maximum allowed by the articles, but the general meeting may increase or reduce the number of directors generally, and may determine in what rotation the directors shall retire, provided that such reduction shall not invalidate any prior act of the removed director.
What this means
Short answer
A company that is not a small company must have at least two directors (section 271(1)). If the number falls below two, the company has one month to appoint new directors and may not carry on business after that month unless it does (section 271(2)).
The two-director rule
Section 271(1) says every company, other than a small company, must have at least two directors. Section 394 explains what makes a company small, so check it before relying on the exception.
The consequences of dropping below two are real. A company in that position must appoint new directors within one month and must not carry on business after the month ends unless it has done so (section 271(2)). A director or member who knows the company carried on business with fewer than two directors for more than 60 days is personally liable for all the liabilities and debts the company incurred in that period (section 271(3)).
Appointing the first directors
Under section 272, the number and names of the first directors are decided in writing by the subscribers to the memorandum, or by a majority of them. The directors may also be named in the articles of association.
Appointing directors later
At the annual general meeting the members may re-elect or reject directors and appoint new ones (section 273(1)). Section 273(2) covers a rare case: if all the directors and shareholders have died, a personal representative may ask the Court for an order to convene a meeting of the shareholders’ personal representatives to appoint new directors. If they fail to convene it, the creditors may do so.
Filling a casual vacancy
The board may appoint a new director to fill a casual vacancy caused by death, resignation, retirement or removal (section 274(1)). The general meeting can approve that person at the next annual general meeting. If it does not, he must stop being a director immediately (section 274(2)).
The directors may also increase the number of directors, as long as it stays within the maximum in the articles. The general meeting can increase or reduce the number and decide the order in which directors retire. A reduction does not invalidate anything the removed director did earlier (section 274(3)).
Questions and answers
How many directors must a company have?
At least two, unless it is a small company (section 271(1)). The qualification for a small company is in section 394.
What happens if a company has fewer than two directors?
It must appoint new directors within one month and cannot carry on business after that unless it does (section 271(2)). A director or member who knows it carried on business for more than 60 days below two is liable for the debts incurred in that time (section 271(3)).
Who appoints directors after the company is formed?
The members at the annual general meeting may re-elect or reject directors and appoint new ones (section 273(1)). The board can fill a casual vacancy, subject to approval at the next annual general meeting (section 274).
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