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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Conceptual Framework of Corporate Governance

Orbit Engineering Ltd's Board appointed Mr. Bose as an independent director for a first term of five years in 2020. In 2025 the Board proposes to reappoint him for a further five-year term. What procedure is required?

Reappointment for a second term requires a special resolution passed by shareholders, following the Board's recommendation. An independent director can serve up to two consecutive five-year terms, but a Board resolution or ordinary resolution alone does not suffice for the second term.

  1. ABoard resolution alone is sufficient
  2. BSpecial resolution of shareholders is required for reappointment, after Board and committee recommendationCorrect
  3. COrdinary resolution at the general meeting is sufficient
  4. DNo reappointment is possible as independent directors can serve only one term

Explanation

An independent director may hold office for up to two consecutive terms of five years each. The second term needs a special resolution of the company and disclosure in the Board's report. Board approval alone is inadequate, and an ordinary resolution is the wrong threshold, as a second term is not allowed on a lower majority.

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