Power to Appoint Directors

3. Power to Appoint Directors (Sec. 408)
The Central Government has been empowered to appoint Directors on an order passed by the Company Law Board to effectively safeguard the interest of the company or its shareholders or the public interest to prevent mismanagement or oppression. The power is in the nature of a preventive action and can be exercised by the Company Law Board either on a reference made by Central Government or on an application of not less than 100 members of the company or members holding not less than l/lOth of the total voting power therein. The Company Law Board has no SilO moto power. The Central Government may appoint any number of Directors in a company, as may be specified by the Company Law Board. At one time, appointment is not to exceed 3 years' period.
Alternatively, the Company Law Board may direct the company if it is a public company or its subsidiary to amend its Articles so as to provide for proportional representation for appointment of Directors and make fresh appointments of Directors in pursuance of the Articles so amended, within such time as may be specified. Till new Directors are appointed in pursuance of the order aforesaid, such number of persons as the Company Law Board may, by order in writing specify as being necessary to effectively safeguard the interest of the company or its shareholders or the public interest, shall hold office as additional Directors of the company.
Section 408(5) provides that no change in the Board of Directors made after a person is appointed or directed to hold office as a Director or Additional Director, so long as such Director or Additional Director holds office, have effect unless confirmed by the Company Law Board.
4. Power to Prevent Change in Board of Directors (Sec. 409)
If any Managing Director or any other Director or Manager complains to the Company Law Board that a change in the Board of Directors is likely to take place and such change, if allowed, would prejudicially affect the affairs of the company, the Company Law Board may, after being satisfied, order that no such change in the Board shall have effect unless prior approval of the Company Law Board is obtained.
This power cannot be exercised in the case of a private company unless it is subsidiary of a public company.

~6.

(a) Explain the powers of the Central Government to appoint directors on
the Board of a company to prevent oppression and mismanagement.
[C.A. (Final) May, 1986J
In what way does the Companies Act, 1956 empower the Central
Government to prevent oppression and mismanagement in a company?
[CA (Final) Nov., 1985; Nov., 1989J
(b) Explain the powers of the Company Law Board to prevent changes in
the Board of Directors of a company.

.9L1l.5. (a) Section 408 empowers the Central Government to appoint Directors on the Board of a company on the recommendations of Company Law Board that it is necessary to appoint government Directors to effectively safeguard the interests of the company or its shareholders or the public interests. On the application of not less than 100 members of the company or of members holding not less than 1/10th of the total