In a Private Limited Company, such clauses are generally unnecessary unless you want to explicitly override any general rotational clauses in your Articles of Association (AoA).
1. Board Resolution Clause
This clause should be included in the resolution passed by the Board (and subsequently the Shareholders) for the appointment/re-appointment of the Managing Director.
"RESOLVED THAT pursuant to the provisions of Sections 196, 197, 203 and other applicable provisions, if any, of the Companies Act, 2013 read with Schedule V and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and subject to the provisions of the Articles of Association of the Company, [Name of MD] be and is hereby appointed as the Managing Director of the Company for a period of [5] years with effect from [Date].
RESOLVED FURTHER THAT in accordance with the provisions of Section 152 of the Companies Act, 2013 and the Articles of Association of the Company, [Name of MD] shall not be liable to retire by rotation during his/her tenure as the Managing Director of the Company, provided that the total number of non-rotational directors does not exceed one-third of the total strength of the Board (excluding Independent Directors)."
2. Letter of Appointment Clause
This legal provision should be inserted into the formal Employment Agreement or Letter of Appointment issued to the MD.
Clause: Tenure and Retirement
Non-Rotational Status: The Appointee is appointed as a Director of the Board and designated as the Managing Director. In accordance with the Company’s Articles of Association and Section 152 of the Companies Act, 2013, the Appointee’s office as a Director shall be non-rotational.
Exemption: He/she shall not be required to retire by rotation at the Annual General Meetings of the Company during the term of this Agreement.
Compliance Boundary: Notwithstanding the above, if the statutory limit for non-rotational directors (currently one-third of the total directors) is exceeded, the Board reserves the right to re-designate the office as rotational to ensure regulatory compliance.
3. Important Strategy for Compliance Professionals
As a Company Secretary, you should check two things before implementing these:
Check the AoA: Does your Articles of Association have a specific clause that says "All directors shall be liable to retire by rotation"? If so, you must amend the AoA first, or the resolution above will be technically inconsistent with your charter.
The "2/3rd" Calculation: If your board is small (e.g., 3 directors, excluding Independent Directors), 2/3rd of 3 is 2. This means only 1 director can be "non-rotational." If you already have a Promoter or Founder as a non-rotational director, you cannot make the MD non-rotational as well.