REMOVAL OF DIRECTOR

INTRODUCTION

Here we discuss the procedure & circumstances to remove the director from the Board of directors of the company. As per companies act, 2013 and relevant rules there are the following 4 ways to remove the director are:-

  • Removal of Director by Board of Directors;
  • Removal of Director by Shareholders;
  • Resignation by Director (Suo moto);
  • Removal of director by Central government or NCLT.

REMOVAL BY BOARD OF DIRECTORS

  • The Board of Director has the authority to remove any director from the company except the Director is appointed by the Central government or NCLT.
  • The Director of the company needs to call a general meeting of the shareholders to pass the ordinary resolution.

CONDITION FOR REMOVAL OF DIRECTOR

As per section 167 of companies act, 2013 if the director of the company didn’t attend all the meeting of Board of director for consecutive 12 months without taking sick leave or without any proper notice.

PROCEDURE TO REMOVE DIRECTOR

Calling of the Board meeting

The company secretary or authorised person called the meeting of the Board of directors after furnishing proper 7 days notice to all director of the company through

  • Email or
  • Courier or
  • Speed post or
  • Any other electronic mode.

Passing of resolution

The Board of Director passing a resolution to call the general meeting of shareholders to pass the resolution for removal of Directors.

 

Calling of General Meeting of Shareholders

  • The 21 clear days advance notice sent to all shareholders of the company along with Motion (all the resolution before passing are motion) with explanatory statement & any other agenda.
  • The date of dispatching, Receiving of notice & date of meeting excluded from the 21 days clear notice.

Passing of resolution

  • The shareholders of the company have the power to remove a director from the Board of the company.
  • The resolution moved towards the shareholders to discuss and pass the ordinary resolution to remove a director from the company.
  • Ordinary resolution means more than 50% of shareholder present in the meeting vote in favour of the resolution.

Intimation to ROCs by company

The company needed to file eform DIR 12 & MGT 14 with ROCs within 30 days of passing of a resolution for removal of Director along with following documents are:

  • Notice sent to shareholder along with explanatory statement &
  • CTC (certified true copy) of a resolution passed by shareholders.

 

REMOVAL OF DIRECTOR BY SHAREHOLDERS

  • As per section 169 of companies act, 2013 the shareholders of the company have the power to remove a director or a appoint a director in the place of removal director by passing Ordinary resolution except
  • Director appointed by NCLT under section 242 of Company act, 2013 or
  • Company appoint 2/3 of director of its Board as per section 163 of Company act, 2013 (Proportional Representation)
  • The tenure of Director appointed in the General meeting in place of a removed director is the same as the tenure of the removed director if he is not removed from the Board of Directors.

PROCEDURE TO REMOVE DIRECTOR

Calling of General Meeting of Shareholders

  • The 21 clear days advance notice sent to all shareholders of the company along with Motion (all the resolution before passing are motion) with explanatory statement & any other agenda.
  • The date of dispatching, Receiving of notice & date of meeting excluded from the 21 days clear notice.

Special Notice by shareholders.

  • The shareholder required to sent special notice to the company if they want to remove any director or appoint another director in place of director remove in that meeting.
  • The special notice sent to the company at least 14 days before the date of the General Meeting of shareholders.
  • The Special notice is signed & sent by members holding not less than 1% of the total voting power or holding shares on which such aggregate sum not exceeding five lakh rupees.

Intimate to Concerned Director

  • The company intimate to the Director whether he is or not a member of the company for which special notice is sent to the company by shareholders.
  • The concerned director has a right to heard the resolution to be pass in the general meeting of shareholders.

Representation by Concerned Director

  • The concerned Director sent representation to the company in respect of resolution for his removal.
  • The copy of representation sent by the company to every shareholder who entitled to attend the meeting.
  • If a company not able to sent the representation to the shareholders than representation is orally read in front of all the shareholders.

Passing of Ordinary Resolution

  • The shareholders of the company have the power to remove a director from the Board of the company.
  • The representation of concerned director is read in front of all the shareholders if representation not sent along with Notice of General Meeting.
  • If the company think the representation is against the interest of shareholders then company not required to read representation of removing Director after getting approval from the NCLT.
  • The resolution moved towards the shareholders to discuss and pass the ordinary resolution to remove a director from the company.
  • Ordinary resolution means more than 50% of shareholder present in the meeting vote in favour of the resolution.

Intimation to ROCs by company

The company needed to file eform DIR 12 & MGT 14 with ROCs within 30 days of passing of a resolution for removal of Director along with following documents are:-

  • Notice sent to shareholder along with explanatory statement;
  • Special Notice of Shareholders;
  • Representation of concerned Director;
  • Appointment letter of Director appointed in the meeting;
  • CTC (certified true copy) of a resolution passed by shareholders.

COMPENSATION TO DIRECTOR

The company is liable to pay compensation or damages to the Director as per the terms & condition of his appointment If any person removed from the company as per section 169 of Companies Act,2013.

 

RESIGNATION BY DIRECTOR (SUO MOTO)

As per Section 168 of Companies Act, 2013 the director has the right to give SUO MOTO resignation from his position but he needs to intimate ROCs & Company respectively.

 

Prepare of Letter of resignation

The Director shall prepare his resignation letter including Date of resignation, Reason of resignation, Anti-competitive clause & any other information relevant to the company.

 

Intimate to Company

The independent director intimates to the company through Email or courier resignation letter to the Board of directors of the company.

 

Intimate to ROCs by Director

  • After resignation from the position of director. he responsible to file e form DIR 11 to ROCs (Registrar of companies) within 30 days of resignation.
  • The following details are to be mention & attached in Eform DIR-11 are:-
  1. Date of appointment in the company.
  2. Enter his DIN.
  3. Reason of Resignation.
  4. Copy of resignation letter sent to the company.
  5. Attached proof of resignation letter dispatch to company.
  6. Attached DSC for verification of details.

Intimate to ROCs by company

The company needs to inform to ROCs through Eform DIR-12 within 30 days from the date of receiving the letter of resignation from the director.

 

The effective date of resignation

The date mention in the resignation letter or date of receiving resignation letter to the company (Whichever is later)

 

Liability of Director after the resignation

The liability of the director shall continue after resignation for all the decision or transaction taken place when he is a director of the company.

 

REMOVAL OF DIRECTOR BY CENTRAL GOVERNMENT OR NCLT

  • As per Section 388 (B) to 388 (E) of companies act, 1956 (New companies act, 2013 provision does not enforce yet) the central government on the recommendation of NCLT (National Company Law Tribunal) remove any Director if he involves directly or indirectly in following activity are:-
  1. The business is carried out is against the public, government & company policies.
  2. The director or Directors is or are involves in act of frauds, negligence, mismanagement, oppression & etc.
  3. The company carried out a business against the Business Principles or commercially viable practices.
  4. The director or Directors are involved in any terrorism act, money laundering & Defrauding stakeholders etc.
  • The NCLT has the power to conduct an inquiry against the Director or Director & order to the central government to change the Board of company.
  • No compensation or damages were payable to the Director by Company.

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