Removal Of Director

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Removal Of Director


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ABOUT Removal Of Director

Section 169 of the Companies Act 2013 deal with removal of a director and states that a company can remove a director before the tenure of his office by passing an ordinary resolution, unless he has been appointed as a director by the Tribunal under section 242 of the Act of 2013 after providing him a reasonable opportunity of being heard. However, a company cannot remove a director if he has been appointed under the principle of proportional representation under section 163. Thus, under the 2013 Act, a company can remove a director only in a general meeting by passing an ordinary resolution and if he has not been appointed as a director under the principle of proportional representation or under section 163. Further, a special notice is required for removal of a director and such director is entitled to attend the general meeting and is eligible to be heard on the resolution at the meeting.

A director is to vacate office if he remains absent from all the board meetings held during 12 months. Thus, a director to keep his position alive shall have to attend the board meeting once in a year compulsorily under the Companies Act ,2013. Otherwise, this would be adequate ground to disqualify for removal of a director.

Benefits

Hire new talent on board

With the growth of business, strategies and alliances are developed, that requires inputs of each department are required for effective planning. Also, with an addition of the new product line or department, an expert to lead the team can be hired in a managerial position being director of the company. This benefits the company with specialization and focused efforts.

Inability to work by existing directors

The existing directors may be unable to serve the company after a certain period due to retirement or other personal reasons. Whether it is a resignation by the director or his death, the company needs to make sure that its work is unaffected. It needs to process for both discontinuations by director and appointment of a new director if any.

Minimum Requirements

Public Company
Minimum 3 directors all time

One Person Company
Minimum 1 director all time

Process

According to section 115 of the Companies Act

2013, a special notice with the intention of removing a director by the specified no. of members of the company has to be passed at least before 14 days before the concerned meeting at which it has to moved excluding the day on which the notice is served and the day of the meeting.(Section 169)

The company shall immediately

after it has received the notice should inform its members by a notice of resolution in the same way it does at the time of a general meeting.

If it is not possible for the company

to send notice to all the members, it should publish it in form of an advertisement in a newspaper having an appropriate circulation at least before 7 days of the meeting.

The company should give intimation to the concerned

director about his removal by sending the copy of the resolution which is sought to be passed. The director will have the right to be heard on the resolution at the meeting.

The director can submit his statement

in writing against his removal from the company and can also ask the company to notify it to the other members. If the representation of a reasonable length and has not been too late also then the company must-

  • Mention in the notice of resolution that the fact of the representation has been received at the annual general meeting.
  • Send a copy of the representation to every member of the meeting if the representation has been received before the notice of the meeting.

If the writing is not able

to reach the members of the company because it has been received too late or the company itself made some default in sending it then the representation must be read at the annual general meeting, it is at the discretion of the director. In addition, he can also make oral representation.

Provided that the copy

of the representation need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter and the tribunal may order the company’s costs on the application to be paid in whole or in part by the director notwithstanding that he is a party to it.

Frequently Asked Questions

Can I resign myself from the company?

Yes, a director can voluntarily resign. The notice of resignation must be served to company stating reason of resignation. Also, the resigning director needs to file a form for intimation to MCA about his resignation from company.

In order to remove a director from a Company, the directors shall conduct a meeting of members for their consent after serving special notice in this regard. The exiting director must be given an opportunity to represent his grounds

Once the director has filed his resignation with the company and MCA, it is the responsibility of the company to intimate the change to MCA. The requisite e-form is required to be filed within 30 days from the resignation. Further, the vacancy of the director is also required to be filled as per the requirement.

No, even after the end of the tenure as director, a person can hold the shares in the company. However, if the shares in the company are subscribed as a condition to appointment as provided by AoA, the shares are also required to be disposed of in the manner provided in AoA.

The shares of the company shall be transferred by way of executing the Share Transfer deed and by affixing the stamps as per the rates mentioned in the Stamp Act of the concerned State after the change.

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