A company in India can remove a director if the director is disqualified to hold the office or does not conduct as per the company’s guidelines. This article explains how a director can be removed as per the Companies Act, 2013.
Directors are real persons appointed to manage the affairs of a company. It is the duty of the board of directors to ensure that the interests of all the stakeholders of the company are protected. With such huge responsibility, there are some important powers vested in them. The most important power is the Remove a Director from a company
Removal of a Director as per the Companies Act, 2013
The Companies Act, 2013 has empowered a company to remove a director by passing an ordinary resolution. However, the company is not allowed to remove a director who the tribunal or the court has appointed. A director once removed cannot be reappointed. The time taken for the removal of a director depends on the type of removal, and the company’s policies.
Guidelines for the Removal of a Director
Section 169 of the Companies Act rules out the circumstances under which a director can be removed, and the procedure for the removal. Following are the cases under which a director shall be removed:
Case 1: When the Director Resigns Voluntarily
- The Board has to first convene a Board Meeting by issuing seven days of Clear Notice. A Clear Notice implies a 21 days notice excluding the day on which it was sent and received.
- The Board then discusses and deliberates on the decision to either accept or reject the resignation.
- If the Board accepts the resignation, the board passes a resolution to confirm the acceptance of the resignation.
- The outgoing director must then file a Form DIR-11, along with a copy of the resignation letter, and proof of its delivery.
- The company has to file a Form DIR-12 with the Registrar of Companies (RoC) within 30 days of the removal. A copy of the resignation letter and the Board resolution must be attached to the Form.
- The next step is for the outgoing director and Board to file a Form DIR – 11. Proof of the resignation letter’s delivery and a copy of the resignation letter has to be affixed to the form.
- On filing all the forms and documents, the director’s name shall be removed from the MCA portal and its database.
Case 2: When The Board Decides to Remove a Director Suo-Moto
- A seven-day notice is given to all the directors informing them about removing the concerned director and convening a Board Meeting for the same.
- At the board meeting, a resolution shall be passed for holding another general meeting for the removal of the concerned director under the shareholders’ approval.
- The company then shall have a general meeting by giving 21 days’ clear notice. In this meeting, all the members will vote. A decision will be made as per the majority votes, and a resolution shall be passed.
- Before a decision is made, the company has to give the concerned director an opportunity to be heard.
- Once the resolution to remove the director is passed, Forms DIR – 11 and DIR -12 shall be filed with the board resolution.
- After the successful filing of the forms, the name of the director removed will be stricken from the MCA’s website and its database.
Case 3: When the Director Shows Absenteeism From Board Meetings
- If a director does not attend any board meetings for twelve months or fails to attend three board meetings consecutively, he or she is liable to be removed from the company.
- In such a case, the director will have seemed to have vacated the office.
- Form DIR-12 shall be filed and his name shall be removed from the database and portal of the Ministry of Corporate Affairs.
Consequences of Non-submission of Form DIR-12
A company must submit Form DIR-12 within 30 days of the passing of the board resolution to remove the director. Failing to submit the form on time could attract huge penalties. If the submission is delayed by
- Up to 30 days, 2 times the standard fee is charged
- For more than 30 days, and less than 60 days, 4 times the standard fee is charged
- For more than 60 days, and less than 90 days, 6 times the standard fee is charged
- For more than 90 days, and less than 180 days, 10 times the standard fee is charged
- More than 180 days, 12 times the standard fee is charged.
The Final Verdict
If the removal is not made as per the process stipulated by the Companies Act, the decision can be made void if appealed in a court. To avoid such a scenario, companies can opt to seek services from professionals like Vakilsearch. Business experts at Vakilsearch help companies draft board resolutions and also file all the necessary forms to ensure a properly documented, easy, and speedy removal of a director from the company.
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