A director is an individual appointed to perform certain functions and duties on behalf of the company. Is it possible to remove a director during their term of office? If yes, how? This article answers all these questions.
Who Is a Director?
To represent a company and manage and supervise the affairs of any organization or company, directors are appointed. Directors of a company are responsible for protecting the interests of all the company’s stakeholders. Directors are usually appointed by the shareholders or the guidelines on the appointment of directors as prescribed in the Articles of Association (AoA) set by the company. A firm or a corporation cannot be appointed as a director. Only a real person can be appointed as a director.
How Many Directors Can a Company Have?
The number of directors a company can appoint depends upon the company’s structure. In the case of a public limited company, a minimum of two directors, and in the case of a private limited company, a minimum of three directors must always be present. The maximum number of directors appointed shall be 15. However, if the company wants to appoint more directors, it can do so by passing a special resolution at its General Meeting.
What Does the Board of Directors Mean?
A team or collection of directors is said to be the “Board of Directors (BoD). The Board of Directors plays the important role of supreme executive authority in a company. If there is som
Is the Removal of a Director from His Office Possible?
As per the Companies Act, 2013, a director can be removed even before the expiration of their term from the directorship. For the removal, the director has to satisfy any of the following criteria:
- Suppose the director incurs any disqualifications mentioned under the Companies Act. Such disqualifications include the director:
- Being of an unsound mind or becoming bankrupt
- Possessing a criminal background
- Has incurred pending overdue returns.
- If they do not attend any board meetings over 12 months
- If the director has not abided by the terms and protocols mentioned in the Companies Act of 2013.
- If the director is convicted by a court of law for any offense or is sentenced to imprisonment for not less than six months
- If they are disqualified by a tribunal or a court of law
- If a director takes up contracts or gets into arrangements against the provisions of Section 184 of the Companies Act.
- If any director by themselves resigns from the directorship
What Are the Incidents in Which a Director Can Be Removed from Their Office?
There are three such incidents wherein removing a running director is possible.
Removal of Director by the Board on a Suo-Moto Basis
As per the Section 169 of the Companies Act, 2013. The board of directors can remove the director from their office by passing an ordinary resolution in a general meeting. However, the board cannot remove a director of company the Tribunal or the Central Government has appointed. Fo the removal:
- The board has to inform all the directors regarding the removal of the director. The board should also attach a notice to all the directors and arrange for a board meeting within seven days from the date of the issue
- The board then has to pass a resolution to conduct a general meeting. The decision regarding the removal of the director in question shall be subject to the shareholders’ approval on the day of the meeting.
- The board will provide a 21-day notice, after which the second general meeting shall be held. The director in question shall be given a chance to speak. After which, the decision regarding the removal is decided in this meeting through voting.
- After the declaration of the resolution, the shareholders must file Form DIR-12, along with the attachments of the board resolution and the ordinary resolution.
- Absenteeism from the Director from the Board Meetings for 12 Months
- As per Section 167 of the Companies Act, if the director remains absent from all the board meetings held over a period of 12 months, with or without informing the board about the same, the director shall be considered to have vacated their office.
- For the removal, the form DIR-12 has to be filed.
2. Voluntary Resignation of the Director
- The board shall hold a meeting by giving seven days of clear notice. The resignation will be taken into consideration at the meeting.
- The board has to pass a resolution in a particular format.
- The resigning director has to file the form DIR-11 in their individual capacity.
- The company has to file Form DIR-12 with the RoC and the board resolution.
On successful completion of all the formalities, the director’s name in consideration shall be removed from the MCA database and consequently from the website. In any kind of removal, the form DIR-12 has to be filed, failing to attract penalties.
- What Are the Rules for Removal of a Director?
- What Are the Provisions Regarding Removal of Directors?