Legal Advice

FAQs on Removal of Directors Under Companies Act, 2013

Though there is a clear process laid down in the Companies Act, 2013, there are certain frequently asked questions regarding a director’s removal. This article answers a few such FAQs in simple words.

Can a Director Be Removed From Office Without Their Consent?

A director can be removed without consent. This often happens when the director does not comply with the company’s laws or works against the company’s benefit. However, such removal has a strict procedure to be followed.

Can the Board Remove Any Directors?

The Companies Act, 2013 has entitled corporations to remove a director. However, any director appointed by the Tribunal or the court cannot be removed by the company.

How Can a Director Resign?

A director can vacate the office voluntarily. To do so,

  • The director can give a resignation letter to the company.
  • The director then has to file a copy of his resignation letter and the e-form DIR-11 to the RoC within thirty days.
  • Simultaneously, the company can take note of the same and file the e-form DIR-12 with the RoX and affix the resignation letter within thirty days from the date of resignation.

How Can a Company Remove Its Directors?

The removal of a director can happen in three ways:

  1. If the director resigns voluntarily to the board of directors
  2. If the company believes that the director does not perform as per the constitution of the company and should be removed to protect the interests of the stakeholders of the company, and
  3. Suppose the director does not attend any board meeting over twelve months or does not attend three board meetings. In that case, he shall be deemed to have vacated his office.

CONTACT US REMOVAL OF A DIRECTOR

Is the Removal of a Director the Same as Resignation?

No, removal and resignation are two very different things. The resignation happens when a director voluntarily decides to give up the directorship. Removal occurs when the company forces a director to step down.

What Are the Liabilities of a Director Who Is Resigning?

Even after resignation, a director who is resigning shall still be held liable for the offences conducted by him during the term of his office.

How Does the Company Decide on the Removal of a Director?

After intimating all the directors and shareholders, the board convenes a board meeting. Voting takes place to pass the resolution regarding the removal of the director. The majority votes decide whether the removal is approved or rejected.

When Should the Company Appoint a Director to Fill in the Position That Becomes Vacant After Removal?

As per the Companies Act, 2013, in the same board meeting where the removal of a director is consented to by the board, another individual has to be appointed to fill in the position. If the vacancy is not so filled, following the Companies Act, 2013, it may be filled as a casual vacancy.

What Is the Term of the Director So Appointed to Fill in the Vacancy? 

An appointed director shall remain in the office as long as his predecessor would have held the office had he not been removed.

Is It Necessary for the Outgoing Director to Transfer or Sell Their Shares?

No, the outgoing director shall continue to hold his shares, even if he discontinues to be a director of the company. However, this may depend upon the guidelines laid down in the company’s Articles of Association (AoA).

What Are the Rights of the Director So Being Removed?

The concerned director has a right to be heard at the meeting. The director may make a representation in writing and request it be notified to the other members of the company. The director may also require that the representation be read out at the meeting. 

What Form Has to Be Submitted for the Removal Process?

Form DIR-12 must be submitted to the Registrar of Companies (RoC). The board resolution has to be attached along with the form. In case of resignation, a copy of the resignation letter must also be attached.

What Happens if Form DIR-12 Has Not Been Filed?

Filing Form DIR-12 within 30 days from the date of removal is mandatory. If the company fails to do so, it might attract the following penalties:

  • Twice the government fees if the form is filed after 30 days and within 60 days.
  • Four times the government fees if the form is filed after 60 days and within 90 days.
  • Ten times the government fees if the form is filed after 90 days.
  • Twelve times the government fees if the form filing exceeds 180 days. Also, the government will book for the compounding offense as well.

Can You Hire Professionals to Remove a Director?

A director’s removal is a delicate process and might sometimes attract legalities. Hiring professionals like Vakilsearch can help you remove a director through a completely online process, quickly and with ease.

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