Introduction
How to Fire Directors from Private Limited Companies in India: Removing directors from your private limited company in India can be an arduous and complicated process, especially if you have a director who refuses to step down.
However, that doesn’t mean you must endure this situation forever—or even at all! If the situation calls for it, you can remove directors from your company with the right information and knowledge of the right process. Follow these steps to remove directors from your company and enjoy smooth sailing ahead.
1) Find a Legal Way to Fire Directors
If you want to remove directors from your private limited company, there are a few legal ways that you can do this. One way is if the Director agrees to resign from their position before the termination date. Another way is if the Director agrees to be removed by the majority vote of shareholders present at a meeting. Finally, it may also be possible for your company’s articles of association or constitution to provide that directors may only be removed with cause by an extraordinary resolution.
2) If There Is No Mutual Consent, Then File a Complaint.
If the Director refuses to step down, you have no choice but to file a complaint with the Court. The Court will then decide whether or not it should remove them. If there is mutual consent, you need both parties’ signatures on an application form and send it back to the registrar.
3) Send Notice for Removal via Registered Mail.
removal of director, you must first send them a notice of removal via registered mail. It would help if you also published the notice on the company’s website. If they do not resign after receiving the notice, you can apply for removal with the Registrar of Companies and request that they are removed. The company must hold an EGM within 14 days of filing its application and get at least three-fourths of the votes to remove that Director.
4) Settle Out of Court.
If you are looking for a way out of the court process, one option is to settle out of Court. You can also offer a director an incentive for them to resign or fire themselves. It can do this by offering a severance package or other financial compensation. If this doesn’t work and you still need the Director removed, you may need to go through the court process.
5) Seek the Help of Your Legal Counsel.
There are four ways to remove a director from your private limited company. First, the general meeting of the members may resolve that the Director’s term should be terminated by passing a special resolution. Secondly, if the majority of members have passed a resolution removing them as directors, and they have given notice of their intention to do so at least 14 days before the date on which it is proposed, it should remove them. Thirdly, if they have been convicted of an offense and sentenced to imprisonment for three months or more, they do not comply with any directions set out in section 241 requiring them to cease being a director.
6) Go Through All Proper Channels.
Removing a director can be difficult if the directors are unwilling to resign. There are various ways to remove a director, but you must go through all the proper channels to avoid damaging your company. The first step is to get the consent of other directors. If they do not agree, you will have to get an order from a court of law appointing a liquidator who will appoint new directors on behalf of the company. This process takes much longer and is more expensive than other alternatives. It also requires that you have evidence for why it must remove the person.
7) Take Action Against the Director Personally (If You Can).
A director is an individual who exercises managerial control over the company. For example, they might remove a director if they are guilty of misconduct, becomes bankrupt, have been absent for more than three consecutive board meetings, or if there is a breakdown of the business relationship between the company and that person.
A private limited company can remove a director if they want to eliminate them. Firstly, you must ensure that any letter sent to the Director is correctly addressed and signed by two directors on behalf of the company. If you cannot find out where this person lives, address your letter to The Company’s registered office. Secondly, state why you are sending the letter and inform them that they have seven days to respond; otherwise, it will send a copy to their last known address.
8) File Bankruptcy Proceedings at NCLT
If you want to remove a director from your company, file for bankruptcy proceedings at NCLT. An aggrieved creditor can file a petition with the Court. The petition is called a claim against the company. You will have to provide evidence of the Director’s misconduct, mismanagement, or breach of duty that resulted in loss or damage to the company. The Court will decide whether there is enough evidence, and if it agrees with you, it may order that the Director be removed as one of its directors.
9) Terminate Them as per Board Decision and Charter Agreement.
If the Director or co-director has been appointed by the board and is not also a shareholder, they can be terminated by a majority vote of shareholders. If the Director or co-director is also a shareholder, they can be removed only if they are guilty of acts amounting to fraud, criminal breach of trust or wilful neglect of duties.
10) Seek Intervention by Shareholders.
The shareholders can intervene by passing a resolution of no confidence against the Director. The company must be informed of this intention and given at least 14 days’ notice. Alternatively, one-third of the shareholders may petition for removal if they believe that the Director is unfit or unable to continue in office. This petition must be accompanied by a statement detailing their reasons for seeking removal and must be placed before all the shareholders for a vote.
Suppose a majority of shareholders agree that the authority should remove the Director. In that case, they will no longer be able to act as a director, attend board meetings, or exercise any powers associated with being on the board until their position is reinstated.
Conclusion
If you own and run your own private limited company, you might be interested in removing the Director of a company to gain more control over it. Vakilsearch provides access to the best lawyers, chartered accountants, and company secretaries in India.
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