Under the Companies Act of 2013, if you want to Discharge a director from your private limited Company, there is an established procedure to follow that you should be aware of before attempting to remove them.
Following a proper procedure for the Discharge of a Director in a Private Limited Company Under the Companies Act of 2013 can help you avoid problems later on, such as being found in breach of the Articles of Association and getting into legal trouble due to your attempt at removing them. Here are ten things you need to know about removing a director from a private limited company under the Companies Act, 2013.
1. A Member Who Wants to Remove a Director Must Follow These Steps
A member who wants to remove a director must deliver written notice of their intention. -If the other directors do not admit the grounds for removal, they must write their reasons for not admitting it. If they admit them, they must state what action they propose to take and state in writing any reasons why that is preferable.
It can give the notice at any time up until 14 days before an annual general meeting of members or up until 14 days after notice of that meeting was given if there isn’t one scheduled. The notice should contain full particulars of the facts relied on on and offer all evidence in support reasonably available to the member giving it.
2. The Process Is Legal, Easy and Quick
The process is legal, easy and quick. For example, if all Directors of a Private Company agree, then the replacement of one Director can be executed by following this process: The new Director must attend an extraordinary general meeting which it must convene for that purpose. At least seven days’ notice shall be given of such meeting, specifying that it is to appoint a successor Director. At such a meeting, it shall be determined whether or not there is unanimity as to whether or not to remove the existing Director.
3. How Members Can File Their Complaint
The procedure for removing directors is initiated by a complaint filed with the registrar of companies. Once the complaint has been registered, it can be investigated by the registrar and, if found valid, forwarded to court. The court will then decide whether or not there is good cause for removal and appoint an inspector to investigate if necessary. If there’s no good cause found or after investigation, the inspector finds no good cause, then the court will dismiss the case and award costs against those who brought it.
4. Removing A Director From Private Ltd Under India Law
Removing a director from a private limited company is not as simple as it may seem. Some steps have to be taken before and after the removal of director, and it should give rights to the removed person. The following is an outline of what has to happen for one of the members of your board of directors to be able to resign from their post. This blog will also briefly discuss what happens if someone has been removed without following these procedures.
5. Facts Members Must Prove Against a Director
The members must prove that they have decided to remove the Director. The members must prove that it did not prevent them from voting on the decision by anything other than their lack of interest in voting or some conduct engaged in by the person seeking removal
The members must prove that there are grounds for removal, simply defined as an event showing a lack of ability or willingness to act. The members must show that there is no good reason for keeping them. Once it has been shown that these criteria have been met, it will be necessary for those wishing to remove the Director then decide who should replace them and how long they should remain in office
6. Things Directors Can Do Before Removal
A director can resign by giving notice in writing to the Company. It can remove the directors of a public limited company without notice if they fail to comply with their duties. If a director is guilty of misconduct, it is possible for that person’s term as an officer or member of the corporate body, or both, to be terminated by a resolution of members passed at an annual general meeting.
7. Director’s Rights During Removal Case
The directors have a right of representation during any proceedings for their removal. If they are not provided with this right, they can apply for it separately and will be granted representation if the court is satisfied with a good reason for doing so. They also have the right to make representations as to why they should not remove them. The court will consider any representations made by directors before deciding on their removal from office.
8. What Happens if Member Refuses To Comply?
If a member refuses to comply, they need to understand their liability. They will be liable for any loss incurred by the Company due to their refusal. If they are asked again and still refuse, they are guilty of criminal contempt of court, which could result in imprisonment or an unlimited fine.
9. How Will Reinstatement Work?
The authority may reinstate the Director on an application made to the court. The court will set aside their removal if it considers that. It removed them unfairly. They have been working continuously with the Company for at least 12 months. Therefore, re-instatement would not prejudice the interests of creditors or shareholders or otherwise be contrary to the public interest.
10. Final Verdict of the Removal of Directors from A Private Ltd?
If the articles of association, or rules and regulations, state that a director may be removed by special resolution, then it is generally easier than if they can only be removed by ordinary resolution. This means that directors will have had to make themselves vulnerable at the outset to be able to be removed.
This is because, in order for removal by special resolution to work, there must either have been evidence of misconduct or it must have been impossible for them to carry out their duties properly. This also means that any replacement voted into office must abide by these terms when they take office.
Conclusion
A requisition for an extraordinary general meeting of the Company shall be in writing and signed by at least 25 per cent of the members entitled to vote. The notice convening an EGM shall specify whether it is called as a court-mandated EGM or at the requisition of members, also specifying that if it is called as a court-mandated EGM, copies of any order or agreement obtained by or made with the court shall be annexed to it and delivered to every member together with the notice. Members may only remove one or more directors at any time under these provisions. Vakilsearch is the ultimate solution for anyone looking for a lawyer, chartered accountant or company secretary.
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