Section 169 of the Companies Act & Points to Remember

Section 169 of the Companies Act of 2013 (previously Section 284 of the Companies Act of 1956) governs the Points to Remember

Section 169 of the Companies Act of 2013 stated:

• A company may eliminate a director who is not a director appointed by the Tribunal under Section 242 by ordinary resolution before the expiry of his term of office after giving him a reasonable opportunity to be heard
• Any resolution to remove a director under this section or appoint someone in place of a director must be given special notice at the meeting at which he is removed
• When the company receives notice of resolution to remove a director under this section, it must immediately send a copy to the director in question. Whether or not he is a member of the company, the director has the right to be heard on the resolution at the meeting
• Where notice of a resolution to remove a director has been given under this section, and the director of the company concerned makes representation in writing to the company and requests notification to members of the company, the company shall, if time allows, notify the members of the company

(a) Mention the fact that the representation was made in any notice of the resolution sent to company members;

(b)send a copy of the representation to each member of the company to who notice of the meeting is sent (whether before or after receipt of the representation by the company). If a copy of the representation is not sent as aforesaid due to insufficient time or the company’s default, the director may require that the representation be read out at the meeting

The Tribunal may order the company’s costs on the application to be paid in whole or in part by the director if, on the application of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this subsection are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application to be paid in whole or in part by the director

• A vacancy created by a director under this section may be filled by the appointment of another director in his place at the meeting at which he is removed, if the company appointed him in a general meeting or by the board, provided special notice of the intended appointment has been given under subsection (2).
• A director so appointed shall serve until the date on which his predecessor would have served if he had not been removed
• Suppose the vacancy needs to be filled under subsection (5). In that case, it may be filled as a casual vacancy according to the following provisions of this Act:
• The directors may not re-appoint the director who was removed from office as a director.
• Nothing in this section is to be taken literally :
• As person shall be deprived and removed under this section of any compensation or damages due to him as a result of his appointment as a director being terminated as per the terms of his contract or terms of his appointment as director, or any other appointment terminating with that as director
• Any power to remove a director under other Act provisions is not affected.

Points to Remember:

1. Under Section 169 of the Companies Act 2013, any member, irrespective of the investor, can operate with reasonable notice.
2. Whether or not he is a member of the company, the concerned director can file a written objection to the proposed removal resolution
3. The concerned director must be given a reasonable opportunity to be heard.

The Procedure for the Discharge of a Director Is Summarised as Under: 

• Section 169 of the Companies Act 2013 allows any member, regardless of shareholding, to give notice of the resignation of a director
• When the company receives a Special Notice from a member to remove a Director, it is the company’s responsibility to inform the affected director as soon as possible and to notify its members of the resolution
• If giving notice to all members is not possible, the company should publish the same notice advertisement in a newspaper with sufficient circulation before the meeting
• The director must be notified of the removal notice in a timely manner. It is important to protect the right of such a director to be heard on the resolution
• A director has the right to make a written representation against his removal and request that the company notify the company’s members under Section 169(4)
• If the representation could not have been sent to the members because it was received late or because the company failed to send it, the representation must be read out at the general meeting
• It is now the company’s responsibility to call a General Meeting to discuss the situation and vote on an ordinary resolution to remove the director
• Within 30 days of passing the resolution, submit Form DIR 12 to the ROC.

Also, Read the following:

• What are the rules for the discharge of a director?
• Steps Involved In Dismissing A Director
  
• Termination of a Business Director
• What Are the Incidents a Director Can Be Removed from Their Office?