When a company has to remove a director, it has to pass a special notice as per the companies act 2013. Now learn more about the same.
When a company needs to remove some or all of its directors, it’s often because the operational needs of the business have changed and new directors are required to drive the business forward. In such circumstances, most companies will need to give special notice when removing a director.
This is normally because that director has a fiduciary duty to the company, meaning they cannot be removed without special notice. If a director is being removed because they breached their fiduciary duties, other factors may also require special notice (for example, if their removal would put the company in breach of another person’s rights).
However, not every individual who is a director of a company needs to receive special notice as part of their removal as a director. The different types of directorships will each have different implications on whether or not you need special notice when being removed from that position. Here we’ll explain what those implications are and how they can impact whether or not you need to receive special notice from your company when being removed as one of its directors.
What Is a Special Notice?
Special notice is a specific period that a company must wait before removing a fiduciary director from its position. The reason a company must wait is that the director has a certain level of fiduciary duty to the company, meaning they cannot be removed without special notice. The exact time period that the company has to wait will vary depending on the type of fiduciary duty that the director has.
Provision Under the Companies Act, 2013
Section 169 of the Companies Act, 2013 as was mentioned before, Section 284 of the Companies Act of 1956 (Before the Act, 2013, section 169 allows for the removal of directors. A shareholder vote by normal resolution is required, as is a special notice. Directors can be removed under Section 169 in several ways, as described below.
- Before a director’s term expires, the board can remove him by common resolution, as long as he has not been appointed by the Tribunal under Section 242 of the Act
- The removal must be completed before the expiration of the period of office of the director being removed
- Special notices must be circulated
- Directors must be given a reasonable opportunity to express their views before they are removed by justice.
Rights of a Director Who Is Being Removed by Giving Special Notice
As per our experts at Vakilsearch a director can secure his or her position by establishing the following arrangements under the aforesaid Section
- Written Representation: The concerned director can send a written statement to the company opposing the removal notice. In response, the company must notify the board of directors regarding the statement’s existence. Directors can ask the company to read the statement aloud at the meeting, or they may ask for it to be shared with the board
- Directors may be heard orally, and the company must not prejudice his or her case. The company or any aggrieved individual may appeal to the tribunal if they disagree with the legal process. The Tribunal may terminate the process if it finds that the director commands such a large rig.
What Does It Mean When a Company Gives You Special Notice?
Special notice is a legal mechanism that protects directors from being removed from their position without due process. Without special notice, a company can remove a director from its position almost immediately. With special notice, the director gets an opportunity to address any issues before being removed from their position. If the director manages to address the issues, they can stay on as a director. The period of time if any will give you for the special notice period will vary depending on the situation.
Company Directors Who Do Not Have to Receive Special Notice When Being Removed
Certain types of directors who do not hold fiduciary positions can be removed without receiving any special notice at all. These types of directors are either non-executive directors or hold public office. While non-executive directors can technically receive special notice if there are issues relating to their removal, it is highly unlikely that they would be given sufficient time to address those issues. A director who holds a public office cannot receive any special notice at all, as their removal would need to be as prompt as possible.
Company Directors Who Do Need to Receive Special Notice When Being Removed
Certain types of directors who hold fiduciary positions will receive special notice before being removed. These types of fiduciary directors are executive directors, the managing director, or if a director has a term of office of more than one year. An executive director is someone who is actively involved in the day-to-day operations of the company. A managing director is a person who is in charge of the whole company, reporting directly to the shareholders.
How Vakilsearch Can Help in Company Director Termination
Now that you know the rights of a director who is being removed by giving special notice, you will be aware that the removal of a director is a legally binding process. Vakilsearch experts provide the best support for removing your director from your company. Here are the advantages of working with Vakilsearch to remove a director Termination from your business:
We have the best team of attorneys who are experienced and skilled. You will understand the procedures for removing a director as well as filing the necessary documents and forms. You will receive the highest quality and greatest holistic assistance from the best in the market. Reach out to us right now!
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