Removing a Director

Removing a Director

Every private company should have a minimum of two directors whereas a public company shall have a minimum of three directors. A company can remove a director if he incurs any of the disqualifications specified under the Act, absents himself/herself from board meetings over 12 months. And, enters into contracts or arrangements against the provisions of section 184, and is disqualified by an order of a court or Tribunal, or is convicted by a court of any offense and sentenced to imprisonment for not less than six months.

What is the procedure to remove a director

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To remove a director from a company, he/she should have not abided by the terms and protocols according to the Companies Act, 2013, or can himself come up with resignation or misses to attend the board meeting for three continuous times in a year. Now, let us look at the procedure to remove a director in three different circumstances in detail:

Removal of a director suo-moto by the board

Shareholders hold the authority to remove a director, as per Section 169 of the Companies Act 2013. The process can be done by passing an ordinary resolution in a general meeting, except in the case the Director was not appointed by the Central Government or the Tribunal.

There are several steps in which the removal process can take place:

• A notice should be sent to all the directors to have a board meeting by offering seven days. Additionally, all the directors of the organization will receive a notice in regards to the removal of the director.
• Followed by the notice, a resolution will be passed for having the general meeting. Along with it, the resolution for the removal of the director will also be passed. The subject of passing the resolution is for the approval of the shareholders on the day when the board meeting will be held.
• There would again be a general meeting held after providing 21 days of clear notice to the directors. The meeting is conducted for the members of the board to vote for the particular resolution taken by the company. The decision is made based on the majority of the votes. If the majority of the votes are in favor of one decision, then accordingly the resolution will be passed.
• But, before all, the director for whom the resolution is passed will have an opportunity for being heard.
• Once the resolution is passed, the director must file two forms namely: Form DIR-11 and Form DIR-12. The two forms along with the attachments of the Board Resolution, an ordinary resolution must be filed.
• Once all the formalities are over, and the form has been filed, then the name of the consent director will be removed from the Ministry of Corporate Affairs (MCA) database and subsequently in the MCA website as well.

Self-submission of the resignation by a director

The director of the company, for any reason, wishes to resign from the post of a director, then he/she can continue by passing a resolution initially to the company. Follow the below-mentioned steps to know the procedure on how the process the resignation of a director in a company.

• Firstly, the company will have to provide seven days’ notice for the board meeting. The seven days excludes the day on which the notice is sent and received as well.
• While in the board meeting, the decision of whether to accept the resignation provided by the director or to not takes place. The board members will have a proper discussion with each other and conclude also on hearing upon the director himself.
• Once they decide to accept the resignation of the director, then the further process will take place. The Board resolution on accepting the resignation will take place in the following format:

RESOLVED THAT

the resignation of the (Director Name) and is hereby accepted with an immediate effect.

FURTHER RESOLVED THAT

the Board places on record its appreciation for the assistance and guidance provided by the (Director Name) during his tenure as Director of the Company.

RESOLVED FURTHER THAT

directors of the company are and are hereby jointly authorized to do all the acts, deeds and things which are obligatory to the resignation of an aforesaid person from the directorship of the Company.

• Form DIR-11 needs to be filed by the director who will be relieved from his/her directorship post after the resolution has been passed. Along with Form DIR-11, the Board Resolution, Proof of delivery of the resignation letter and copy of the resignation letter will be filed.
• The director is accountable for the filing of DIR-11 whereas it is the responsibility of the company to file the Form DIR-12 with the Registrar of Companies (RoC) along with the Registration letter and the Board Resolution.
• When all the forms are filled and the formalities are done, then the name of the Director, who wants to resign, will be removed from the directory of the Ministry of Company Affairs (MCA) website.

The absenteeism of the director in three consecutive board meetings in the year

If a director didn’t attend the Board meeting for 12 months (a year), then the absenteeism has to be taken seriously. The duration is calculated from the day on which he/she was not available from the first meeting and to any of the meetings, even after sending him/her due notice for all the meetings. It will be considered that he/she has abandoned the office and respective steps will be taken as per section 167 of the Companies Act, 2013. Correspondingly, a Form DIR-12 should be filed on the missing director’s name. Further, after the formalities, the respective director’s name will be removed from the Ministry of Corporate Affairs.

What are the consequences of not filing the form DIR-12?

Within 30 days from the date of resignation, if the company fails to or doesn’t file the form DIR-12, then the following penalty will be applicable. e-Form DIR-12 is also available.

• One time of actual Government fees until 15 days;
• If it exceeds more than 15 days, then it’s two times of the actual government fees;
• A penalty of 4 times of the actual government fees is applicable if it exceeds 30 days to 60 days;
• In case it exceeds 180 days, then 10 times of the actual government fees are applicable;
• The penalty is also applicable to the company which fails to file the form DIR -12 within 300 days from the date of passing the resolution, then the company has to pay 12 times the actual government fees and the compounding offense as well.

Vakilsearch’s Procedure for Removal of a Director

3 Working Days

By ordinary resolution, the director can be removed before the expiry of his period of office, provided he does not hold office for life. Special notice of any resolution to remove a director must be sent by the company to the director concerned. The director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.

10 Working Days

The company should wait for an explanation from him. If no reply is received, special notice must be given and, through members' approval, the director can be removed. File the DIR-12 with the Registrar of Companies. Within 10 to 15 days, the director will be removed.

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