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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, enters into contracts or arrangements against the provisions of section 184, 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.
The removal of a director from a company becomes also necessary if he/she has not abided by the terms and protocols mentioned in the Companies Act, 2013 or have resigned voluntarily from his position.
Let us look at the procedure for removal of a director in three different circumstances:
Removal of a director by shareholders
There are several steps through which the removal process can take place:
Removal of the director when he submits the Resignation by himself
Sometimes, a director of the company, for any reason, may wish to resign from the post he holds. In such a scenario, the company must follow the below-mentioned steps to complete the process of removal of directors in company law.
“FURTHER RESOLVED THAT the Board places on record its appreciation for the assistance and guidance provided by Mr./Ms (Director Name) during his tenure as Director of the Company”.
“RESOLVED FURTHER THAT
directors of the company are hereby jointly authorized to do all the acts, deeds, and things which are necessary to the resignation of the aforesaid person from the directorship of the Company”.
If the director remains absent in 3 Consecutive Board Meetings in a year
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 for submission.
This section of the Companies Act 2013 deals with Board resolutions that require special notice. As mentioned in this section, special notice is required for a resolution for the removal of a director by shareholders before the expiry of the tenure of his office. The notice specifying such an intention to pass a resolution can only be given to the company by shareholders holding not less than 1% of the total voting power or holding shares not exceeding Rs 5, 00, 000 in aggregate, by following the below-mentioned procedure-
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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