The removal of a director from a company is a process strictly governed by both the company’s internal policies and relevant laws, such as the Companies Act 2013. Whether for a public company or a private company, the removal of a director requires proper adherence to legal and procedural requirements.
To initiate the removal of a director, a special notice, as required under Section 115 of the Companies Act, 2013, must be issued by shareholders or the Board of Directors. This notice must be delivered in clear terms to both the company and the concerned director at least 14 days before the general meeting of the company. The director in question has the right to submit a written representation, which must be shared with shareholders ahead of the vote.
At the Board Meeting, the company’s leadership will pass a Board Resolution to formalize the decision. In many cases, the company will need to convene either an Extraordinary General Meeting (EGM) or discuss the removal during the Annual General Meeting (AGM) to vote on the matter. The ordinary resolution or special resolution passed at these meetings is vital for completing the removal process. Failure to follow the correct procedure can result in legal disputes, especially for independent directors who may be protected under special provisions such as proportional representation.
Once the resolution is approved, The company must file the appropriate forms, such as Form DIR-12, with the Registrar of Companies (ROC) to comply with the requirements under the Companies Act, 2013 and officially update the register of directors.. The company’s articles of association often govern additional steps related to filling any casual vacancy that may arise from such removal.
The Ministry of Corporate Affairs ensures compliance with these regulations, and if disputes arise, they may be escalated to the National Company Law Tribunal. Whether it’s due to a breach of fiduciary duties, shareholder dissatisfaction, or other grounds for removal, the legal requirements must be meticulously followed. For companies looking to streamline this process, Abhinav Suresh Advocate CA offers expert services to manage the removal of a director in compliance with the law. From filing forms like Form DIR to assisting with board resolutions and shareholder agreements, Abhinav Suresh Advocate CA helps ensure the removal of the director is handled professionally and efficiently.
A director, under the Companies Act 2013, is an individual appointed to manage and oversee the affairs of a company. Directors are responsible for ensuring that the company complies with its legal obligations, as outlined in the Memorandum of Association (MOA) and Articles of Association (AOA). Since a company is a separate legal entity, it operates through its directors, who form the Board of Directors.
The role of a director in a company is crucial for ensuring its success, governance, and compliance. Here are the primary responsibilities that directors handle:
A director can be removed from a company through various methods, including by resolution of shareholders, disqualification under the Companies Act, 2013 or voluntary resignation. Here are two ways to remove a director of a company:
Voluntary Resignation
A director can voluntarily resign by submitting a formal written resignation to the company, which must then be acknowledged by the Board. The resignation is formally accepted through a Board resolution, and the company is required to file Form DIR-12 with the Registrar of Companies (ROC) to officially document the resignation. The resignation takes effect either on the date specified in the resignation letter or when the Board accepts it. Depending on internal policies, the company may also inform relevant stakeholders of the change.
When a director chooses to resign, the company’s duty is to acknowledge this by passing a Board resolution. As per the provisions of the Companies Act 2013, a director may be removed by the shareholders through an ordinary resolution in a General Meeting, provided they hold more than 50% of the voting shares. This right of removal cannot be restricted by the company’s Articles of Association or any agreement. Furthermore, a director may be removed by court orders, the Central Government, or a tribunal in cases of fraud, breach of duty, or other significant violations.
Compulsory Removal
Shareholders hold the authority to remove a director under Section 169 of the Companies Act 2013. This process requires a special notice and the passing of a resolution in a General Meeting, during which the director is provided an opportunity to present their case before the final decision. In instances of misconduct or non-compliance, disqualification may result in the director’s removal, and the company must again file Form DIR-12 with the ROC. Additionally, court orders related to fraud or breach of fiduciary duties can lead to the director’s compulsory removal.