Removal and Resignation of Director - TrueConnect ®
Removal and Resignation of Director Under Companies Act, 2013
Companies Act, 2013 establishes specific provisions governing the appointment, qualifications, removal, and resignation of directors to ensure accountability for their actions and responsibilities in running the company. The procedures for removal and resignation of directors, along with the compliance requirements, are detailed under this law. Let’s explore these procedures.
Removal of Directors Under Companies Act, 2013
Section 169 of the Companies Act, 2013 governs the removal of directors. According to this section, a company may remove a director by passing an ordinary resolution, provided the director has been given an opportunity to be heard. However, certain exceptions apply:
- Directors appointed by the Tribunal cannot be removed through an ordinary resolution.
- Independent directors reappointed for a second term can only be removed by passing a special resolution after providing them a reasonable opportunity to be heard.
- Directors appointed through proportional representation by two-thirds or more of the directors cannot be removed by an ordinary resolution.
The procedure for the removal of directors under the Companies Act, 2013 is as follows:
- A special notice must be issued for the resolution to remove a director or appoint a replacement. This notice must be signed by members holding at least 1% of the total voting power or members holding shares with a combined value of at least Rs. 5 lakhs.
- The notice must be sent to all members of the company not earlier than 3 months but at least 14 days before the meeting where the resolution will be discussed.
- Upon receipt of the notice, the company must promptly provide a copy to the director concerned, who has the right to be heard at the meeting.
- If the director submits a written representation to the company, requesting its circulation to members, the company must include the representation in the notice of the resolution.
- If the representation cannot be included due to time constraints or the company’s default, the director may request it to be read out at the meeting.
- However, if the Tribunal finds that the representation is being abused for unnecessary publicity or defamatory purposes, it may order costs to be paid by the director.
- The vacancy created by the removal may be filled during the same meeting, provided a special notice of the appointment is given. The newly appointed director serves until the original director’s term would have ended.
- If the vacancy is not filled as above, it may be filled as a casual vacancy.
- Forms E-Form MGT-14 and E-Form DIR-12 must be filed with the Registrar of Companies for the removal of directors.
Resignation of Director Under Companies Act, 2013
A director may voluntarily resign from office under Section 168 of the Companies Act, 2013 by giving written notice to the company. Upon receipt of the notice, the board of directors must acknowledge it and inform the Registrar by filing Form DIR-12 within 30 days. The resignation must also be presented at the next general meeting of the company.
Additionally, the director may submit a copy of the resignation and reasons for resignation to the Registrar within 30 days by filing Form DIR-11. The resignation becomes effective from the date it was received by the company or the date specified in the notice, whichever is earlier.
It’s important to note that resigning from office does not absolve a director of any offenses committed during their tenure, and they remain liable even after resignation. If all directors resign, the promoter or, if absent, the Central Government may appoint directors until replacements are elected at a general meeting.
These are the detailed provisions governing the resignation and removal of directors under the Companies Act, 2013. For any assistance regarding the appointment, removal, or resignation of directors, feel free to contact Udyam.
