How to Appoint or Remove a Director in a Company – A Detailed Guide
Directors act as agents of the company and are responsible for the conduct of operations of the company. The company is authorised to appoint or remove the directors of the company subject to the prescribed procedure. The Companies Act, 2013 has laid down the procedure for appointment and removal of directors. It has also specified the minimum and maximum number of directors that a company can have. In this guide, we have discussed the in-depth procedure to appoint and remove directors in a company.
How to Appoint a Director in a Company?
Only individuals can be appointed as a director of the company. Further, a person cannot be appointed as a director of the company unless he has a valid Director Identification Number (DIN). To appoint a director, the company shall follow the following procedure:
- Obtain Consent to Act as Director: This is the first step for the appointment of a director of the company. The consent of the proposed person to act as director of the company shall be filed by the company in Form DIR-2 along with all the necessary documents. The consent obtained from the director shall be filed with the registrar within 30 days of his appointment.
- Obtain the DIN and DSC of the Proposed Director: The company should obtain the Digital Signature Certificate (DSC) and Director Identification Number (DIN) of the proposed director.
- Call for the Board Meeting and General Meeting: The board of directors shall convene an extraordinary general meeting for passing the resolution for the appointment of the proposed director. The company shall issue a notice to the shareholders intimating them about the EGM.
- Intimation to ROC: After the resolution for the appointment of directors is passed in the EGM, the company shall intimate the ROC about such appointment by filing Form DIR-12 within 30 days of such appointment.
How to Remove Directors in a Company?
There might arise certain instances whereby the company may resort to the removal of the director. Section 169 authorises a company to remove a director before the expiry of the period of his office by passing an ordinary resolution. Following is the detailed procedure for the removal of the director of a company:
- A special notice shall be required for the resolution to remove a director.
- Upon receipt of the special notice for the resolution, the company shall forthwith send a copy of the notice to the concerned director. The director shall be given an opportunity of being heard at the meeting.
- The concerned director can make a representation in writing to the company upon receipt of the notice. The director can request the company for its notification to the members of the company. If the time permits, the company shall state the fact of the representation being made by the concerned director in the notice of the resolution given to the members of the company as well as send a copy of the representation to the members of the company to whom notice of the meeting is being sent.
- If the copy of the representation is not sent as above due to insufficient time or because of the company’s default, then the director may require the representation to be read out in the meeting. This shall be in addition to the director’s right of opportunity of being heard.
- In the meeting, the shareholders shall consider the resolution for the removal of the director.
- If the ordinary resolution is passed, the company shall file Form DIR-12 within 30 days of passing the resolution with the ROC along with the board resolution and ordinary resolution so passed.
- An independent director who has been appointed for a second term can be removed only by passing a special resolution and after a reasonable opportunity of being heard has been given to him.
- The company can appoint another director in the same meeting in which the director is removed provided that the special notice in relation to the intended appointment has also been given. The director so appointed shall hold the office till the date the director so removed would have held if he had not been so removed.
- The copy of the representation may not be sent out and the concerned director may not be provided the opportunity to read his representation in the meeting if it is abused to secure needless publicity for a defamatory matter.
- In the case of the appointment of an independent director, the explanatory statement annexed to the notice of the general meeting shall contain a statement that in the opinion of the board, the proposed independent director fulfills the conditions for appointment as specified in this act.
- As per Section 152(1), every director shall be appointed in the general meeting unless the act provides otherwise.
- An alternate director can be appointed by the board of directors instead of the general meeting. However, the board of directors can exercise this power only if they are authorised by the articles of association or by a resolution passed by the company in the general meeting. The alternate director can be appointed either in the board meeting or by passing a board resolution by circulation.
Thus, if you have a private limited company registration in India, then you need to follow the above procedure for appointment and removal of directors from the company.
Author : Dipen
Date : 13-Jul-2022