Removal and Resignation of Director - eAuditor Office
Removal and Resignation of Director
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Removal and Resignation of Director Under Companies Act, 2013
Companies Act, 2013 lays down explicit provisions, whether it’s about appointment of directors, their qualifications, removal or even their resignation. This is to ensure that those placed with the responsibility to run the company are accountable for their actions and responsibilities. Therefore, not only the appointment, the procedure for removal and resignation of directors have also been laid down under the law. What is the procedure for removal and resignation of directors and what are the consequent compliance requirements? Let’s find out.
Removal of Directors Under Companies Act, 2013
Section 169 of the Companies Act, 2013 governs the removal of directors of the company. As per Section 169, a company may remove a director by passing an ordinary resolution after giving him an opportunity of being heard. However, in the following cases, the director cannot be removed by simply passing an ordinary resolution:
• Where the director is appointed by the Tribunal
• An independent director who is reappointed for second term can be removed by passing a special resolution only after providing him a reasonable opportunity of being heard.
• If two thirds or more of the directors of the company are appointed through proportional representation, then such directors cannot be removed by passing an ordinary resolution.
Following is the procedure for removal of directors under Companies Act, 2013:
• A special notice shall be required for passing any resolution to remove a director or appoint somebody in his place as a director of the company in the meeting in which he is removed. Such special notice shall be signed by members holding not less than 1% of the total voting power or members holding shares on which at least Rs. 5 lakhs have been paid in aggregate.
• Such notice shall be sent to the members of the company not earlier than 3 months but at least 14 days before the meeting in which such resolution is desired to be put.
• On receipt of the notice for the resolution to remove the director, the company shall forthwith forward a copy of the notice to the concerned director. The director shall be entitled to be heard on the resolution of his removal in the meeting.
• Where the notice for the resolution to remove such director has been given and the concerned director makes a representation in writing to the company and requests its notification to the members of the company, then if the time permits, the company shall state the facts of the representation being made in any notice of the resolution given to the members of the company. Further, it shall send a copy of the representation to every member of the company to whom the notice of this meeting is being sent.
• In case the copy of the representation is not sent as aforesaid due to insufficient time or due to the company’s default, then the director may require the representation to be read at the meeting without prejudice to his right of being heard.
• However, the representation shall not be sent as aforesaid and not be read in the meeting if the Tribunal is satisfied, on an application by either the company or any other aggrieved person, that the right of representation is being abused to secure needless publicity for defamatory matter. In such cases, the Tribunal may even order that the company’s costs on the application shall be paid by the director either in whole or in part.
• The vacancy created due to the removal of the director may be filled in the same meeting in which he is removed provided that a special notice of his intended appointment has been given as well. The director so appointed shall hold the office till the time his predecessor director would have held it had he been not removed.
• In case the vacancy is not filled in the aforementioned manner, then it may be filled as a casual vacancy as well.
• Following forms shall be filed with the Registrar of Companies for the removal of the directors:
o E-Form MGT-14
o E-Form DIR-12
Resignation of Director Under Companies Act, 2013
A director can voluntarily resign from his office if he so desires. Section 168 of the Companies Act, 2013 lays down broad provisions and procedure for resignation of directors. He shall give a notice in writing to the company for his resignation. On receipt of such notice, the board of directors shall take a note of the same and intimate the registrar of his resignation by filing Form DIR-12 within 30 days of receipt of the notice. Further, the fact that the director is resigning from his office shall also be placed before the general meeting of the company.
A director may also forward a copy of his resignation along with the detailed reasons thereof to the registrar within 30 days of such resignation by filing Form DIR-11. The resignation of the director shall be effective from the date on which the notice was received by the company or the date mentioned in the notice, whichever is earlier.
It is to be noted that a director resigning from his office does not absolve him from the offences that he committed during his tenure and therefore, he shall be liable for the same even after his resignation. In case all the directors of the company resign from the office, then the promoter or in his absence, the Central Government shall appoint such number of directors as may be required who shall hold the office till the directors are appointed by the company in the general meeting.
Following were the explicit requirements and provisions governing the resignation and removal of directors. In case you require any assistance regarding appointment, removal or resignation of directors, feel free to contact your eAuditors.