Section 168(3) of the Companies Act, 2013 provides a mechanism to address a management vacuum arising when all directors resign under Section 168 or vacate office under Section 167. In such circumstances, promoters may appoint the required number of directors to reconstitute the Board until directors are appointed by shareholders in a general meeting. If promoters fail to act or no promoter exists, the Central Government may appoint directors. The FAQs explain that promoter status is determined under Section 2(69) and does not depend solely on shareholding. They further highlight that neither Section 168(3) nor the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribe a specific procedure for such appointments, creating practical challenges in filing Form DIR-12. MCA General Circular No. 03/2015 addresses technical filing difficulties where no authorised signatory exists but does not restrict the substantive power conferred by Section 168(3).
Question: If all the directors of a company vacate their offices under Section 167 of the Companies Act, 2013, resulting in the absence of a Board of Directors, how shall directors be appointed?
Answer: In such a situation, Section 168(3) of the Companies Act, 2013 provides a mechanism for the appointment of directors to the Board. Where all the directors of a company vacate their offices under Section 167, resulting in the Board becoming non-functional, the promoters of the company are empowered to appoint the required number of directors to reconstitute the Board. Such directors shall hold office until directors are appointed by the company in a general meeting.
If the promoters fail to appoint directors, or if the company has no promoters, the Central Government may appoint the required number of directors. This provision ensures that the affairs and operations of the company do not come to a standstill due to the absence of a duly constituted Board of Directors. Section 168(3) read as under-
“(3) Where all the directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in general meeting.”
Question: How many directors can be appointed by the promoters under Section 168(3) of the Companies Act, 2013?
Answer: Under Section 168(3) of the Companies Act, 2013, where all the directors of a company vacate their offices under Section 167, the promoters may appoint the required number of directors to reconstitute the Board. The Act does not prescribe any specific number; rather, the promoters may appoint such number of directors as is necessary to constitute a valid Board in accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the company. These directors shall hold office until directors are appointed by the company in a general meeting.
Question: Who is the “Central Government” for the purposes of Section 168(3) of the Companies Act, 2013?
Answer: For the purposes of the Companies Act, 2013, the expression “Central Government” generally means the Ministry of Corporate Affairs (MCA), Government of India, acting through its authorized officers and authorities. The Central Government may exercise its powers directly or through officers and authorities to whom such powers have been delegated under Section 458 of the Act.
Accordingly, in a case falling under Section 168(3), where all directors have vacated their offices and the promoters fail to appoint directors (or where there are no promoters), the appointment of directors by the Central Government would ordinarily be carried out through the appropriate authority of the Ministry of Corporate Affairs having jurisdiction over the company, subject to the applicable delegation of powers and administrative arrangements
Question: Who is a “promoter” for the purposes of Section 168(3) of the Companies Act, 2013?
Answer: The term “promoter” for the purposes of Section 168(3) has the same meaning as assigned under Section 2(69) of the Companies Act, 2013. A promoter means a person—
1. Who has been named as a promoter in a prospectus or is identified as a promoter in the annual return filed by the company; or
2. Who has control over the affairs of the company, directly or indirectly, whether as a shareholder, director or otherwise; or
3. In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act.
However, a person acting merely in a professional capacity (such as an advocate, chartered accountant, company secretary, or merchant banker) is not regarded as a promoter.
Therefore, for the purposes of Section 168(3), the persons who satisfy the definition of “promoter” under Section 2(69)—particularly those identified as promoters in the company’s records and annual return—would be entitled to appoint the required number of directors when all the existing directors have vacated office under Section 167. If no such promoter exists, or if the promoters fail to act, the Central Government may appoint the directors.
Question: Is it necessary for a person to hold a requisite shareholding in a company to be regarded as a promoter under the Companies Act, 2013?
Answer: No. Holding a particular percentage of shareholding is not a mandatory requirement for a person to be regarded as a promoter under Section 2(69) of the Companies Act, 2013.
Accordingly, a person may be a promoter even without holding any shares in the company, provided the person satisfies any of the above criteria. For example:
- A person who controls the management or policy decisions of the company through contractual rights may be a promoter despite having no shareholding.
- A founder who has transferred all of his shares but continues to be disclosed as a promoter and exercises control may still be regarded as a promoter.
- A person whose directions are routinely followed by the Board may be regarded as a promoter notwithstanding the absence of shareholding.
Conversely, a person holding a substantial or even majority shareholding is not automatically a promoter unless he falls within one of the limbs of Section 2(69). Mere ownership of shares, without control or identification as a promoter, does not by itself make a person a promoter.
Therefore, shareholding may be evidence of promoter status, but it is neither a necessary nor a conclusive requirement for a person to be regarded as a promoter under the Companies Act, 2013.
Question: How can it be established that a person has control over the affairs of a company, directly or indirectly, whether as a shareholder, director or otherwise?
Answer: Whether a person has control over the affairs of a company is a question of fact and must be determined based on the overall circumstances of each case. Control may be established through direct or indirect evidence demonstrating the ability of a person to influence or direct the management and policy decisions of the company.
The following factors may be relevant in determining control:
1. Shareholding Rights: Holding a majority of voting rights or possessing special voting rights that enable a person to influence decisions of the company.
2. Right to Appoint Directors: Possessing the contractual, statutory, or other right to appoint or remove a majority of the directors on the Board.
3. Management Agreements: Agreements that confer upon a person the power to direct the management or policy decisions of the company.
4. Actual Conduct and Decision-Making: Evidence showing that the company’s affairs are in fact conducted in accordance with the directions or wishes of a particular person, irrespective of their formal designation.
5. Indirect Control through Entities: Exercising influence through holding companies, subsidiary companies, trusts, partnerships, or other arrangements that effectively enable control over the company’s affairs.
6. Board Dependence: Situations where the Board of Directors is accustomed to act in accordance with the advice, directions, or instructions of a particular person.
Under the Companies Act, 2013, “control” generally includes the right to appoint a majority of the directors or to control the management or policy decisions of the company, whether directly or indirectly, by virtue of shareholding, management rights, shareholders’ agreements, voting agreements, or any other manner.
Therefore, to establish control for the purposes of determining who may be regarded as a promoter under Section 2(69), one must examine the company’s constitutional documents, shareholding structure, shareholder agreements, board composition, ROC filings, and the actual conduct of the company’s affairs. Mere shareholding or influence may not by itself constitute control unless it is accompanied by the ability to direct or substantially influence the management or policy decisions of the company.
Question: Whether it is possible for a company to have no promoter for the purposes of Section 168(3) of the Companies Act, 2013?
Answer: Yes, it is possible for a company to have no promoter for the purposes of Section 168(3) of the Companies Act, 2013.
This is evident from Section 168(3) itself, which provides that where all the directors vacate their offices under Section 167 and there is no promoter of the company, the Central Government shall appoint the required number of directors. Thus, the legislature has expressly contemplated situations where a company may not have any promoter.
Illustrative instances where a company may not have a promoter include:
1. Widely held public companies where no person is identified as a promoter and no individual or entity exercises control over the affairs of the company.
2. Companies in which the original promoters have completely exited their shareholding and management, and no other person falls within the definition of “promoter” under Section 2(69) of the Act.
3. Companies whose annual return does not disclose any promoter, and where no person can be shown to have control over the affairs or management of the company.
4. Professionally managed companies where management is vested in an independent board and ownership is dispersed among a large number of shareholders, none of whom exercises control.
However, in the case of most private companies and closely held public companies, one or more persons are ordinarily identifiable as promoters from the company’s annual return, shareholding structure, constitutional documents, or control arrangements. Therefore, the absence of a promoter would generally be an exception rather than the norm.
Question: Does Section 168(3) of the Companies Act, 2013, or any rules framed thereunder, prescribe any procedure for the appointment of the required number of directors by the promoters or the Central Government?
Answer: No. Neither Section 168(3) of the Companies Act, 2013 nor the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribe any specific procedure for the appointment of directors by the promoters or the Central Government in a situation where all the directors have resigned or vacated office under Section 167. The provision does not prescribe any detailed procedure for making such appointments.
Section 168(3) merely confers the power to make such appointments and provides that:
- The promoters shall appoint the required number of directors; and
- If there are no promoters or the promoters fail to appoint directors, the Central Government shall appoint the required number of directors.
However, the Act and the Rules do not prescribe:
- The manner in which the promoters are to take the decision;
- Whether the promoters must act unanimously or by majority;
- The notice requirements among promoters;
- The form of resolution to be passed;
- The timeline within which such appointments are to be made; or
- The procedure to be followed by the Central Government while making such appointments.
Accordingly, the provision appears to create a substantive right to appoint directors without laying down the mechanism for its exercise. In the absence of any prescribed procedure, the promoters would be expected to adopt a fair, reasonable and properly documented process for making such appointments, while ensuring that the proposed appointees satisfy the eligibility and qualification requirements under the Companies Act, 2013. Thereafter, the requisite statutory filings, including Form DIR-12 and other applicable compliances, would need to be completed.
Therefore, it may be concluded that Section 168(3) provides the power to appoint directors in order to prevent a management vacuum, but neither the Act nor the Rules prescribe any specific procedure for exercising such power.
Question: E-Form DIR-12 does not provide any specific option for appointment of directors under Section 168(3) of the Companies Act, 2013. How can the form be filed in such a situation?
Answer: This is one of the practical difficulties arising from Section 168(3). While the provision empowers the promoters (or, in their absence, the Central Government) to appoint the required number of directors where all directors have vacated office under Section 167, neither the Act, the Rules, nor e-Form DIR-12 specifically provide a separate filing category for an appointment made under Section 168(3).
Although e-Form DIR-12 does not contain a specific option titled “Appointment under Section 168(3)”, the form presently provides the following purposes of filing:
- Appointment;
- Cessation;
- Change in designation;
- Appointment due to disqualification of all the existing directors; and
- Appointment by Liquidator / IRP / RP.
Further, where all directors have vacated office, the company may be left without any authorized signatory to digitally sign and file DIR-12. Recognizing this difficulty, the Ministry of Corporate Affairs issued General Circular No. 03/2015 dated 03.03.2015, authorizing the Registrar of Companies, upon request and after due examination, to permit one of the resigned directors who was an authorized signatory to file DIR-12 for the limited purpose.
Accordingly, in practice:
1. The promoters may appoint the required number of directors under Section 168(3).
2. An application/representation may be made to the jurisdictional Registrar of Companies explaining the circumstances and seeking permission or guidance for filing the necessary DIR-12 forms.
3. Upon approval, the ROC may permit filing through the mechanism contemplated in MCA General Circular No. 03/2015 where there is no available authorized signatory.
4. DIR-12 may then be filed reporting the appointment of the directors, although the form itself does not contain a dedicated field mentioning “appointment under Section 168(3).”
Therefore, while Section 168(3) creates the substantive power to appoint directors, the MCA filing framework does not expressly provide a corresponding procedural mechanism or filing category. In the absence of a specific provision, the company would ordinarily have to approach the jurisdictional ROC for appropriate directions and facilitation of the filing process. The existence of MCA General Circular No. 03/2015 itself indicates that the legislature and the MCA recognized the procedural vacuum that may arise when a company is left without any director capable of signing and filing statutory forms.
Additional Observation: The presence of the DIR-12 option “Appointment due to disqualification of all the existing directors” suggests that the MCA system contemplates situations where the entire Board ceases to hold office. However, neither the Act nor the form instructions expressly clarify whether this option is intended to cover appointments made under Section 168(3) following vacation of office under Section 167. Consequently, uncertainty continues to exist in the practical implementation of Section 168(3).
Question: What exactly does MCA General Circular No. 03/2015 provide?
Answer: The circular does not provide a mechanism for appointment of directors under Section 168(3). Nor does it create any substantive right in favour of promoters, shareholders, or resigned directors.
The circular merely addresses a technical filing difficulty arising when all the directors of a company have resigned and, consequently, there is no authorized signatory available to file e-Form DIR-12 with the Registrar of Companies.
Accordingly, the circular clarifies that:
- Until an alternative mechanism is made available in the MCA21 system;
- The Registrar of Companies, within its jurisdiction;
- Upon a request from the stakeholders and after due examination;
- May permit any one of the resigned directors who was an authorized signatory of the company;
- To digitally sign and file e-Form DIR-12;
- Subject to payment of applicable additional fees and compliance with other provisions of the Companies Act, 2013.
Thus, the circular is essentially an administrative relaxation relating to the signing and filing of DIR-12. The only purpose of the circular is to enable filing of DIR-12 where the MCA21 system would otherwise not permit filing due to the absence of any existing authorized signatory of the company.
Therefore, the circular solves a procedural filing problem, not the substantive governance problem of reconstituting the Board under Section 168(3). Indeed, the very fact that the circular was issued indicates that the MCA recognized that the electronic filing system did not adequately cater to situations where a company is left without any director capable of signing statutory forms.
Question: Whether, in view of MCA General Circular No. 03/2015, only one director should be appointed by the promoters under Section 168(3) since there would otherwise be no authorized signatory on the MCA portal, or can the promoters appoint the required number of directors to reconstitute the Board?
Answer: In my view, the better interpretation is that the promoters may appoint the required number of directors to reconstitute the Board, as expressly contemplated by Section 168(3).
The reasons are as follows:
1. Section 168(3) uses the expression “required number of directors”. The statute does not limit the promoters to appointing only one director. Rather, it authorizes the appointment of as many directors as are necessary to constitute a valid Board.
2. The MCA Circular does not deal with appointments under Section 168(3). It merely permits one of the resigned directors, who was an authorized signatory, to file DIR-12 in circumstances where no authorized signatory remains available. The circular addresses a filing issue and does not curtail the substantive power conferred by Section 168(3).
3. The purpose of Section 168(3) is to reconstitute the Board. If only one director were appointed in every case, the statutory objective may be defeated, particularly where:
-
- the company is required to have a minimum of two directors (private company) or three directors (public company) under Section 149(1); or
- the Articles of Association prescribe a higher minimum number.
4. The filing mechanism cannot override the statute. Even if the MCA portal presents practical difficulties in filing multiple appointments, such technical limitations cannot restrict the substantive power granted by Parliament under Section 168(3).
Question: Is there any specific format prescribed for making a request to the Registrar of Companies under MCA General Circular No. 03/2015 where all directors have resigned?
Answer: No. Neither the Companies Act, 2013 nor MCA General Circular No. 03/2015 prescribes any specific statutory form, format, or proforma for making such a request to the Registrar of Companies.
The Circular merely provides that where all directors of a company have resigned and the company is unable to file statutory documents because there is no authorized signatory, the ROC may permit filing by a resigned director who was an authorized signatory of the company before cessation of office. The Circular does not prescribe any particular application form for seeking such permission.
Accordingly, the request is generally made by way of a written representation or application addressed to the concerned ROC setting out:
1. The particulars of the company;
2. The fact that all directors have resigned;
3. The circumstances resulting in the absence of any authorized signatory;
4. The details of the applicant who was previously authorized to sign and file documents on behalf of the company;
5. The specific forms or documents proposed to be filed; and
6. A request for permission to file such documents in terms of MCA General Circular No. 03/2015.
Therefore, while there is no prescribed statutory format, the application should be made in a comprehensive written form containing all relevant facts and supporting documents to enable the ROC to examine the request and exercise its discretion under the Circular.
Question: Whether any alternate mechanism has been put in place in the MCA21 system as referred to in MCA General Circular No. 03/2015?
Answer: As on date, no specific alternate mechanism has been notified or implemented in the MCA21 system to comprehensively address the situation contemplated under MCA General Circular No. 03/2015.
The Circular itself states that the relaxation granted to the Registrar of Companies to permit filing by a resigned director (who was earlier an authorised signatory) is a temporary arrangement, intended to operate “till an alternative mechanism is put in place in MCA21 system.”
However, despite the passage of time, the MCA21 system has not introduced any dedicated workflow or module that replaces or codifies this relaxation in a structured electronic process.
Question: Whether the promoter, to appoint the required number of directors under Section 168(3) of the Companies Act, 2013, is required to call a general meeting of shareholders?
Answer: In my view, the answer is No. Section 168(3) does not require the promoter to convene a general meeting before appointing the required number of directors.
Section 168(3) specifically empowers the promoter (or, in his absence, the Central Government) to appoint the required number of directors where all the directors of a company have vacated their offices under Section 167 or have resigned under Section 168. The object of the provision is to immediately remove the management vacuum and ensure continuity in the affairs of the company.
Significantly, the section provides that the directors so appointed shall hold office “till the directors are appointed by the company in general meeting.” This indicates that the promoter’s appointment is an interim measure intended to precede, and not follow, the appointment of directors by the shareholders in a general meeting.
Had a prior general meeting been necessary for such appointment, the very purpose of Section 168(3) would be frustrated, as the company would be left without a functioning Board to manage its affairs and facilitate the holding of such meeting.
Accordingly, the promoter may directly appoint the required number of directors under Section 168(3) without first convening a general meeting. The directors so appointed shall continue in office until directors are appointed by the company in a general meeting in accordance with the Companies Act, 2013 and the Articles of Association.
It is, however, open to the shareholders in the subsequent general meeting either to appoint the same directors, thereby effectively affirming their continuation on the Board, or to appoint different persons as directors. The tenure of the directors appointed by the promoter under Section 168(3) is therefore temporary and subject to the decision of the shareholders in general meeting.
Question: Is there any other argument supporting the view that the promoter is not required to call a shareholders’ meeting before appointing the required number of directors under Section 168(3) of the Companies Act, 2013?
Answer: Yes. An additional and significant argument arises from the statutory scheme governing the convening of general meetings.
Ordinarily, a general meeting is convened by the Board of Directors. However, Section 168(3) becomes applicable precisely in a situation where all directors have vacated office under Section 167 or have resigned under Section 168, resulting in the absence of a functioning Board. In such circumstances, there is no Board capable of convening a general meeting in the ordinary course.
If Section 168(3) were interpreted to require the promoter to first convene a general meeting and obtain shareholder approval before appointing directors, the provision would become unworkable. The company would be left without a functioning Board, and the very purpose of Section 168(3), namely, to remedy the management vacuum, would be defeated.
The Companies Act, 2013 separately provides mechanisms for shareholders to convene meetings in exceptional circumstances. For instance, Regulation 43(ii) of Table F in Schedule I provides that where there are not sufficient directors capable of acting to form a quorum, or where there are no directors capable of acting, any one director or any two members of the company may call an Extraordinary General Meeting (EGM). The meeting is required to be called in the same manner, as nearly as possible, as that in which meetings are ordinarily called by the Board.
Further, Section 98(1) of the Companies Act, 2013 empowers the National Company Law Tribunal (NCLT) to order a meeting of the company to be called, held and conducted in such manner as it thinks fit where, for any reason, it is impracticable to call, hold or conduct a meeting in accordance with the Act or the Articles of Association. The Tribunal may also issue consequential directions, including directions regarding quorum and procedural requirements. Under Section 98(2), a meeting conducted in accordance with such order is deemed to be a valid meeting of the company.
The existence of these separate provisions is significant. It demonstrates that where the legislature intended shareholders or other persons to convene a meeting in the absence of a functioning Board, it expressly provided a mechanism for doing so. In contrast, Section 168(3) contains no requirement that the promoter must first convene a general meeting before exercising the statutory power of appointment.
Therefore, the better view is that Section 168(3) confers an independent and immediate power upon the promoter to appoint the required number of directors without any prior shareholders’ meeting. The appointment is intended to restore the Board and enable the company to function normally, after which the shareholders may exercise their rights in a general meeting by appointing directors of their choice.
Another argument supporting the view that the promoter is not required to convene a shareholders’ meeting before appointing directors under Section 168(3) arises from the nature of the statutory power itself.
As discussed above, Section 168(3) expressly empowers the promoter to appoint the required number of directors. Significantly, a promoter need not necessarily be a shareholder of the company. Under Section 2(69) of the Companies Act, 2013, a person may qualify as a promoter by virtue of control over the affairs of the company, being identified as a promoter, or because the Board is accustomed to act in accordance with his directions or instructions. Shareholding is not an essential requirement.
Had the legislature intended that the appointment should be made through a shareholders’ meeting, it could have vested the power directly in the members of the company. Instead, Section 168(3) deliberately vests the power in the promoter, who may or may not be a shareholder.
This indicates that the source of the power is the statutory status of the person as a promoter and not his rights as a member of the company. Consequently, the exercise of such power does not depend upon, nor is it required to be preceded by, any meeting of shareholders.
The provision thus creates a special statutory mechanism for restoring a functioning Board in situations where the company is left without directors. Requiring the promoter to first seek approval through a shareholders’ meeting would dilute the independent nature of the power expressly conferred by Section 168(3) and would be inconsistent with the legislative objective of ensuring immediate continuity of management.
Question: Whether the Registrar of Companies, while acting under MCA General Circular No. 03/2015, can restrict the appointment of directors under Section 168(3) of the Companies Act, 2013, or is its role confined to examining the documents and taking the filings on record?
Answer: In my view, the role of the Registrar of Companies under MCA General Circular No. 03/2015 is primarily administrative and procedural. The Circular authorizes the ROC, upon examination of the request and documents submitted by stakeholders, to facilitate the filing of statutory forms in situations where all directors have resigned and no authorized signatory remains available to complete the filing requirements.
The Circular does not confer any substantive power upon the ROC to determine the validity of appointments made under Section 168(3) or to restrict the number of directors that may be appointed by the promoter. The source of the power to appoint directors is Section 168(3) itself and not the Circular. Therefore, the scope and extent of the appointment power must be determined from the statute and not from an administrative circular.
The ROC may examine whether the documents filed are complete, whether the statutory requirements appear to have been complied with, and whether the filing is in the prescribed form. However, the Circular does not authorize the ROC to rewrite or curtail the statutory power granted by Section 168(3). In particular, where Section 168(3) empowers the promoter to appoint the “required number of directors“, the ROC cannot, merely on the basis of the Circular, insist that only one director may be appointed or otherwise impose restrictions not found in the Act. Likewise, in the absence of any such requirement under Section 168(3), the ROC cannot insist upon a prior shareholders’ meeting or a shareholders’ resolution as a condition for recognizing appointments made under the said provision.
In my view, while examining the request, the ROC may legitimately consider, inter alia:
1. Whether the person claiming to exercise the power under Section 168(3) qualifies as a promoter within the meaning of the Companies Act, 2013;
2. Whether all directors have in fact vacated office under Section 167 or resigned under Section 168 so as to attract the operation of Section 168(3);
3. Whether the prescribed forms, declarations, consents and supporting documents relating to the appointment of directors have been duly furnished;
4. Whether the filing otherwise complies with the procedural requirements prescribed under the Act and the Rules.
However, such examination is only for the purpose of processing and taking the filing on record. It does not confer upon the ROC any adjudicatory power to determine disputed questions of title, status or validity, nor does it empower the ROC to impose substantive conditions not contemplated by the Act.
At the same time, acceptance of a filing by the ROC should not be construed as a judicial determination regarding the legality or validity of the appointment. The ROC’s act of taking documents on record is essentially administrative in nature and remains subject to scrutiny by competent judicial or quasi-judicial forums in appropriate proceedings.
Accordingly, the better view is that the ROC’s role under the Circular is limited to examining the request and supporting documents for filing purposes and facilitating statutory compliance. The ROC does not derive from the Circular any authority to restrict, modify or override the substantive appointment power conferred upon the promoter under Section 168(3) of the Companies Act, 2013.
Question: Whether a resigned director can withdraw his resignation?
Answer: The Companies Act, 2013 does not contain any specific provision dealing with the withdrawal of a resignation once tendered by a director. Therefore, the issue has largely been addressed through judicial interpretation.
Under Section 168(1) of the Companies Act, 2013, a director may resign from his office by giving notice in writing to the company. The resignation takes effect from the date on which the notice is received by the company or the date specified by the director in the notice, whichever is later. The provision does not expressly confer any right upon the director to unilaterally withdraw the resignation after it has become effective.
In Remuka Datla (Dr.) v. Biological E. Ltd., decided on 17 November 2017, the Andhra Pradesh High Court held that while a director can resign unilaterally, the withdrawal of such resignation cannot be effected unilaterally. The Court observed that once the resignation has taken effect and the director has ceased to hold office, a subsequent communication seeking withdrawal of the resignation does not automatically restore the directorship. Unless the Board of Directors considers and accepts the request for withdrawal, the cessation continues and the unilateral withdrawal has no legal effect.
Accordingly, the following principles may be drawn:
1. A director may resign unilaterally by giving notice in accordance with Section 168.
2. Before the resignation becomes effective, it may be arguable that the director can withdraw the resignation, particularly if the company has not acted upon it and no rights of third parties have intervened.
3. Once the resignation has become effective and the director has ceased to hold office, he cannot, as a matter of right, unilaterally withdraw the resignation and claim restoration to office.
4. Any restoration after the resignation has taken effect would ordinarily require acceptance by the competent authority of the company, typically the Board of Directors, or a fresh appointment in accordance with the Act and the Articles of Association.
Therefore, the better view is that a director does not possess an absolute or unilateral right to withdraw an effective resignation. After cessation of office, his return to the Board depends upon acceptance of the withdrawal by the company or a fresh appointment in accordance with law.
Question: What would be the legal position where all directors have resigned, filed DIR-11, their resignations were not accepted by the company, and thereafter they seek to withdraw their resignations, but there is no Board in existence to consider or accept the withdrawal?
Answer: In my view, the answer depends upon whether the resignations had already become effective under Section 168(1) of the Companies Act, 2013.
Section 168(1) provides that a director’s resignation takes effect from the date on which the notice is received by the company or the date specified by the director in the notice, whichever is later. The provision does not make the effectiveness of resignation contingent upon acceptance by the company or the Board of Directors.
Accordingly, once the effective date contemplated by Section 168(1) has arrived, the resignation becomes operative by force of statute and the director ceases to hold office, irrespective of whether the company has accepted the resignation or filed Form DIR-12.
Therefore, where all directors have resigned and their resignations have already become effective, the mere fact that the company did not accept the resignations would not, by itself, keep them in office.
In such a situation, a subsequent communication seeking withdrawal of resignation may face substantial legal difficulty. As held in Remuka Datla (Dr.) v. Biological E. Ltd., while resignation may be unilateral, withdrawal of an effective resignation is not ordinarily unilateral and requires acceptance by the competent authority of the company.
The practical difficulty arises because there is no Board remaining in office to consider or accept the request for withdrawal. Consequently, the former directors cannot automatically restore themselves to office merely by issuing withdrawal letters.
In such circumstances, a strong argument exists that the vacancy created by the resignations must be filled through the statutory mechanism provided in Section 168(3), namely, by appointment of the required number of directors by the promoter or, in the absence of a promoter, by the Central Government. Once a valid Board is constituted, the company may consider whether the former directors should be appointed again in accordance with law.
However, another possible view may be advanced. If the withdrawal notice was communicated before the resignation became effective under Section 168(1), it may be argued that there was in fact no completed cessation of office and that the resignation stood validly withdrawn before taking effect. In such a case, the directors may contend that they continued in office and that no occasion arose for invoking Section 168(3). The outcome would depend on the timing of the withdrawal and the specific facts of the case.
Example: ABC Private Limited has three directors, namely Mr. A, Mr. B and Mr. C.
On 1 June 2026, all three directors submit their resignation letters to the Company. However, the resignations are not intended to take immediate effect. Each resignation letter specifically states that the resignation shall become effective from 30 June 2026.
In terms of Section 168(1) of the Companies Act, 2013, where a director specifies a future effective date in the resignation notice, the resignation takes effect from the later of:
(a) the date on which the notice is received by the company; or
(b) the date specified by the director in the notice.
Accordingly, although the notices were received by the Company on 1 June 2026, the resignations would become effective only on 30 June 2026, being the later date.
Before 30 June 2026 arrives, suppose that on 20 June 2026, Mr. A, Mr. B and Mr. C each submit a written communication withdrawing their respective resignations and expressing their intention to continue as directors of the Company.
In such circumstances, an argument may be made that the resignations had not yet become effective as on 20 June 2026 and, therefore, the directors had not ceased to hold office. Since no vacancy had actually arisen and the directors continued to remain on the Board up to that date, the withdrawal operates before the resignations take effect.
Consequently, it may be contended that there was never a point of time at which the Company was left without directors and, therefore, the contingency contemplated under Section 168(3) — namely, all directors having resigned resulting in a management vacuum — never arose.
This situation is distinguishable from a case where a resignation has already become effective and the director has ceased to hold office. In the latter case, a subsequent withdrawal would amount to an attempt to restore an office already vacated, whereas in the present example the withdrawal occurs before the effective date of resignation and before the office is actually vacated.
Remark: Therefore, where the resignations had already become effective and all directors had ceased to hold office, the better view appears to be that unilateral withdrawal would not automatically revive their directorships merely because no Board exists to accept the withdrawal. The resulting management vacuum would ordinarily have to be addressed through Section 168(3) or other applicable statutory mechanisms rather than through self-restoration by the former directors.
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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
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