Removal of Director by Shareholders Under Companies Act 2013

Power to remove directors have always been bestowed on shareholders, as we all know, that at the end of the day, directors are answerable to shareholders. Nothing has changed in the procedural aspect under Companies Act, 2013 as well. Shareholders can remove any director before the expiry of his tenure, except any director appointed by Tribunal for prevention of oppression and mismanagement u/s 242 and a director appointed under principle of proportional representation u/s 163.

Section 115, 169 and Chapter 7 details the procedure of removal of director by shareholders as follows:

• Special notice to Company-There is a criteria on who can send the notice to the Company. Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director. The same should be signed by the concerned shareholder/s.
• Date of meeting– Aforementioned shareholders have the right to decide the date of meeting. However, the special notice shall be sent not earlier than three months but at least 14 clear days before the date of the meeting, at which the resolution is to be moved.
• Intimation to Director– The Company shall forthwith send a copy of the notice to the concerned director.
• Reasonable Opportunity of being heard– The Director may request to send his representations along with the notice to the members and to be heard at the meeting. However, the rights may not be available, if on the application either of the Company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity.
• Intimation by Company to all shareholders– Company shall take immediate steps to send the notice to its members, at least 7 clear days before the meeting. The notice has to be sent in the same manner as in case of any other general meeting of the Company.
• Publication in Newspapers– If it is not practicable to give the notice as aforementioned, then notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated. At the same time, the notice shall also be posted on the website, (if any). However, it shall be published at least 7 clear days before the meeting.
• Convening of General Meeting – Members may pass remove the director by passing ordinary resolution.
• Appointment of director in place of removed director– The shareholder/s may recommend appointment of any other director in place of removed director through special notice. Such a director can only hold office till the tenure of removed director.
• Casual Vacancy– If a new director is not appointed as aforementioned, then Board may fill the position through casual vacancy, however the removed director shall not be re-appointed as a director by Board.
• Vacation of Office– When a director is removed as aforementioned, his office vacates automatically u/s 167.

Author:  NovoJuris.