Commentary on Section 168 of Companies Act, 2013

SECTION 168 OF THE COMPANIES ACT, 2013

Section 168- Resignation of Director

(1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company:

Provided that a director may also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in such manner as may be prescribed

(2) The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later:

Provided that the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure.

(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.

RELEVANT RULES OF COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014

Rule 15- Notice of Resignation of Director

The company shall within thirty days from the date of receipt of notice of resignation from a director, intimate the Registrar in Form DIR-12 and post the information on its website, if any.

Rule 16- Copy of resignation of director to be forwarded by him

Where a director resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Provided that in case a company has already filed Form DIR-12 with the Registrar under rule 15, a foreign director of such company resigning from his office may authorise in writing a practising chartered accountant or cost accountant in practice or company secretary in practice or any other resident director of the company to sign Form DIR-11 and file the same on his behalf intimating the reasons for the resignation.

ANALYSIS OF SECTION 168 OF THE COMPANIES ACT, 2013

This is a new provision in the Companies Act, 2013 and there is no corresponding provision in the Companies Act, 1956. This section regulate resignation by director and making it clear that resignation can be rendered only in writing, company has to do compliance because of resignation, provide an option to resigning director for intimating his resignation with detailed reasons to Registrar and erring director cannot escape his liability after resignation for his tenure.

Sub-section (1) of section 168 casts responsibility on director that he may resign only after giving notice in writing (not oral resignation) to company and on receipt of such notice Board shall take note of the same. Such company is required to intimate Registrar in form DIR-12 within 30 days of receipt of notice of resignation and such fact shall also be mentioned in Director’s report that is laid in immediately following general meeting by the company so that member can take note of the same and may enquire reason of resignation if they wish and if such company has website then this information will also be posted on such website thereby providing information to general public and persons dealing with the companies.

Earlier Proviso to section 168(1) used to cast responsibility on such retiring director that he shall intimate his resignation with detailed reason to ROC in form DIR-11 and this was introduced to prevent likely misuse of Director’s name by company after his resignation but Companies (Amendment) Act, 2017 w.e.f 7^th May 2018, has made this filing requirement optional at the desire of such resigning director and thereby giving relief to such resigning director now he may or may not file DIR-11 with ROC thereby making DIR-11 optional for resigning director.

Resigning director of IFSC private company and public company was required to file DIR-11 on optional basis (because of Notification No. G.S.R. 08(E) dated 4^th January 2017) but now to this facility is available to director of any company  whether specified IFSC company or not.

Section 168(2) is making a very clear that resignation of director shall be effective from receipt of notice of resignation or in case of prospective resignation (i.e on later date as mentioned in notice) date specified by director in the notice, whichever is later. Proviso to section 168(2) has made it clear that resigning director cannot escape his liability for offences which occurred during his tenure.

Section 168(3) introduced to take of exception cases where all the director resign from their offices hence resulting in no director company but section 168(3) is there to take care of this exceptional and rare situation and provide mechanism whereby promoter or in his absence Central Government can appoint required number of directors till new director are appointed by company in general meeting.

PROCEDURE UNDER SECTION 168 OF THE COMPANIES ACT, 2013

1. Concerned Director shall render his resignation in writing.
2. Board to take note of resignation submitted by director
3. Make necessary changes in Register of Directors and KMP.
4. Company is under obligation to inform Registrar within 30 days from the date of receipt of resignation notice
5. Company is required to post resignation information on its website if such company has website
6. Board report shall include fact of resignation
7. Resigning director can optionally file DIR-11 to Registrar within 30 days of his resignation

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